[Federal Register Volume 60, Number 116 (Friday, June 16, 1995)]
[Rules and Regulations]
[Pages 31854-31888]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-14667]
[[Page 31853]]
_______________________________________________________________________
Part IV
Federal Election Commission
_______________________________________________________________________
11 CFR Part 106, et al.
Public Financing of Presidential Primary and General Election
Candidates; Final Rule
Federal Register / Vol. 60, No. 116 / Friday, June 16, 1995 / Rules
and Regulations
[[Page 31854]]
FEDERAL ELECTION COMMISSION
[Notice 1995-9]
11 CFR Parts 106, 9002, 9003, 9004, 9006, 9007, 9008, 9032, 9033,
9034, 9036, 9037, 9038, and 9039
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 has revised its regulations governing public
financing of presidential primary and general election candidates.
These regulations implement provisions of the Presidential Election
Campaign Fund Act [``Fund Act''] and the Presidential Primary Matching
Payment Account Act [``Matching Payment Act'']. The revised rules
reflect the Commission's experience in administering these programs
during the 1992 election cycle, and are intended to anticipate
questions that may arise during the 1996 presidential election cycle.
DATES: Further action, including the publication of a document in the
Federal Register announcing the effective date, will be taken after
these regulations have been before Congress for 30 legislative days
pursuant to 2 U.S.C. 438(d) and 26 U.S.C. 9009(c) and 9039(c).
FOR FURTHER INFORMATION CONTACT:
Ms. Susan E. Propper, Assistant General Counsel, 999 E Street NW.,
Washington, DC 20463, (202) 219-3690 or (800) 424-9530.
SUPPLEMENTARY INFORMATION: The Commission is publishing today the final
text of revisions to its regulations at 11 CFR Parts 106, 9002, 9003,
9004, 9006, 9007, 9008, 9032, 9033, 9034, 9036, 9037, 9038 and 9039
governing public financing of presidential campaigns. On October 6,
1994, the Commission issued a Notice of Proposed Rulemaking [``NPRM'']
in which it sought comments on proposed revisions to the public
financing regulations. 59 FR 51006 (October 6, 1994). Subsequently, the
Commission extended the comment period to provide the regulated
community with additional time to comment on the proposed rules. 59 FR
64351 (December 14, 1994). The Commission received written comments
from Hervey W. Herron, Common Cause, the Center for Responsive
Politics, Public Citizen, the White House Counsel's office, the
Republican National Committee, Huckaby and Associates, the Democratic
National Committee and Lyn Utrecht of Oldaker, Ryan & Leonard in
response to the Notice. The Commission held a public hearing on
February 15, 1995, at which four witnesses presented testimony on the
issues raised in the NPRM.
The Commission also received two Petitions for Rulemaking that
addressed related issues. See Notice of Availability on Petition for
Rulemaking filed by the Center for Responsive Politics [``CRP''], 59 FR
14795 (March 30, 1994); Notice of Availability on Petition for
Rulemaking filed by Anthony F. Essaye and William Josephson, 59 FR
63274 (December 8, 1994). In addition to the comments noted above, the
Commission received comments from the Internal Revenue Service, Public
Citizen, Common Cause and a joint comment from the Republican National
Committee and the Democratic National Committee in response to the CRP
Rulemaking Petition. The Commission received comments from the Internal
Revenue Service and the Republican National Committee in response to
the Essaye/Josephson Petition.
The CRP Petition for Rulemaking sought the abolishment of the
general election legal and accounting compliance fund [``GELAC''] and
is discussed in connection with 11 CFR 9003.3, below. The Essaye/
Josephson petition asked the Commission whether expenses incurred in
connection with the meeting of the Electoral College are covered by the
Fund Act or the Federal Election Campaign Act [``FECA''], 2 U.S.C. 431
et seq. This is a complex question that the Commission believes
deserves further consideration. Therefore, the issue has been dropped
from this rulemaking and will be addressed in a separate rulemaking
document.
Sections 9009(c) and 9039(c) of Title 26, United States Code, and 2
U.S.C. 438(d) 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. These regulations were transmitted to Congress on June 12,
1995.
Explanation and Justification
The Commission has revised several aspects of its regulations
governing publicly-financed presidential primary and general election
candidates. A detailed, section by section analysis of these changes
appears below. The document then discusses some additional proposals
that were considered in the course of this rulemaking that were not
ultimately incorporated into the final rules.
Part 106--Allocations of Candidate and Committee Activities
Section 106.2 State Allocation of Expenditures Incurred by Authorized
Committees of Presidential Primary Candidates Receiving Matching Funds
The Commission is adding a sentence to paragraph (a)(1) of this
section to reflect the new attribution of certain expenditures between
the primary and the general election limits. See discussion of 11 CFR
9034.4(e), below. The new sentence states that expenditures required to
be allocated to the primary election under these new requirements shall
also be allocated to particular states in accordance with 11 CFR 106.2.
Part 9002--Definitions
Section 9002.11 Qualified Campaign Expense
The Commission is adding a conforming amendment to paragraph (c) of
this section to reflect the new attribution of certain expenditures
between the primary and the general election limits. The amendment
notes that certain expenditures formerly covered by this paragraph will
now be attributed under these new guidelines. See discussion of 11 CFR
9034.4(e), below.
Part 9003--Eligibility for Payments
Section 9003.1 Candidate and Committee Agreements
The new rules contain a number of changes in section 9003.1. In the
interests of clarity, the Commission is adding a comma in the last
sentence of paragraph (b)(4), which relates to candidate and committee
agreements to furnish certain documentation to the Commission. The
rules also slightly reword paragraph (b)(9) to more clearly indicate
that candidates must agree to pay any civil penalties arising from
violations of the FECA, whether provided for in a conciliation
agreement or imposed in a judicial proceeding.
Paragraph (b)(10) has been added to require that, as a precondition
of their receiving public funds, presidential candidates agree that
they will prepare all of their television commercials with closed
captioning or so that they are otherwise capable of being viewed by
deaf and hearing impaired individuals. Congress added this requirement
to 26 U.S.C. Sec. 9003(e) when it enacted section 354 of the
Legislative Branch
[[Page 31855]]
Appropriations Act of 1992, Pub. L. No. 102-393, 106 Stat. 1764 (1992).
One commenter requested that committees be allowed to pay the costs
of closed captioning with funds from their general election legal and
accounting compliance fund. However, the Commission views this not as a
compliance cost, but rather as a means for committees to get their
message out to those who otherwise would not hear it. Thus it is a
qualified campaign expense.
Section 9003.3 Allowable Contributions
On March 1, 1994, the Commission received a Petition for Rulemaking
from the Center for Responsive Politics requesting that the Commission
repeal its rules providing for the use of privately-financed general
election legal and accounting compliance funds in presidential
campaigns. Specifically, the petitioner sought repeal of 11 CFR
100.8(b)(15) (last two sentences), 106.2(b)(2)(iii)(last sentence),
9002.11(b)(5), 9003.3(a), and 9035.1(c)(1).
The Commission published a Notice of Availability on March 30,
1994, seeking statements in support of or in opposition to the
Petition. 59 FR 14794 (March 30, 1994). The Commission received four
comments in response to the Petition. Two comments were supportive,
while one opposed the reversal of the Commission's longstanding
policies regarding legal and accounting costs. The Commission
subsequently incorporated the Petition into this rulemaking, and sought
further comment on a number of options. The Commission received seven
additional comments on the issues raised in the Petition.
The petitioner argued that the Commission's rules allowing private
contributions of up to $1,000 for the GELAC undermine the ability of
the public financing laws to achieve the objective of eliminating the
corrupting influence of large contributions in presidential elections.
The Commission's reasons for establishing the GELAC are explained below
and in the 1980 Explanation and Justification, 45 FR 43371 (June 27,
1980). The decision to allow the GELAC to accept contributions up to
$1,000 is based on the structure of the FECA. As the Supreme Court
recognized in Buckley v. Valeo, 424 U.S. 1, 58 (1976), Congress created
contribution limits to combat the reality or appearance of improper
influence. Nevertheless, through the NPRM, the Commission sought
evidence either supporting or refuting the petitioner's claim that the
privately-funded GELAC undermines the public financing regime by
allowing the actuality and the appearance of improper influence in
presidential elections. No evidence was presented.
As explained more fully below, the Commission has decided not to
eliminate the GELAC. The Commission agrees with the commenters who felt
that the separate fund for compliance has worked well since the GELAC
rules were promulgated in 1980. To repeal them would force presidential
campaigns to devote some of their public funds for compliance expenses,
instead of using public monies for campaign expenses. One commenter
noted that in the absence of a GELAC, committees would face
extraordinary pressure to minimize the amount spent on compliance so as
to devote as much money as possible to campaigning. Reducing compliance
funds may very well reduce committees' abilities to keep good records,
thereby increasing the difficulty and duration of post-election audits.
Section 431(9)(B)(vii) of the FECA recognizes an exception for the cost
of certain legal and accounting compliance services that is not
recognized for other types of costs. The elimination of monetary
contributions of $1,000 or less for compliance purposes could force
some committees to turn to much larger in-kind donations of legal and
accounting services to ensure that their compliance obligations are
satisfied. See 2. U.S.C. Sec. 431 (8)(B)(ix) and (9)(B)(vii). The GELAC
is also used to make repayments, which would still need to be funded
from private sources if the campaign had no public funds remaining to
pay those amounts.
The Petition for Rulemaking also charged that these regulations
permit evasion of the prohibition on accepting contributions to defray
qualified campaign expenses established by the Fund Act. 26 U.S.C.
Sec. 9003(b). Furthermore, the Petition claims that the Commission's
regulations violate the spending limits established by the FECA. 2
U.S.C. Sec. 441a.
The Commission is not persuaded that the creation and operation of
the GELAC is beyond its statutory authority or inconsistent with the
public funding regime established by the Fund Act and the FECA. The
regulations first establishing a separate GELAC were duly promulgated
pursuant to 2 U.S.C. Sec. 437d(a)(8) and 26 U.S.C. Sec. 9009(b) for the
practical reasons explained above. They were transmitted to Congress on
June 13, 1980, together with the Explanation and Justification, for the
required legislative review period. They became effective on September
5, 1980, after neither House of Congress disapproved them under 26
U.S.C. Sec. 9009(c)(2). This is, as the Supreme Court has noted, an
``indication that Congress does not look unfavorably'' upon the
Commission's construction of the Act. FEC v. Democratic Senatorial
Campaign Committee, 454 U.S. 27, 34 (1981). See also, e.g., Sibbach v.
Wilson, 312 U.S. 1, 16 (1941) (``That no adverse action was taken by
Congress indicates, at least, that no transgression of legislative
policy was found''). Subsequently, in legislative recommendations to
Congress, the Commission has identified funding for compliance
activities as an area Congress may wish to clarify, but Congress has
not done so to date.
Consequently, the revised rules follow the previous provisions by
retaining sections 100.8(b)(15) (last two sentences), 106.2(b)(2)(iii)
(last sentence), 9002.11(b)(5), 9003.3, and 9035.1(c)(1). For the
reasons set forth, the Petition for Rulemaking filed by the Center for
Responsive Politics is denied.
Comments were also requested on several alternative revisions to
the GELAC. For example, the NPRM raised the possibility of limiting the
amount raised and spent for compliance to a fixed percentage of the
general election spending limit. Although one commenter supported
limiting the GELAC to 10% of the general election spending limit, or
less, several others believed a limit would be artificial, unworkable
and unfair, particularly since several factors make compliance costs
unpredictable. Hence, to some extent, these costs cannot be controlled
by the committee or known in advance. Other commenters opposed limiting
the GELAC because they believed limits would not overcome fundamental
defects in the current GELAC rules, and that the rules should be
repealed.
The Commission agrees that compliance costs can be unpredictable,
and therefore concludes that limiting the amount or percentage of the
GELAC is not advisable.
The NPRM also expressed concern that fundraising activities for the
GELAC could be used to generate electoral support for the candidate's
campaign. Accordingly, the NPRM sought comments on whether to continue
to permit the GELAC to pay the entire amount of these costs, or whether
a fixed percentage of GELAC fundraising costs should be paid by the
general election campaign committee.
In response, the petitioner and two commenters questioned the
appropriateness of allowing fundraising costs for the GELAC to be paid
for by the GELAC on the grounds these
[[Page 31856]]
expenses are campaign expenses that should be paid by the general
election campaign and subject to the spending limits. On the other
hand, several witnesses and commenters pointed out that effective
fundraising necessarily involves setting forth what the candidate
stands for. Some felt it is not appropriate to use public funds to
raise private contributions that are used solely for legal and
accounting compliance purposes.
The Commission has concluded that the rules regarding fundraising
for the GELAC should remain largely unchanged. The Commission's audit
and enforcement processes provide the appropriate mechanisms for
ensuring that GELAC fundraising activities (or any other type of
expenses paid from GELAC funds) do not involve campaigning for the
candidate's election.
However, changes are being made regarding the information to be
disclosed in solicitations to prospective contributors. Former section
9003.3(a)(1)(i)(A) required solicitations to clearly state that the
contributions are solicited for the GELAC. The NPRM proposed adding
language to let contributors know that their money would be used solely
for legal and accounting costs. Those supporting the Petition for
Rulemaking did not believe the proposed change would resolve the
problems they perceived. Others noted that if the required language is
lengthy enough, nobody will read it. Hence, the final rules have been
modified to require committees to tell contributors that federal law
prohibits the use of private contributions to pay a publicly-funded
general election candidate's campaign expenses. This new language more
clearly conveys to contributors that their contributions to the GELAC
will only be used to ensure compliance with the law. The GELAC
solicitation must also indicate how contributors should make out their
checks, so as to avoid potential confusion regarding the contributor's
intent.
Please note that the provisions regarding redesignations and
transfers of primary funds to the GELAC in paragraphs (a)(1)(ii)-(iv)
have been reorganized for clarity. In addition, new language has been
added to resolve questions regarding depositing designated and
undesignated contributions in the GELAC. Paragraph (a)(1)(i)(C) states
that contributions must be designated in writing for the GELAC to be
deposited directly into the GELAC. All contributions not designated in
writing for the GELAC must be deposited initially in a primary election
account and reported as such. An explanation of the term ``designated
in writing'' for the GELAC is being added as new paragraph (a)(1)(vi).
Please note that 11 CFR 110.1(b)(4) covers designations for a
presidential primary election. Contributions made out to the
candidate's name or the primary committee, unless properly designated
in writing for the compliance fund, cannot be deposited in it, and can
be transferred to it only if they are properly redesignated by the
contributor for the GELAC. Undesignated contributions cannot be
deposited in the GELAC, regardless of when they are made or received,
and can be transferred to it only if the committee receives a proper
GELAC redesignation from the contributor. An exception to the
redesignation requirement exists for leftover primary contributions
made during the matching payment period; they may be transferred to the
GELAC without securing redesignations if they exceed the amount needed
to pay remaining net outstanding campaign obligations for the primary
and any repayments. In addition, the revised rules permit contributions
made after the date of nomination, but not designated in writing for
the GELAC, to be redesignated for the GELAC only if they are not needed
to pay remaining net outstanding campaign obligations from the primary
campaign. The rules also specify that contributions designated in
writing or redesignated for the GELAC cannot be matched.
Current paragraphs (a)(2)(i) (A) through (H) of section 9003.3 set
forth the permissible uses of GELAC funds. The Petition for Rulemaking,
and several commenters, urged the Commission to delete current
paragraph (H) allowing GELAC funds to be used to pay unreimbursed costs
of providing transportation for the Secret Service and national
security staff. Other commenters and one witness urged the Commission
to retain this provision, given the alternative of requiring campaigns
to pay these costs from their limited campaign funds, even though
transporting Secret Service and National Security staff does little to
further the campaign.
This provision has been retained in the final rules because the
limits on the amounts that can be reimbursed for transporting the
Secret Service and National Security staff may be less than the actual
cost to the campaign, and because the campaign must transport security
personnel who do not provide a campaign-related benefit. However, GELAC
funds may not be used to pay transition costs (costs incurred by the
President-elect in preparation for the assumption of his or her
official duties which are not provided for under the Presidential
Transition Act of 1963) (cf. AO 1980-97); legal defense fund expenses
(expenses incurred in a judicial, civil, criminal, administrative,
state, federal, or Congressional investigation, inquiry or proceeding
not related to the Presidential campaign) (cf. AO 1979-37); or legal
expenses not related to ensuring compliance with the FECA and the Fund
Act, such as contract litigation.
In addition, the Commission has reduced from 70% to 50% the
standard amount that the GELAC may pay for computer-related costs, and
the corresponding exclusion from the spending limits. See 11 CFR
9003.3(a)(2)(ii)(A), (b)(6) and (c)(6). Some expressed concern that
this allocation demonstrated the impossibility of separating compliance
expenses from campaign expenses, thereby necessitating repeal of the
GELAC rules. One commenter argued that the allowance should be reduced
to 10%. On the other hand, others urged the Commission to increase the
allowance to 80% or 90% to more accurately reflect the burden of
compliance.
The Commission believes that a reduction from 70% to 50% accurately
reflects the increased usage of computers for non-compliance campaign-
related activities such as scheduling of campaign-related events,
electronic communications, word processing, office automation,
maintaining political databases, etc. Moreover, campaign committees
must incur computer costs to perform basic accounting purposes
irrespective of the need to comply with the campaign financing laws.
Please note, however, that committees may still deduct a higher amount
if they can show that their computer-related compliance costs are
higher.
Section 9003.3(a)(2)(iv) has been modified slightly to clarify that
funds remaining in the GELAC may only be used to pay debts remaining
from the primary or for other lawful purposes pursuant to 2 U.S.C.
Sec. 439a if all GELAC expenses have been paid. Two commenters argued
that this allows wealthy donors to evade the primary contribution
limits and results in corruption of the public financing system. As
explained above, the Commission believes that this provision is in
keeping with the purpose and structure of the public funding statutes
and notes that Congress did not disapprove of the Commission's
regulations on transfers of surplus GELAC funds.
[[Page 31857]]
Finally, two citations contained in 11 CFR 9003.3(a)(2)(iii) are
being revised. The first sentence of this paragraph referred to
paragraphs 9003.3(a)(2)(i) (A) through (E). This is being updated to
read, ``11 CFR 9003.3(a)(2)(i) (A) through (F) and (H).'' Also, the
previous citation to paragraph 9003.3(a)(2)(i)(F) in the second
sentence has been changed to refer to paragraph 9003.3(a)(2)(i)(G).
Portions of paragraphs (b) and (c) of section 9003.3 have been replaced
with language indicating that certain provisions in paragraph (a) apply
to minor party candidates and situations where major party candidates
do not receive full public funding.
Finally, the Commission is deleting the reference to final
repayment determinations contained in former paragraph (a)(2)(ii)(B),
now paragraph (a)(2)(ii)(G), as that term does not appear in the
revised repayment process. See discussion of 11 CFR 9007.2, below.
Section 9003.4 Expenses Incurred Prior to the Beginning of the
Expenditure Report Period or Prior to Receipt of Federal Funds
Former paragraph (a) of this section stated that certain
expenditures for polling could be considered qualified campaign
expenses for the general election, regardless of when the results of
the polling were received. However, the Commission has now decided that
polling expenditures should be attributed to the primary or the general
election limits based on when the results are received. See discussion
of 11 CFR 9034.4(e)(2), above.
The reference to polling in this paragraph has therefore been
deleted. The Commission is adding new language referring readers to the
new provisions at 11 CFR 9034.4(e)(2), to better alert them to this
change.
Section 9003.5 Documentation of Disbursements
Section 9003.5(b)(1)(i) sets forth the documentation required for
disbursements in excess of $200. Under the previous rules, a canceled
check, negotiated by the payee, was required in most situations, but
not when the committee presented a receipted bill from the payee
stating the purpose of the disbursement. The revised rules in this
section require committees to provide canceled checks negotiated by the
payees for all disbursements over $200. One witness opposed these
changes, and urged more flexibility in the requirements for
documentation. However, this change will assist the Commission's audit
staff in verifying that public funds are spent on qualified campaign
expenses. Committees should already have canceled checks in their
possession, so production would not be burdensome. New paragraph
(b)(1)(iv) indicates that the purpose of the disbursement must be noted
on the check if it is not included in the accompanying documentation.
Please note that, as in the past, the revised rules require that
documentation in addition to the committee's check be provided for
disbursements exceeding $200.
Paragraph (b)(3) of this section has also been changed to include
individuals who are advanced $1000 or less for travel and subsistence
in the definition of payee. The $500 limit in the previous rules was
raised to reflect current prices.
Part 9004--Entitlement of Eligible Candidates to Payments; Use of
Payments
Section 9004.4 Use of Payments
Winding Down Costs; Gifts and Bonuses
New paragraph (a)(5) of section 9004.4 addresses the use of public
funds to pay for gifts and bonuses for campaign staff and consultants.
It generally follows new language in section 9034.4, which is discussed
below. New language is being added to section 9004.4(a) to allow the
GELAC to pay 100% of salary and overhead expenses incurred after the
end of the expenditure report period. These expenses are presumed to be
solely to ensure compliance with the FECA and the Fund Act.
One commenter questioned why computer expenses were not included in
the proposed language when they were included in the corresponding
primary regulations. The rules have been revised to recognize that the
GELAC may pay 100% of computer expenses incurred after the end of the
expenditure report period.
Responsibility for Lost or Damaged Equipment
Accounting procedures employed by the Commission make allowance for
reasonable loss and normal damage of equipment leased or purchased by a
campaign. However, the Commission has at times encountered incidents
involving lost or damaged equipment that do not fall into these
categories. The Notice of Proposed Rulemaking therefore sought to
clarify how such situations should be handled in the audit process.
The Commission first sought comment on whether, as a precondition
for the receipt of public funds, the candidate should agree to meet
certain standards in handling public monies as well as in overseeing
the use of and accounting for public funds. Such standards would have
been specified at 11 CFR 9003.1(b). However, the Commission now
believes the question of liability for lost or damaged equipment is
best handled by amending 11 CFR 9004.4(b) to clarify that the cost of
lost or misplaced items may be considered a nonqualified campaign
expense for purposes of these rules.
The Commission recognizes that there are varying degrees of
responsibility in this area. The new rules therefore state that certain
factors should be considered prior to any determination that a
repayment is required. In particular, whether the committee
demonstrates that it made careful efforts to safeguard the missing
equipment would be of primary importance in this regard. Whether the
committee sought or obtained insurance, the type of equipment involved
and the number and value of items that were lost will also be among the
factors considered in making this determination. However, the
Commission has dropped as a stated factor the value of the lost
equipment as a percentage of the total value of the equipment leased or
owned by the committee, as the loss of even a small percentage of a
committee's equipment can involve a sizeable amount of public funding.
One commenter argued that the phrase ``used for any purpose other
than * * * to defray [ ] qualified campaign expenses'' in 26 U.S.C.
Secs. 9007(b)(4) and 9038(b)(2), stating the reasons for which the
Commission can require a repayment, connotes intentional conduct, so
the Commission is barred from ever requiring a repayment for lost or
misplaced items. While the word ``purpose'' can connote ``intent,'' the
Commission does not believe the two are synonymous in this context.
The Commission routinely determines that funds have been ``used for
the purpose'' of nonqualified campaign expenses, regardless of the
specific intent behind particular disbursements. Barring the Commission
from inquiring into such situations would run counter to its long-
standing practice in this area, and would also be inconsistent with the
responsibility to ensure that public funds are properly used.
One commenter proposed a number of safeguards a committee could
adopt to help ensure that losses are kept to a minimum. These include
(1) maintaining a written inventory of equipment, (2) establishing and
disseminating written procedures for handling of equipment by the
staff, (3) maintaining and implementing security
[[Page 31858]]
procedures that limit access to the premises on which equipment is used
and ensuring that equipment cannot be removed from the premises without
appropriate written authorizations, (4) limiting use of vehicles to
designated individuals, (5) maintaining a check-out system for portable
equipment such as cellular telephones, and making individuals
personally liable for return of the equipment, (6) obtaining insurance
where economically prudent in accordance with the standards of the
insurance industry, (7) establishing a procedure for reconciling
inventory of equipment, in accordance with recognized accounting
standards, when offices are closed, and (8) establishing procedures for
handling of funds, including the handling of cash and writing of
checks, that generally conform to recognized standards for internal
controls established by the American Institute of Certified Public
Accountants.
These are sound business practices that, if followed, should
greatly reduce the possibility of loss. The Commission plans to
recommend in the Financial Control and Compliance Manuals prepared in
connection with the 1996 Presidential election that committees
implement these or comparable standards.
This commenter further argued that, if a committee could
demonstrate ``substantial compliance'' with these guidelines, the
Commission should avoid an ``item by item'' examination of lost or
misplaced items. While committees that follow these standards should
have little problem with loss, the fact that they have done so should
not preclude the Commission from ever challenging a loss, especially
where costly items are involved.
The Notice sought comment on another approach, that of limiting the
dollar amount of lost property that could be considered a qualified
campaign expense. If a committee lost goods worth more than the
specified amount, any amount over that figure would be a nonqualified
campaign expense. This would have the advantage of focusing the
Commission's resources on only the more serious instances, while
recognizing that some loss is inevitable in large, lengthy campaigns.
The Commission believes this approach has merit, but feels it is
inappropriate to include an actual dollar figure in the text of the
rules. Rather, the Commission may address this matter in the context of
the confidential materiality thresholds established in connection with
each audit cycle.
Conforming Amendment
The Commission is moving paragraph (c) of 11 CFR 9004.4 to new 11
CFR 9007.2(a)(4). This paragraph, which deals with permissible sources
of repayments, is more properly located in the section dealing with
repayments.
Section 9004.5 Investment of Public Funds
Section 9004.5 of the existing regulations allows a committee to
invest public funds or use them in other ways to generate income,
provided that an amount equal to the net income derived from those
investments, minus any taxes paid, is paid to the Treasury. Section
9007.2(b)(4) also lists the receipt of any income as a result of
investment or other use of payments from the Fund pursuant to 11 CFR
9004.5 as one of the bases for requiring committees to make payments to
the Treasury.
The final rules revise section 9004.5 to clarify that the payment
requirement applies to any use of public funds that results in income
to the committee, regardless of whether the committee engaged in that
use with the intention of generating income. The final rules also
contain a conforming amendment to the introductory language of section
9007.2(b)(4), clarifying that the receipt of income from any use of
payments from the Fund is a basis for requiring payment to the
Treasury. The Commission received no comments on these provisions.
These revisions ensure that any income received through the use of
pubic funds benefits the pubic financing system. If a committee loses
an item that is insured, and the insurance proceeds exceed the cost of
replacing the item, such excess will be considered income under
sections 9004.5 and 9007.2(b)(4). However, these rules are not meant to
require payment of income that qualifies as exempt function income
under section 527(c)(3) of the Internal Revenue Code, 26 U.S.C.
527(c)(3), such as receipts from fundraising activities permitted under
11 CFR 9003.3.
Section 9004.6 Expenditures for Transportation Made Available to Media
Personnel; Reimbursements
Section 9004.6 of the existing rules has been reorganized for
clarification purposes with only minor substantive changes. The revised
version operates largely the same as the existing rule. Generally,
expenditures for transportation and other services provided to media
representatives, Secret Service personnel, and national security staff
will be qualified campaign expenses and, with the exception of costs
related to Secret Service and national security personnel, will count
toward the overall expenditure limits in section 9003.2. However,
committees may seek reimbursement for these expenses, and may deduct
reimbursements received from media representatives from the amount
subject to the spending limit, in accordance with paragraph (c) of the
revised rule.
Paragraph (b) limits the amount of reimbursement a committee can
seek from a media representative to 110% of that representative's pro
rata share of the actual costs of the transportation and services made
available. Any reimbursement received in excess of that amount must be
returned to the media representative under paragraph (d)(1). Paragraph
(b)(2) sets out the formula for determining a media representative's
pro rata share of the costs of transportation and services made
available.
Paragraph (c) states that the committee may deduct the
reimbursements received from media representatives from the amount of
expenditures subject to the overall limitation. The rule limits the
amount of this deduction to the actual cost of the transportation and
services provided to media representatives. However, the rule also
allows the committee to deduct an additional amount of the
reimbursements received from media representatives, representing the
administrative costs of providing these services and seeking
reimbursement for them. Generally, this deduction is limited to 3% of
the actual cost of the transportation and services provided to the
media representatives. However, the committee may deduct an amount in
excess of 3% if it can document the total amount of administrative
costs actually incurred.
Paragraph (c)(2) clarifies that ``administrative costs'' includes
all costs incurred by the committee in providing these services and
seeking reimbursement for them. Thus, any costs that are not part of
the actual cost of the transportation and services made available are
administrative costs, regardless of whether they are incurred directly
by the committee or by an independent contractor hired to make travel
arrangements and/or seek reimbursements. If the committee uses a
contractor, and the contractor charges the committee a fee for
providing these services, the fee charged is part of administrative
costs. The contractor's expenses and fees are not part of the actual
costs for which the committee may seek reimbursement under paragraph
(b)(1). Likewise, if the committee accepts credit card payments
[[Page 31859]]
from media representatives, any credit card fee, commission or discount
is an administrative cost.
Paragraph (d) requires the committee to return any reimbursement
received in excess of 110% of the actual pro rata cost of the
transportation and services made available to the media representative
providing the reimbursement. In addition, any amount in excess of the
amount deductible under paragraph (c) that has not been returned to a
media representative must be paid to the Treasury. For example, if a
representative's pro rata cost is $1,000, the committee can bill the
representative for $1,100. Assuming the committee claims the standard
3% to cover its administrative costs, it can deduct up to $1,030 from
the amount of expenditures subject to the limit. Any reimbursement
received in excess of $1,100 must be returned to the media
representative. Any portion of the remaining amount that exceeds the
$1,030 that can be deducted from the spending limit must be paid to the
Treasury.
Paragraph (e) requires the committee to report disbursements made
in providing these services as expenditures under 11 CFR 104.3(b)(2),
and to report any reimbursements received as offsets to operating
expenditures under 11 CFR 104.3(a)(3)(ix).
The final rule contains two changes to the existing rule that
reflect current practice. Generally, a media representative's pro rata
share of the actual cost of transportation and services made available
is determined by dividing the total costs of the services provided by
the total number of persons to whom the services are made available.
However, the new rule contains a special formula for determining the
pro rata cost of transportation on a government conveyance to a city
not served by regularly scheduled commercial airline service. See 11
CFR 9004.7(b)(5)(i)(C). Committees should not include national security
staff in the total number of persons to whom the services were made
available when determining pro rata cost in this situation. This
formula places incumbent candidates on an equal footing with
challengers, who are not required to transport national security
personnel. See discussion of section 9004.7, below.
The new rule also clarifies that the administrative costs incurred
by the committee in providing these services and seeking reimbursement
for them must be included in the amount reported as an expenditure
under paragraph (e).
Two commenters expressed general support for the Commission's
efforts to reorganize this section. However, they also urged the
Commission to treat billed out unreimbursed media transportation
expenses the same as unreimbursed expenses associated with transporting
Secret Service and national security personnel, by excluding these
expenses from the spending limit and allowing the use of GELAC funds to
reimburse the committee for these expenses.
The Commission has not adopted these recommendations because
committees are now better able to recover the full cost of providing
these services to media representatives than they were in the past.
Committees can require media representatives to provide advance payment
through the use of a credit card. If a representative fails to pay, the
committee may, if it chooses, deny the representative access to the
services being provided.
A review of one 1992 general election committee, and its associated
primary committee, clearly demonstrates that this policy does not
impose a financial burden. The two committees sought reimbursement from
media representatives for a combined total of about $7 million in
transportation expenses. Both committees collected more than 99% of the
amount they billed. Since the rules allow the committees to bill the
representatives for 110% of actual cost, they received about $7.5
million in reimbursements. Each committee received more than 109% of
the cost of the services they provided. Thus, notwithstanding the
failure of some representatives to provide reimbursement, the
committees received payments substantially in excess of the costs they
incurred.
In contrast, the amount of reimbursement received from Secret
Service and national security personnel is limited by the rules of
other federal agencies, not the FEC, and in some cases is not enough to
cover the costs of transporting these persons. Allowing committees to
use GELAC funds to cover the unreimbursed amounts ensures that
transporting these persons does not deplete the public fund.
Consequently, the Commission has decided to continue its current
policy of including unreimbursed media transportation expenses in the
amount subject to the spending limit. It has also decided not to allow
committees to pay these unreimbursed expenses with GELAC funds.
Section 9004.7 Allocation of Travel Expenditures
The NPRM sought comments on modifying 11 CFR 9004.7 to address
several issues regarding the cost of campaign-related travel using
government airplanes, helicopters and other vehicles. Please note that
these rules apply to travel on federal government conveyances, and
state or other government conveyances. The rules contemplate that for
plane flights between cites served by a regularly scheduled commercial
airline service, the campaign must reimburse the appropriate
governmental entity for the first class airfare, and that this amount
is treated as a qualified campaign expense. New language in section
9004.7(b)(5)(i) specifies that, for travel by airplane, the amount of
the lowest unrestricted non-discounted first class commercial airfare
available for the time traveled is to be used. Discounted fares that
are subject to restrictions on the dates and times of travel, or
restrictions on changing flights, are not comparable to the service
provided when the campaign uses a government conveyance. Several
commenters and witnesses supported this new language.
Under section 9004.7(b)(5)(v), campaign committees are responsible
for determining the first class fare at the time of the flight to
ensure that the right amount is paid to the appropriate government
entity, and to ensure that they maintain documentation supporting these
amounts. The lowest unrestricted non-discounted first class airfare is
available from several sources including travel agents, and on-line
services. Unfortunately, it is not possible to specify a single source
for this information.
Questions also arose regarding cities that are served by regular
air service, but first class flights are not available. In this case,
the revised rules specify that committees should use the lowest
unrestricted non-discounted coach fare available for the time traveled.
This approach is consistent with the valuation method established by
the Select Committee on Ethics of the United States Senate for the use
of private aircraft. See Interpretive Ruling No. 412, Select Committee
on Ethics, United States Senate, 101st Cong., 1st Sess., S. Prt. 101-18
at 251-52 (1989). It is also consistent with the valuation methods used
by the House of Representatives' Committee on Standards of Official
Conduct with respect to gifts of private transportation not associated
with official travel. See, Valuation of Gifts of Transportation on
Private Aircraft, Committee on
[[Page 31860]]
Standards of Official Conduct, Letter dated June 11, 1987. Several
witnesses and commenters supported this approach.
For cities not served by regularly scheduled commercial service,
the rules continue to specify that the amount to be reimbursed is the
charter rate. The NPRM had proposed using the charter rate for a
comparable airplane of similar make, model and size. Although that
would be consistent with the approaches used by the Congressional
Ethics Committees, several commenters and witnesses noted that there
are no aircraft comparable to Air Force I and Air Force II, which are
specially designed in terms of communications equipment and security.
It was also pointed out that the Commission's proposals diverged from
the approach taken in AO 1984-48 and the rules in 11 CFR 106.3(e).
It is not feasible to follow precisely the same approach as 11 CFR
106.3(e) because that rule governs non-presidential candidates who are
not accompanied by the Secret Service. Accordingly, the final rules
have been revised to indicate that the charter rate may be used for an
aircraft sufficient in size to accommodate the campaign-related
travelers, including the candidate, plus the news media and the Secret
Service. Under this approach, campaigns having the use of government
aircraft will incur approximately the same cost as campaigns that must
charter a plane sufficient to hold campaign staff, media and Secret
Service personnel.
The revised regulations address several questions that have arisen
regarding the costs of ``positioning'' flights needed to bring the
government aircraft from one stop where it dropped off the candidate
and campaign staff to another stop where it will pick them up to
continue the trip or return to the point of origin. New language in
section 9004.7(b)(5)(ii) incorporates the Commission's previous
practice regarding positioning flights. Thus, committees must pay the
appropriate government entity for the greater of the amount billed by
the government entity or the applicable fare for one passenger. This
approach recognizes that positioning flights are campaign-related, and
therefore these costs are properly treated as qualified campaign
expenses. Several commenters and witnesses argued there should be no
charge for positioning flights because commercial airlines do not
charge to bring their planes to the city of departure. However, this
argument fails to reflect the fact that charter services do build these
costs into their price structures. Several commenters also noted that
the Commission has not previously required committees to pay the costs
of fuel and crew time for positioning flight. The proposed language
regarding the payment for fuel and crew costs has been deleted from the
final rules because it would be burdensome for committees to absorb
these costs.
Paragraph (b)(5)(iii) in section 9004.7 contains provisions
regarding travel on federal or state government conveyances other than
airplanes. For travel by helicopter or ground conveyance, the
commercial rental rate should be paid for a conveyance sufficient in
size to hold those traveling on behalf of the campaign, plus media
representatives plus Secret Service personnel. This paragraph has been
modified from the language previously included in the NPRM because
there is no conveyance comparable in terms of security and
communications to those used by the President and Vice President.
Additional guidance on this area can be found in Advisory Opinion 1992-
34. Please note that in the case of a presidential candidate who is
also a state official, the equivalent rental conveyance does not need
to be able to hold state police or other state security officers.
Section 9004.7(b)(5)(iv) continues to require payment for the use
of accommodations paid for by a government entity. Under 11 CFR
100.7(a)(1)(iii)(B), the committee should use the usual and normal
charge in the market from which it ordinarily would have purchased the
accommodations. The term ``accommodations'' includes both lodging and
meeting rooms.
New paragraph (b)(8) of section 9004.7 explicitly reflects
Commission policy that travel on corporate conveyances is governed by
11 CFR 114.9(e). One witness suggested changing section 114.9(e) to
include the lowest unrestricted nondiscounted coach fare for travel on
corporate aircraft between cities where there is no first class
service. Such a change is beyond the scope of this rulemaking.
Finally, new language in paragraph (b)(2) provides additional
guidance as to when a stop will be considered campaign-related. It
follows the Commission's previous decisions in AOs 1994-15 and 1992-6
that campaign activity includes soliciting, making or accepting
contributions, and expressly advocating the nomination, election or
defeat of the candidate. See, e.g., AOs 1994-15, 1992-6, and opinions
cited therein. In these opinions, the Commission also indicated that
the absence of solicitations for contributions or express advocacy
regarding candidates will not preclude a determination that an activity
is campaign related. Hence, the revised rules include other factors the
Commission has considered in determining whether a stop is campaign-
related. Please note that this section continues to provide that
incidental campaign-related contacts during an otherwise noncampaign-
related stop do not cause the stop to be considered campaign-related.
While several witnesses and commenters favored inclusion of express
advocacy and contribution solicitations as tests of whether a stop is
campaign-related, some felt that the additional factors were
subjective, workable, failed to provide sufficient guidance, and
exceeded the Commission's authority given the language in Buckley, 424
U.S. at 79-80, equating ``expenditure'' with express advocacy, not mere
issue advocacy. Several suggested creating a rebuttable presumption
that a stop is not campaign-related in the absence of express advocacy
or the solicitation, making or acceptance of contributions. The
difficulty with this type of narrow interpretation of Buckley is that
if a stop is not campaign-related because there is no express advocacy
of the candidate's selection or defeat, then the costs of the stop
cannot be considered qualified campaign expenses, and cannot be paid
for from public funds.
Please note that paragraphs (b)(2) and (b)(3) of this section have
been revised to indicate what should be shown on the itinerary, and to
indicate what the official manifest created by the government or
charter company must be made available for Commission inspection.
Section 9004.9 Net Outstanding Qualified Campaign Expenses
The NPRM sought comments on a proposal to require primary
committees to include a categorical breakdown of their estimated
winding down costs when submitting a NOCO statement. The Commission
proposed this change in order to obtain more useful information about
the committee's remaining obligations.
The Commission has decided to require this breakdown, and has
incorporated it into paragraph 9034.5(b) of the primary regulations,
which are discussed in detail below. In addition, the Commission has
decided to require general election candidates to submit this
information with the statements of net outstanding qualified campaign
expenses [``NOQCE''] they submit after the general election. Under
paragraph 9004.9(a) of the final rules, a general
[[Page 31861]]
election committee must include a breakdown of the estimated winding
down costs listed on the NOQCE statement by category and time period.
The committee must provide estimates of quarterly or monthly expenses
from the date of the NOQCE statement until the expected termination of
the committee's political activity. These estimates must be broken down
into amounts for office space rental, staff salaries, legal expenses,
accounting expenses, office supplies, equipment rental, telephone
expenses, postage and other mailing costs, printing, and storage.
Requiring this breakdown will assist the Commission in ensuring
that public funds are used only for qualified campaign expenses. It
will also ensure that candidates who are eligible for post-election
funding receive the amount to which they are entitled.
The Commission is also amending paragraph (d)(1) of this section to
provide for a straight 40% depreciation of capital assets that
committees include on their post-election statements of net outstanding
qualified campaign expenses. Previously, committees could claim a
higher depreciation under certain circumstances. This amendment
conforms to the Commission's policy of adopting ``bright line'' rules
where feasible throughout the public funding process. The changes to
this section generally follow those to 11 CFR 9034.5(c)(1), discussed
below.
Part 9006--Reports and Recordkeeping
Section 9006.3 Alphabetized Schedules
The final rules include new section 9006.3, which requires that
presidential campaign committee reports containing schedules generated
from computerized files list in alphabetical order the sources of the
receipts, the payees and creditors. For individuals, including
contributors, the list must be in alphabetical order by surname.
However, presidential campaign committees are not required to
computerize their records if they do not wish to do so. The new
provision is intended to remedy situations in which, for example,
committees maintain computerized records of contributors in
alphabetical order, but file schedules with the order of the names
scrambled. That practice makes it very difficult, if not impossible, to
locate particular names on the committee's reports if the schedules are
voluminous, thereby thwarting the public disclosure purposes of the
FECA and making it more difficult to monitor compliance.
Alphabetization of lists of contributors is required for contributions
to minor and new party candidates. Lists of contributors to the GELAC
must also be alphabetized. In the event of a deficiency in the
Presidential Election Campaign Fund, where private contributions may be
accepted by major party candidates, alphabetical lists of contributors
are also required. Unless there is a deficiency in the Fund, major
party candidate who accept public funding for the general election may
not accept private contributions.
There was no consensus among the witnesses and commenters on this
proposal. While some supported it because it furthers full public
disclosure, others opposed it on the grounds that it could increase
computer costs and increase reliance on computer-driven accounting
systems. The Commission notes that committees able to demonstrate such
increased computer costs may claim a higher exemption for compliance
expenses. One witness stated that accounting software does not
currently alphabetize disbursements, debts or obligations, and
suggested that committees indicate on their reports whether
disbursements are listed by date of invoice, check number or date of
payment. However, Commission inquiries indicate that commercial
spreadsheet packages sort data in many different ways, including
alphabetically. Given that most presidential campaigns use a variation
of commercially available software, it should not be difficult for them
to use standard database management software to alphabetize the
information included on disclosure reports.
Part 9007--Examinations and Audits; Repayments
Section 9007.1 Audits
Further Streamlining the Audit Process
As noted in the NPRM, the Commission took several actions in the
1990-91 review of the public funding rules that have substantially
shortened the audit process. These included easing compliance with the
state-by-state allocation rules set forth at 11 CFR 106.2, and
clarifying the use of subpoenas in presidential audits. See 56 FR
35899-900, 35903-04 (July 29, 1991).
The NPRM sought comments on other changes that might further
streamline this process. These included publicly releasing the Interim
Audit Report (``IAR''), moving up the committee's oral presentation to
some earlier point in the process, and compressing or eliminating some
stages of the process.
Most of the commenters who addressed this issue opposed further
changes to the audit process at this time. They noted that, in part
because of changes in the last cycle, the Commission was able to
approve all Final Audit Reports for the 1992 presidential elections
substantially faster than in earlier cycles. They also noted that
issues tend to fall away as the process continues, and argued that the
size of the audits and the number of issues involved justify the length
of the current process.
Nevertheless, the Commission believes that it is appropriate to
further condense the audit process. This will result in more timely
audits and a more efficient use of Commission and committee resources.
Accordingly, the Commission is compressing the audit process by
eliminating the current IAR. Briefly, the revised process entails an
expanded exit conference, including a written Exit Conference
Memorandum (``ECM'') prepared by Commission staff and presented to the
committee at the exit conference; an opportunity for the committee to
respond to the ECM; an audit report that contains the Commission's
repayment determination; the opportunity for an administrative review
of that determination, including the opportunity to request an oral
hearing; and a post-review repayment determination and accompanying
statement of reasons. These stages are discussed in greater detail
below.
Former 11 CFR 9007.1(b)(2)(iii) provided for an exit conference at
which Commission staff discussed preliminary findings and
recommendations with committee representatives. The revised paragraph
states that Commission staff will in addition prepare a written ECM
that discusses these findings and recommendations, and provide a copy
of the ECM to committee representatives at the exit conference. The
listing of potential subjects to be addressed at the exit conference
includes those formerly listed with regard to the IAR, but deletes
references to Commission findings and enforcement actions, as the
Commission will not have made any findings or instituted any
enforcement actions at this point of the process.
Revised paragraph (c) gives the candidate and his or her authorized
committee 60 calendar days following the exit conference to submit in
writing legal and factual materials disputing or commenting on the
findings presented in the ECM. The candidate should also provide any
additional documentation requested by Commission staff during this
period. The language in former 11 CFR 9007.1(c) regarding preparation
of an IAR has been deleted, as the IAR is not longer part of the audit
process.
[[Page 31862]]
Revised paragraph (d) contains many of the procedural provisions
formerly found in 11 CFR 9007.1(c), which discussed preparation of the
IAR. This paragraph has been renamed ``Preparation of audit report,''
and refers to the report prepared following consideration of written
materials submitted in response to the ECM. Revised paragraph (d)(1)
notes that this report may address issues other than those discussed at
the exit conference. This report also contains the repayment
determination made by the Commission pursuant to 11 CFR 9007.2(c)(1).
In addition, former 11 CFR 9007.1(e)(2) has been moved to new
paragraph (d)(2). The language has been revised to conform with the
Commission's practice of issuing audit reports in their entirety,
including all matters noted in the audit process. Former 11 CFR
9007.1(e)(4) has been moved to new paragraph (d)(3), and the language
revised to clarify that addenda to the audit report may include
additional repayment determination(s).
Revised paragraph (e), which discusses the public release of the
audit report, corresponds to former 11 CFR 9007.1(e) (1) and (3), and
has been slightly reworded to conform to the new procedures.
Sampling
The Commission is also adding new paragraph (f) to 11 CFR 9007.1 to
incorporate sampling and disgorgement procedures that were adopted for
use during the 1992 presidential election cycle.
The Commission has a statutory obligation to complete the audits of
publicly-funded committees in a thorough and timely manner. In the
past, the resources required to conduct reviews of the contributions
received by presidential committees contributed to the Commission's
difficulty in fulfilling that obligation.
Beginning with the 1992 election cycle, the Commission began to
make more extensive use of statistical sampling for audits of
contributions received by publicly-financed presidential primary
election committees, and to use the sample results to quantify, in
whole or in part, the dollar value of any related audit findings. While
the Commission continues to conduct a limited non-sample review of
contributions received by these committees, most audit testing of
contributions and supporting documentation is now done on a sample
basis.
The Commission notes that this approach will apply in a general
election only to contributions that need to be raised due to a
deficiency in the Presidential Election Campaign Fund, to the GELAC, or
to contributions raised by new or minor party candidates. See 26 U.S.C.
Secs. 9003(c)(2), 9006(c); 11 CFR 9003.2 (a)(2) and (b)(2), 9003.3 (b)
and (c).
Some commenters argued that the Commission does not have the
statutory authority to use statistical sampling in conducting its
audits. However, the Commission has been given broad authority to audit
publicly-funded presidential and vice presidential campaigns, see 26
U.S.C. Sec. 9007(a), which authority includes the right to utilize
generally accepted auditing standards in conducting these audits.
The use of statistical sampling is legally acceptable for
projecting certain components of a large universe, such as excessive
and prohibited contributions. See, e.g. Chavez County Home Health
Service v. Sullivan, 931 F.2d 904 (D.C. Cir. 1991) (sampling audit used
to recoup Medicaid overpayments to health care providers); Michigan
Dep't of Education v. U.S. Dep't of Education, 875 F.2d 1196 (6th Cir.
1989) (sampling of 259 out of 66,368 total payment authorizations
upheld as proper basis for determining amount of misexpended federal
funds in vocational-rehabilitative program); Georgia v. Califano, 446
F. Supp. 404 (N.D. Ga. 1977) (Medicaid overpayments).
Most of these cases require the agency to demonstrate that it is
infeasible to conduct a 100% review. See, e.g., Chavez, 931 F.2d at
916. While the Commission was able to conduct a more extensive review
in the past, the increasing volume of records to be checked has now
made this impossible. An accountant who testified at the Commission's
public hearing stated that the Commission had no option but to use
sampling, because of the large number of records involved in
presidential campaign audits--a recent campaign with which he had been
worked had involved over 200,000 contributions and tens of thousands of
disbursements. These figures are not unusual in presidential campaign
audits.
One commenter argued that these cases, which involve recoupment of
government overpaid funds, should not be used to justify the use of
sampling to determine excessive and illegal contributions which come
from private sources. However, for statistical purposes there is no
distinction between these two situations.
Some commenters also questioned the validity of the statistical
sampling technique currently employed in this process. However, the
fact that the technique may be used in dissimilar programs, or programs
seeking other types of information, does not mean that it is not
appropriate for use in this context.
There is substantial judicial precedent to the effect that, when
considering a challenge to individual accounting rules, the reviewing
court must defer to agency expertise. In A.T.&T. Co. v. United States,
299 U.S. 232 (1936), the Supreme Court stated that before it would
overrule an agency's decision to use a certain accounting system, that
system ``must appear to be so entirely at odds with fundamental
principles of correct accounting as to be the expression of whim rather
than an exercise of judgment.'' Id. at 236-37. See also
Transcontinental Gas Pipe Line Corp. v. Federal Power Commission, 518
F.2d 459, 465 (D.C. Cir. 1975).
The statistical sampling method used for the Commission's matching
fund submission process was designed and recommended by Ernst and
Whinney (now Ernst and Young), one of the world's largest accounting
firms. The Commission believes that this method works equally well in
evaluating excessive and illegal contributions. In addition, in 1979
the Commission's Audit Division wrote to Arthur Andersen & Company,
asking whether it would be appropriate to use statistical sampling to
determine both matching fund eligibility and nonqualified campaign
expenses. They responded that this would be appropriate in both
situations. The Commission soon afterwards began to use statistical
sampling in making matching fund determinations, but has not yet done
so to determine nonqualified campaign expenses. However, if statistical
sampling can be used to extrapolate the amount of nonqualified campaign
expenses, it would seem equally capable of extrapolating the number of
excessive and illegal contributions.
One commenter who supported this approach requested that the
Commission advise committees in advance what records will be reviewed
on a full 100% basis. The Commission believes it is inappropriate to
divulge this kind of information in advance. Also, this can vary from
committee to committee.
In its letter endorsing the use of statistical sampling to
determine the amount of nonqualified campaign expenses, Arthur Andersen
& Company recommended ``that the resulting repayment determination [the
repayment determination based on the sample] not be deemed as final
until the committee being audited has been provided with the
opportunity to
[[Page 31863]]
furnish additional support that might indicate that a modification of
the sample results would be appropriate.'' The Commission follows this
recommendation in projecting excessive and illegal contributions.
The Commission's projection of the total amount of excessive or
prohibited contributions based on apparent excessive or prohibited
contributions identified in a sample of a committee's contributions is
only a preliminary finding. The Commission informs the committee which
items served as the basis for the sample projection, and the committee
responds to the specific sample items used to make the projection. If
the committee shows that any errors found among the sample items were
not excessive or prohibited contributions; were timely refunded,
reattributed or redesignated; or for some other reason were not errors,
a new projection is made, based on the reduced number of errors in the
sample. A witness at the Commission's hearing on these rules endorsed
the use of sampling in this context in part because of this opportunity
to work with Commission auditors and obtain a lower projection if the
committee provides additional information to reduce the number of
errors found in the sample.
Disgorgement
The Commission is further clarifying at new paragraph 9007.1(f)(3)
that the amount of any excessive or prohibited contributions that are
not refunded, reattributed or redesignated in a timely manner shall be
paid to the United States Treasury. Committees have 30 days from the
date of receipt in which to refund prohibited contributions, and 60
days in which to obtain the reattribution, redesignation or refund of
excessive contributions. 11 CFR 103.3(b) (1), (2) and (3). A
committee's failure to take action on these contributions is a failure
to cure contributions that are in violation of the FECA. The same is
true of attempts to cure them outside of the specified time periods.
Courts have upheld the use of disgorgement in cases involving
securities violations ``as a method of forcing a defendant to give up
the amount by which he was unjustly enriched.'' SEC v. Tome, 833 F.2d
1086, 1096 (2d Cir. 1987), citing SEC v. Commonwealth Chemical
Securities, Inc., 574 F.2d 90, 102 (2nd Cir. 1978). Requiring repayment
to the Treasury for contributions that have been accepted in violation
of 2 U.S.C. Secs. 441a and 441b is consistent with this reasoning.
Disgorgement eliminates the need for the Commission to monitor a
committee's refunds of excessive or prohibited contributions. In
addition, it is easier for a committee to make one payment to the
Treasury, as opposed to refunding multiple contributions. Finally,
although the Commission has used disgorgement in instances where a 100%
review is conducted, this is a practical approach in those situations
where it is difficult to discern the original contributors, e.g., where
a 100% review is not done.
Some commenters questioned the Commission's authority to require
repayment to the Treasury because this is not specifically provided for
in the public funding Acts. However, the equitable doctrine of
disgorgement supports the payment to the Treasury under these
circumstances. The purpose of statistical sampling would be defeated if
a 100% review of contributions was required to determine which
particular contributions must be refunded, reattributed or
redesignated. On the other hand, allowing committees to refund only
those excessive or illegal contributions uncovered in the sample could
result in a committee's retention of substantial funds to which it was
not legally entitled.
Disgorgement is also consistent with past Commission practice. See
Matter Under Review (``MUR'') 1704, where, based upon preliminary
estimates, Commission directed respondents to pay $350,000 to the
United States Treasury for contributions that would have exceeded
section 441a limits; Plaintiff's Motion to Effectuate Judgment, FEC v.
Populist Party, No. 92-0674(HHG) (D.D.C. filed May 4, 1993).
Moreover, this proposed payment is analogous to, and consistent
with, the requirement at 11 CFR 9038.6 that stale-dated checks (those
to creditors or contributors that remain outstanding after the campaign
is over) be paid to the Treasury. This issue arose after the 1984
election cycle, and the rule was promulgated as a means to codify the
Commission practice of requiring disgorgement, which was implemented
during that cycle. See 52 FR 20864, 20874 (June 3, 1987).
One commenter argued that the stale-dated check situation should be
distinguished from that involving excessive and illegal contributions,
because the former involves the return of public funds to the Treasury,
while the latter involves private contributions. Once again, however,
the same accounting principles apply to both situations.
Section 9007.2 Repayments
Further Streamlining the Audit Process
Section 9007.2 has been revised to reflect amendments made to
section 9007.1. Revised paragraph (a)(2) states that the audit report
provided to the candidate under 11 CFR 9007.1(d), which contains the
Commission's repayment determination, will constitute notification for
purposes of the three-year notification requirement of 26 U.S.C.
9007(c). This approach is consistent with two recent decisions by the
United States Court of Appeals for the District of Columbia Circuit,
Dukakis v. Federal Election Commission, No. 93-1219 (D.C. Cir. May 5,
1995) and Simon v. Federal Election Commission, No. 93-1252 (D.C. Cir.
May 5, 1995).
Paragraph (a)(2) has also been revised to conform to the statutory
requirement that the 26 U.S.C. 9007(c) notification period ends 3 years
after the day of the presidential election.
Paragraph (a)(3) has been reworded to state that once the candidate
receives notice of the Commission's repayment determination contained
in the audit report, the candidate should give preference to the
repayment over all other outstanding obligations of the committee,
except for any federal taxes owed by the committee.
The Commission is moving former 11 CFR 9004.4(c) to new paragraph
(a)(4). This paragraph, which deals with permissible sources of
repayments, is more properly located in the section dealing with
repayments.
New repayment determination procedures are set forth in revised
paragraph (c). Revised paragraph (c)(1) largely follows the former
language, but refers to the audit report as the source of the repayment
determination. The last sentence of that paragraph has also been
revised to clarify that the candidate shall repay to the United States
Treasury the amount which the Commission has determined to be
repayable, using procedures set forth in 11 CFR 9007.2(d).
Revised paragraph (c)(2) sets forth the procedures necessary for a
committee to obtain an administrative review of the repayment
determination. Please note that this review is limited to repayment
issues. It does not cover other issues, such as disgorgement, that will
if necessary be handled through the enforcement process.
Paragraph (c)(2)(i) corresponds to former 11 CFR 9007.2(c)(2) and
addresses the submission of written materials as part of this process.
Paragraph (c)(2)(ii) corresponds to former 11 CFR 9007.2(c)(3),
discussing
[[Page 31864]]
the oral hearing. The language in these paragraphs for the most part
follows the former rules, with the following additions. The deadline
for filing written materials seeking an administrative review of the
repayment determination has been lengthened from 30 to 60 days. Also,
the candidate's failure to timely raise an issue in the written
materials presented pursuant to paragraph (c)(2)(i) will be deemed a
waiver of the candidate's right to raise the issue at any future stage
of the proceedings. See Robertson v. FEC, 45 F.3d 486 (D.C. Cir. 1995).
Further, under paragraph (c)(2)(ii), a candidate who desires an oral
hearing must, at the same time he or she presents written materials
pursuant to paragraph (c)(2)(i), request such a hearing in writing, and
identify in that request the repayment issues the candidate wishes to
address at the oral hearing.
Revised paragraph (c)(3) corresponds to former 11 CFR 9007.2(c)(4),
and now deals with repayment determinations made after an
administrative review. Please note that the statement regarding the
Commission's possible consideration of new or additional information
from other sources does not provide a means for the candidate or anyone
acting on the candidate's behalf to make untimely submissions. Former
11 CFR 9007.2(c)(4) has been repealed.
Paragraphs (d), (f), (g) and (i) have been revised to conform with
the new terminology used elsewhere in this section.
Gains On the Use of Public Funds
As indicated in the discussion of section 9004.5, above, the final
rules contain a conforming amendment to the introductory language of
section 9007.2(b)(4). This amendment clarifies that receiving income
from investment or any other use of payments from the Fund is a basis
for requiring payment to the Treasury. The Commission will require the
committee to pay any such income received, less taxes paid, to the
Treasury. The revisions to sections 9004.5 and 9007.2 ensure that any
income received through the use of public funds benefits the public
financing system. However, as indicated above, this provision does not
apply to income that is exempt function income under 26 U.S.C.
Sec. 527(c)(3), such as amounts received from fundraising activities.
Interest
The Commission sought comment in the NPRM on whether interest
should be assessed in certain situations. Although some commenters
opposed this idea, the Commission believes it is appropriate to assess
interest on late repayments, and is therefore amending 11 CFR 9007.2(d)
to provide that interest will be assessed on repayments made after the
initial 90-day repayment period established at 11 CFR 9007.2(d)(1) or
after the 30-day repayment period established at 11 CFR 9007.2(d)(2).
In the absence of interest charges for late repayments, debtors
have little or no incentive to make timely repayments. Without this
requirement, debtors may be more likely to pay their private sector
debts first, as these generally accrue interest, and their government
debts last.
While the presidential fund Acts contain no language on interest
assessment, federal common law holds that interest may be assessed on
debts owed the government, even without a statutory provision granting
that power. Robinson v. Watts Detective Agency, 685 F.2d 729, 741 (1st
Cir. 1982), cert. denied, 459 U.S. 1204 (1983). In particular, a
statute is not necessary to compel payment of interest where equitable
principles allow this. Young v. Godbe, 82 U.S.. 562, 565 (1872).
The Commission has already established the precedent that it may
assess interest when a presidential committee seeks a stay of a
repayment determination pending appeal. 11 CFR 9007.5(c)(4),
9038.5(c)(4). One reason cited by the Commission for taking this action
was to protect the Treasury ``by helping to ensure that the repayment
challenge is a serious one and not a dilatory tactic.'' Agenda Document
86-118, Proposed Revision of Title 26 Regulations (Nov. 26, 1986).
Another was that, if the candidate is earning interest on the disputed
repayment amount, the Treasury and not the candidate should receive the
benefit if the Commission's repayment determination is upheld. Id. Both
reasons are equally applicable in this situation.
By agreeing to certain conditions, including an audit and
appropriate repayment, the presidential committees have established a
contractual relationship with the Commission under which interest
assessment becomes appropriate. See West Virginia v. United States, 479
U.S. 305, 310 (1987). Also, if a debtor-creditor relationship is
established, ``interest is allowed as a means of compensating a
creditor for loss of use of his money.'' United States v. United Drill
and Tool Corporation, 183 F.2d 998, 999 (D.C. Cir. 1950). Such a
relationship exists in this context in that, prior to the receipt of
public funds, the candidate must agree to repay unexpended funds, money
determined to be spent in an unqualified manner, and amounts received
in excess of entitlement. 11 CFR 9003.1(b)(6), 9033.1(b)(7).
The interest currently assessed under 11 CFR 9007.5(c)(4) and
9038.5(c)(4) is the greater of that calculated using the formula set
forth at 28 U.S.C. Sec. 1961 (a) and (b) for computing interest on
money judgments in federal civil cases, or the amount actually earned
on the funds set aside under those sections. The Commission believes it
is appropriate to utilize a similar approach in this situation. The
Commission is therefore adding new paragraph 9007.2(d)(3) to provide
that a comparable formula shall be used in assessing interest on late
repayments under section 9007.2.
Section 9007.3 Extensions of Time
The Commission is amending paragraph (c) to include in that
paragraph the policy that, whenever 11 CFR Part 9007 establishes a 60-
day response period, the Commission may grant no more than one
extension of time, which extension shall not exceed 15 days. The rules
formerly provided for a 30 day response period. Materials provided to
the committees prior to the audit process explained that extensions of
time were limited to a single, 45 day extension. The rules thus
continue the former 75-day total response period, and the initial 60-
day response period may result in fewer extension of time requests.
Section 9007.5 Petitions for Rehearings; Stays of Repayment
Determinations
The Commission is making conforming amendments to paragraphs (a),
(b), (c)(1)(ii) and (c)(4), to reflect changes in terminology for the
audit and repayment process. See discussion of 11 CFR 9007.1 and
9007.2, above.
Section 9007.7 Administrative Record
New section 9007.7 explains which documents constitute the
administrative record for purposes of judicial review of final
determinations regarding candidate certification and eligibility, and
repayment determinations. The NPRM had included a lengthy list of
documents that usually form the basis of the administrative record. It
also indicated that certain items are not part of the Commission's
decisionmaking process, and thus not part of the record on review.
One commenter expressed concern that the Commission was trying to
impermissibly restrict documents to be included in the administrative
record. The comment noted that judicial review is based on the whole
record before the
[[Page 31865]]
agency. Similarly, another commenter stated that the administrative
record should include all materials that form the basis of the
Commission's decisions. Two comments suggested including workpapers on
which the auditors relied in making their calculations and
recommendations. During the course of the audit and repayment
processes, it has been the Commission's practice to provide committees
with the audit work papers they need to formulate their responses.
The Commission agrees that the administrative record includes all
materials it considered in making its decision, and the final rules
have been modified to reflect this. Thus, it will generally include all
documents circulated to the Commission (including attachments) and
materials referenced in those documents. However, documents in the
files of individual Commissioners, or documents in FEC employees' files
which do not constitute a basis for the Commission's decisions, are not
included in the record. The administrative record also does not include
transcripts or tapes of Commission discussions of audit or repayment
matters. See, Common Cause v. Federal Election Commission, 676 F. Supp.
286, 289 and n.3 (D.D.C. 1986). Although these materials may sometimes
be made available under the Freedom of Information and Government in
the Sunshine Acts, they do not provide an adequate explanation of the
reasons for the Commission's decisions because they represent pre-
decisional discussions. Documents properly subject to privileges such
as an attorney-client privilege, or items constituting attorney work
product, are also excluded from the administrative record.
The new rules indicate that documents and materials timely
submitted by publicly-funded committees for Commission consideration
are a part of the administrative record. Materials will also be
considered timely submitted if they are received within an extension of
time granted by the Commission. It is important that committees avail
themselves of the opportunity to submit documents and other materials
in a timely fashion, as they will be deemed to have admitted all
specific findings and conclusions contained in an audit report or a
repayment determination unless they specifically contest those findings
and conclusions and provide supporting evidence and legal arguments at
the appropriate time. When submitting evidentiary materials, committees
should keep in mind that statements of counsel that are not supported
by personal knowledge do not constitute evidence. Committees may
include in their submissions the audit work papers with which they have
been provided. They need not include transcripts or tapes of their oral
presentation to the Commission regarding repayment determinations, as
those materials are already a part of the record.
Section 9008.12 Repayments
A conforming amendment has been added to paragraph (a)(2), to state
that the audit report provided to the convention committee that
contains the Commission's repayment determination will constitute
notification for purposes of the three-year notification requirement of
26 U.S.C. 9008(h).
The Commission's rules governing public financing of national
nominating conventions provide at 11 CFR 9008.11 that audits of
convention committees follow the procedures for audits of presidential
campaign committees set forth at 11 CFR 9007.1 and 9038.1. The former
language contained a reference to the IAR, which is no longer a part of
these procedures.
Part 9032--Definitions
Section 9032.9 Qualified Campaign Expenses
The Commission is adding a conforming amendment to paragraph (c) of
this section to reflect the new attribution of certain expenditures
between the primary and the general election limits. The amendment
notes that certain expenditures formerly covered by this paragraph will
not be attributed under these new guidelines. See discussion of 11 CFR
9034.4(e), below.
Part 9033--Eligibility for Payments
Section 9033.1 Candidate and Committee Agreements
In the interests of clarity, the Commission is adding a comma in
the second sentence of 11 CFR 9033.1(b)(5). Paragraph (b)(5) concerns
candidate and committee agreements to furnish certain documentation to
the Commission.
A conforming amendment has been added to paragraph 9033.1(b)(7),
clarifying that the same candidate and committee responsibilities that
attach to an audit and examination made pursuant to 11 CFR part 9038
also attach to part 9039 investigations, under appropriate
circumstances. See discussion of part 9039, below.
The final rules slightly reword paragraph (b)(11) of this section
to more clearly indicate that candidates must agree to pay any civil
penalties arising from violations of the FECA, whether provided for in
a conciliation agreement or imposed in a judicial proceeding.
New paragraph 9033.1(b)(12) has been added to require presidential
primary candidates to include closed captioning in the preparation of
their television commercials, as a precondition of their receiving
public funds. This amendment corresponds to new paragraph
9003.1(b)(10), discussed above. The Legislative Branch Appropriations
Act of 1992 does not specifically amend 26 U.S.C. Sec. 9033, which sets
out the eligibility requirements for presidential primary candidates.
However, the Appropriations Act does state that the closed captioning
requirement inserted in 26 U.S.C. Sec. 9003(e) applies both to general
election candidates and to candidates who are eligible for funding
``under chapter 96'' of Title 26 of the United States Code, that is,
the Matching Payment Act. The Commission is therefore amending 11 CFR
9033.1(b) to reflect this new requirement.
Section 9033.4 Matching Payment Eligibility Threshold Requirements
Former 11 CFR 9033.4(b) stated that, in evaluating a candidate's
matching fund submission, the Commission could consider other relevant
information in its possession, including but not limited to past
actions of the candidate in an earlier campaign. This provision was
held to exceed the Commission's statutory authority in LaRouche v. FEC,
996 F.2d 1263 (D.C. Cir. 1993), cert. denied 114 S. Ct. 550. The
Commission is therefore deleting this paragraph from the rule.
Section 9033.11 Documentation of Disbursements
Revised section 9033.11 follows revised section 9003.5.
Part 9034--Entitlements
Section 9034.4 Use of Contributions and Matching Payments
Winding Down Costs
The regulations at 11 CFR 9034.4(a)(3)(i) permit candidates to
receive contributions and matching funds, and make disbursements, for
the purpose of defraying winding down costs over an extended period
after the candidate's date of ineligibility (``DOI''). These amounts
are treated as qualified campaign expenses, and can result in
additional audit fieldwork and preparation of addenda to audit reports
to focus on these receipts and disbursements.
As part of an effort to streamline and shorten the audit process,
the
[[Page 31866]]
Commission sought comment on ways to reduce the winding down time for
campaigns. The NPRM suggested limiting the amount that a candidate may
receive for winding down costs to no more than a specified dollar
amount, or a fixed percentage of the candidate's total expenditures
during the campaign, or a fixed percentage of total matching funds
certified for the candidate. The NPRM questioned whether campaigns that
receive a pre-established dollar amount, but do not use the entire
amount for winding down costs, should be permitted to retain the
unspent amount. Alternatively, comments were sought on establishing a
cutoff date after which winding down expenses would no longer be
considered qualified campaign expenses.
Several commenters and witnesses opposed limiting wind down costs.
They felt that basic fairness requires campaigns to have the resources
necessary to respond during the audit process and to defend themselves
against enforcement proceedings. It was also pointed out that during
this period, campaigns need to be able to verify the proper payment of
remaining bills, and that it would be a waste of federal funds if they
were hampered in identifying incorrect bills.
The Commission agrees that it would be quite difficult to select an
amount or time frame sufficient to meet reasonable expenses incurred in
winding down the campaign. A limit on the amount of public funds
available for winding down would provide the same difficulties as a
restriction on the total funds to be used for wind down. Consequently,
the final rules contain no new restrictions on the amount spent on
winding down or the time taken. Thus, the Commission will continue to
review the committee's wind down costs on a case by case basis.
Post-DOI Expenses as Exempt Compliance Expenses
New language in section 9034.4(a) incorporates the current practice
of permitting publicly-funded primary committees to treat 100% of
salary, overhead and computer expenses incurred after the candidate's
DOI as exempt compliance expenses, beginning with the first full
reporting period after DOI. See, Financial Control and Compliance
Manual for Presidential Primary Candidates Receiving Public Financing,
p. 25 (January 1992). Two witnesses and one commenter urged adoption of
this provision. Please note that this regulation does not apply to
expenses incurred during the period between DOI and the date on which a
candidate either re-establishes eligibility or ceases to continue to
campaign.
Gifts and Bonuses
New language in section 9034.4(a) and section 9004.4(a) permits
campaign committees to use federal funds to defray the costs of gifts
for committee staff, volunteers and consultants, as long as the gifts
do not exceed $150 per individual and as long as all gifts do not
exceed $20,000. This approach received a favorable response from one
witness and one commenter. It is somewhat similar to a provision
included in the public funding rules for convention committees at 11
CFR 9008.7(a)(4)(xii). See 59 FR 33618 (June 29, 1994).
With regard to bonus arrangements provided for in advance in a
written contract, the NPRM sought comments on whether the amount of
these bonuses should be restricted to a fixed percentage of the
compensation paid as provided by the contract, or whether these bonuses
should be subject to the overall $20,000 limit. A number of commenters
and witnesses opposed these suggestions on the grounds that bonus
decisions should remain within the discretion of the committees;
primary campaigns may not know at the outset how much will be available
for bonuses; and campaigns may choose not to enter into written
employment contracts. Some felt these proposals were more feasible for
general election committees than for primary campaigns because the
party nominees know at the outset what their funding level will be for
the general election. It was also suggested that all bonuses be paid
within ten days of a committee's date of ineligibility.
The final rules have been revised to require that for general
election campaigns, bonus arrangements must be provided for prior to
the date of the general election in a written contract, and must be
paid during the expenditure report period, which ends thirty days after
the general election. Similarly, primary campaigns must make bonus
arrangements in advance and must pay bonuses no later than thirty days
after the candidate's DOI. These time frames allow ample time for
campaigns to make decisions regarding bonuses.
Lost or Damaged Equipment
The Commission is adding new paragraph (b)(8) to section 9034.4 to
clarify that the cost of lost or damaged items may be considered a
nonqualified expense for purposes of these rules. This change parallels
new paragraph 9004.4(b)(8), and is discussed in more detail in
connection with section 9004.4, above.
Funding General Election Expenses With Primary Funds
The Presidential Election Campaign Fund Act, the Presidential
Primary Matching Payment Account Act, and Commission regulations
require that publicly funded presidential candidates use primary
election funds only for expenses incurred in connection with primary
elections, and that they use general election funds only for general
election expenses. 26 U.S.C. 9002(11), 9032(9); 11 CFR 9002.11, 9032.9.
These requirements are tied to the overall primary and general election
expenditure limits set forth at 2 U.S.C. 441a (b) and (c), and at 26
U.S.C. 9035(a). See also 11 CFR 110.8(a), 9035.1(a)(1).
Questions have arisen in recent election cycles as to whether
certain expenses charged to primary committees were in fact used to
benefit the general election. Once a candidate has secured enough
delegates to win the nomination, the focus of the campaign may turn in
large part to the general election. However, it can be difficult to
distinguish between primary campaign activity, such as that designed to
lock up delegates or otherwise related to the outcome of the primary
campaign, and convention preparation, from activity that is geared
towards winning the general election.
The NPRM sought general suggestions on how best to address this
situation. For example, it suggested that certain expenditures within a
set time frame before the date of the candidate's nomination might be
subject to higher scrutiny. In addition, the Notice contained specific
proposals on how to treat capital assets, certain goods and services,
and supplies and materials in this context; and sought comments on how
other expenditures, such as those for campaign related travel and media
expenses, should be attributed.
Most of the commenters who addressed this issue favored a ``bright
line'' cut-off date between primary and general election expenses,
which would give committees clear guidance as to which expenses will be
attributed to the primary election and which to the general election.
Some suggested that this date be set as the candidate's date of
ineligibility. Moreover, most comments opposed any guidelines or
presumptions that would require a ``case-by-case'' determination of how
certain expenditures should be characterized.
The Commission recognizes that it can be difficult to select a
single ``bright
[[Page 31867]]
line'' date appropriate for all campaigns under all circumstances.
Also, the adoption of ``bright line'' rules could in certain instances
result in the primary committee's subsidizing the general election
committee, or vice versa. Nevertheless, the Commission believes this
approach is appropriate with regard to certain specific types of
expenditures that may benefit both the primary and the general
election. These include expenditures for polling; state or national
offices; campaign materials; media production costs; campaign
communications; and campaign-related travel costs (see also 11 CFR
9034.5, depreciation of capital assets, discussed below).
The Commission recognizes that there could be situations in which
this approach does not accurately reflect the relative impact of
particular expenditures. However, these differences should balance
themselves out over the course of a lengthy campaign. In addition, a
major factor in the Commission's decision is the desire to complete the
audits more quickly and using fewer agency resources. It can be
extremely time- and labor-intensive for both the Commission and the
committees to examine thousands of individual expenditures, especially
where, as here, both the timing and the purpose of each expenditure is
at issue. Accordingly, the Commission is adding a new paragraph (e) to
this section partially deal with this situation.
The introductory language to this paragraph notes that these rules
apply only to campaigns of candidates who receive public funding in
both the primary and the general election. Paragraph (e)(1) states the
general rule that any expenditure for goods or services that are used
exclusively for either the primary or the general election campaign
shall be attributed to the limits applicable to that election.
Please note that primary expenditures are also attributable to the
state allocation limits set forth in 11 CFR 106.2. Also, any
expenditures that are attributed to the general election limits shall
be paid for with general election funds.
Paragraph (e)(2) states that polling expenses shall be attributed
according to when the results of the poll are received. If the results
are received on or before the date of the candidate's nomination, the
expenses will be considered primary election expenses. If partial
results are received both before and after the date of the candidate's
nomination, the costs shall be allocated between the primary and the
general election limits based on the percentage of results received
during each such period.
A conforming amendment is also being made to 11 CFR 9003.4(a) (see
discussion above). That paragraph formerly stated that certain polling
expenses could count against the general election limit regardless of
when the results of the polling were received.
Paragraph (e)(3) addresses overhead expenditures and payroll costs
incurred in connection with state or national campaign offices, and
attributes these according to when usage of the office occurs. For
usage on or before the date of the candidate's nomination, these
expenses are attributed to the primary election, except for periods
when the office is used only by persons working exclusively on general
election campaign preparations. The definition of ``overhead
expenditures'' set forth in 11 CFR 106.2(b)(2)(iii)(D) is incorporated
by reference into this paragraph.
Paragraph (e)(4) addresses campaign materials, including bumper
stickers, campaign brochures, buttons, pens and similar items, that are
purchased by the primary campaign and later transferred to the general
election campaign. Any such materials that are used in the general
election shall be attributed to the general election limits. Materials
transferred to the general election committee but not used in the
general election shall be attributed to the primary election limits.
Paragraph (e)(5) states that 50% of production costs for media
communications that are broadcast or published both before and after
the date of the candidate's nomination shall be attributed to the
primary election limits, and 50% to the general election limits. Please
note that distribution costs, including such costs as air time and
advertising space in newspapers, must be paid for 100% by the primary
or general election campaign depending on when the communication is
broadcast or distributed.
The Commission notes that the pre- and post-nomination
communications need not be identical for this attribution ratio to
apply. Obvious changes include such matters as stating that the
communication was ``paid for by '' the candidate's general rather than
primary election campaign committee; and references to the candidate as
the party's actual, rather than potential, nominee. However, there are
also situations where a communication is substantially unchanged,
except for a portion targeted to, for example, specific constituent
groups or different parts of the country. The Commission also intends
to apply the 50/50 attribution ratio to these communications.
Paragraph (e)(6) addresses campaign communications, including
solicitations, that are not used in both the primary and the general
election. In the past questions have arisen as to whether a per-DOI
communication was intended to influence the general election, or vice
versa (e.g., thank you letters for primary contributions sent after the
date of the candidate's nomination).
Paragraph (e)(6)(i) states that the costs of a solicitation shall
be attributed to the primary election or to the General Election Legal
and Accounting Compliance Fund, depending on for which purpose the
solicitation is made.
While candidates may not accept private contributions to cover
expenses incurred to benefit the general election campaign, they may
solicit contributions for the GELAC. The rule states that, if a
candidate solicits funds for both the primary election and for the
GELAC in a single communication, 50% of the cost of the solicitation
shall be attributed to the primary election, and 50% to the GELAC.
Consequently, the primary committee must pay 50% of the solicitation
costs, and the GELAC must pay 50%.
Occasionally a committee will solicit contributions to retire a
primary election debt, and receive more money in response to the
solicitation than is needed to pay off the debt. Under 11 CFR
9003.3(a)(1)(iv)(C), the committee may transfer such excess
contributions to the GELAC if proper redesignations are obtained. If a
committee chooses to seek redesignations, the cost of the solicitation
shall be attributed to the primary limits, while any redesignation
costs shall be paid by the GELAC.
Paragraph (e)(6)(ii) states that the costs of a communication that
does not include a solicitation shall be attributed to the primary or
general election limits based on the date on which the communication is
broadcast, published or mailed.
Paragraph (e)(7) states that expenditures for campaign-related
transportation, food and lodging by any individual, including a
candidate, shall be attributed according to when the travel occurs. If
the travel occurs on or before the date of the candidate's nomination,
the cost is a primary election expense, except that the costs of travel
by a person who is working exclusively on general election campaign
preparations shall be considered a general election expense even if the
travel occurs before the candidate's nomination. Travel both to
[[Page 31868]]
and from the convention shall be a primary expense.
Sources of Repayment
The rule set out in current paragraph 9034.4(c) has been moved to
new paragraph 9038.2(a)(4). Paragraph 9034.4(c) has been removed and
reserved for future use. This change generally follows the conforming
amendment discussed in connection with section 9004.4, above.
Section 9034.5 Net Outstanding Campaign Obligations
NOCO Statements
The final rules make a number of changes in the requirements for
submission of NOCO statements set out in section 9034.5. Paragraph (b)
is amended to require committees submitting NOCO statements to include
a breakdown of the estimated winding down costs listed on the statement
by category and time period. The committee must provide estimates of
quarterly or monthly expenses from the date of the NOCO statement until
the expected termination of the committee's political activity. These
estimates must be broken down into amounts for office space rental,
staff salaries, legal expenses, accounting expenses, office supplies,
equipment rental, telephone expenses, postage and other mailing costs,
printing, and storage.
One commenter noted that it can be difficult to estimate winding
down costs until well into the audit process, because the committee
continues to receive bills, and also because it is not clear what
issues will arise until the audit is underway.
The Commission recognizes that the winding down figures on a
committee's NOCO statements are, by necessity, estimates of anticipated
expenses. However the Commission has decided to require a breakdown of
these expenses in order to obtain more meaningful information than is
obtained under the existing rule. Currently, many NOCO statements list
the candidate's estimated necessary winding down costs as a single lump
sum. Requiring the breakdown will help the Commission determine whether
the candidate is entitled to receive the entire estimated amount.
The final rules also revise the schedule for submission of revised
NOCO statements. Under the current rules, candidates are required to
submit a revised NOCO statement with each matching payment request
submitted after DOI. The proposed rules would have required candidates
to submit an additional revised NOCO statement just before the date
when matching fund payments will be certified, on a date to be
published by the Commission. The additional statement would be used to
ensure that the amount of matching funds certified accurately reflects
the committee's financial situation at the time of certification. One
commenter thought this additional requirement would be burdensome and
will not solve the problem identified in the NPRM.
The Commission believes that requiring two revised NOCO statements
for each matching payment submission is unnecessary. Consequently, the
final rules change the Commission's current policy of requiring
candidates to submit a revised NOCO statement at the time of each post-
DOI matching payment submission. Instead, the final rules require the
candidate to submit a certification that his or her remaining net
outstanding campaign obligations equal to or exceed the amount
submitted for matching. If the candidate so certifies, the Commission
will process the matching payment submission.
The candidate must then submit a revised NOCO statement just before
the next regularly scheduled payment date, on a date to be determined
and published by the Commission in the Federal Register. The statement
must reflect the financial status of the campaign as of the close of
business three business days before the due date, and must also contain
a brief explanation of each change in the committee's assets and
obligations from the most recent NOCO statement. This will allow the
Commission to adjust the committee's certification to reflect any
change in the committee's financial position that occurs after
submission of the initial matching payment request. Thus, the amount
certified will be closer to the committee's actual entitlement,
reducing the need to seek subsequent repayment.
This revised schedule is set out in paragraphs 9034.5(f) (1) and
(2) of the final rules. Paragraph 9034.5(f)(2) of the former rules has
been renumbered as paragraph (f)(3), without revision.
The Commission notes that, while the additional information
required should increase the accuracy of the matching fund
certifications, as under the current practice, the Commission will not
approve NOCO statements when they are submitted. Thus, although the new
rules will often reduce the size of a committee's repayment, the
Commission will continue to seek repayment under appropriate
circumstances.
Capital Assets
The Commission is amending paragraph (c)(1) of this section to
provide for a standard 40% depreciation of capital assets that are
received by a primary campaign committee prior to the candidate's DOI
and subsequently sold to the general campaign committee or to another
entity.
The former rule set forth the 40% depreciation allowance, but
allowed a higher depreciation for particular item if the committee
demonstrated through documentation that the asset's fair market value
was lower. However, there was no corresponding provision for the
Commission to document a higher fair market value. The NPRM proposed
that the 40% figure be subject to both increase and decrease, under
appropriate circumstances. Most of those who commented on this issue
opposed this change, which the Commission had proposed to more
accurately reflect its experience in dealing with this situation.
Consistent with its approach to other expenditures that can be
attributed to both the primary and the general election limits (see
discussion of 11 CFR 9034.4(e), above), the Commission is adopting a
``bright line'' 40% depreciation figure for capital assets that are
used in both the primary and the general election campaigns. While the
Commission recognizes that there may be instances in which the 40%
figure is too low, there are also situations in which that figure may
be too high. The Commission believes that in many instances there
differences will balance themselves out over the course of a lengthy
campaign. Also, given the number of capital assets involved in a
typical campaign, it can be time- and labor-intensive for both the
Commission and the committee to handle these on a case-by-case basis.
Please note that the term ``capital asset'' includes components of
a system used as a whole and purchased at the same time at a cost
exceeding $2000, even if individual system components cost less than
$2000.
Section 9034.6 Expenditures for Transportation and Services Made
Available to Media Personnel; Reimbursements
Section 9034.6 has been reorganized with minor substantive changes.
These revisions are the same as those made to section 9004.6, the
parallel provision for general election committees. See the discussion
of section 9004.6, above.
[[Page 31869]]
Section 9034.7 Allocation of Travel Expenditures
The changes in section 9034.7 follow the changes to section 9004.7
Part 9036--Review of Submission and Certification of Payments by
Commission
Section 9036.2 Additional Submissions for Matching Fund Payments
Complete Contributor Identification
Treasurers of political committees, including authorized committees
of presidential candidates, are required by 2 U.S.C. Secs. 432(i) and
434(b) to use their best efforts to obtain, maintain and report the
name, address, occupation and employer of all contributors who give
over $200 per calendar year. The Commission recently issued revised
rules regarding this reporting obligation. See 58 FR 57725 (Oct. 27,
1993). During that rulemaking, two commenters suggested revising 11 CFR
9036.2 so that presidential primary candidates would only receive
matching funds for contributions exceeding $200 that also contain
complete contributor information. While full contributor
identifications are required for such contributions in threshold
submissions under 11 CFR 9036.1(b), they have not been required under
11 CFR 9036.2(b)(1)(v) for additional submissions for matching funds.
Accordingly, the Commission sought comment on whether to delete section
9036.2(b)(1)(v), thereby requiring complete contributor information for
all matchable contributions exceeding $200. In the alternative,
comments were sought on only matching these contributions if committees
can provide evidence demonstrating they made their best efforts to
obtain the information.
There was no consensus among the commenters and witnesses who
addressed this issue. Some felt that the public has a right to complete
disclosure of this information when its money is given to presidential
candidates, and that there is no rational basis for the distinction
between threshold submissions and subsequent requests for matching
funds. They cited figures from the 1992 election cycle to argue that
some candidates did not take the disclosure statutes seriously. Others
pointed out that the new best efforts rules are intended to resolve
this issue, and that it would be onerous for committees to show during
the matching submission process that they have satisfied the new best
efforts rules. Some felt that contributors should not be forced to
forego their privacy rights in order to have their contributions
matched. Hence, they argued that vigorous enforcement of the new best
efforts rules is the appropriate course of action.
For several reasons, the Commission has decided not to change the
current requirements regarding matchability of contributions from
individuals. First, the Commission has seen a significant increase in
the reporting of occupation and employer since the best efforts
regulations were revised. For example, a comparison of authorized
committee reports for April-September 1992 with reports for April-
September 1994, shows the number of itemizable contributions from
individuals which lacked information on the contributor's principal
place of business decreased from 17% to 10%. Thus, it is premature to
conclude that further measures are needed to enhance disclosure.
Secondly, it is not a efficient use of Commission resources to verify
this information during the matching fund submission process. Doing so
would slow down an already time-constrained process. Moreover, the
reasons for requiring occupation and employer in threshold submissions
do not apply to additional submissions. Occupation and employer
information are necessary for threshold submissions to ensure that
candidates have met the eligibility requirements by having received
matchable contributions of at least $5000 from contributors in at least
20 states.
Use of Digital Imaging for Matching Fund Submissions
Several questions were also raised regarding the possibility that
committees may wish to submit contributions for matching through the
use of digital imaging technology such as computer CD ROMs, instead of
submitting paper photocopies of checks and deposit slips. One witness
urged the Commission to allow committees to have this option.
Accordingly, new language has been added to paragraph (a)(1)(vi) of
section 9036.2 to let committees provide digital images of
contributions, but not to require that they do so. If they choose this
option, the Commission may require committees to supply the Commission
with the equipment needed to read the digital data at no cost to the
Commission. One witness stated that this was a reasonable condition.
Given the variety of sources providing this technology, it is not
feasible for the Commission to purchase all the equipment that
different committees might wish to use. The new language also specifies
that the digital information committees provide must include an image
of each contribution received and imaged during the period covered by
the matching fund submission, not just matchable contributions. As a
practical matter, it may be simpler for committees to include all
contributions on CD ROMs rather than separating out the nonmatchable
ones. This approach will have the additional benefit of enabling the
Commission's audit staff to begin examining contributions at an earlier
point, which should speed up the audit process. The Commission may seek
verification from the committee's bank or from contributors pursuant to
11 CFR 9039 if the Commission is unable to resolve questions regarding
the digital images submitted.
While the Commission is approving the submission of contribution
information using computerized digital imaging technology, it is not
changing the requirements regarding the submission of disbursements
documentation. Previously, the Commission has concluded that the
retention of microfilm records satisfies the documentation requirements
of 2 U.S.C. Sec. 432(c), and that for electronic transfers, committees
may keep records in the form of computerized magnetic media. AOs 1994-
40 and 1993-4. However, these advisory opinions addressed fairly
limited record retention issues, and did not address or resolve issues
regarding the use of digital imaging technology to satisfy the
requirements of 11 CFR 9003.5 or 9033.11.
Section 9036.5 Determination of Ineligibility Date
A conforming amendment has been added to paragraph 9036.5(a),
clarifying that the procedures of section 9036.5 apply to matching fund
resubmissions made pursuant to 11 CFR part 9036 and those prompted by
an inquiry under 11 CFR part 9039, under appropriate circumstances. See
discussion below.
Part 9037--Payments and Reporting
Section 9037.4 Alphabetized Schedules
The final rules include new section 9037.4, which follows new
section 9006.3.
Part 9038--Examination and Audits
Section 9038.1 Audit
The amendments to this section follow those made to section 9007.1,
above.
[[Page 31870]]
Section 9038.2 Repayments
Repayment Ratio
Section 9038.2(b)(2) of the current rules requires candidates to
repay amounts received from the matching payment account that are used
for non-qualified campaign expenses. The amount of the repayment is
determined by multiplying the total amount of non-qualified campaign
expenses by the candidate's repayment ratio. The repayment ratio is the
ratio of matching funds received by a candidate to the candidate's
total deposits. Under the current rules, the repayment ratio is
determined as of the candidate's date of ineligibility.
The new rule changes the date for determining a candidate's
repayment ratio from the date of ineligibility to 90 days after the
date of ineligibility. Under the new rule, the Commission will multiply
the amount of non-qualified campaign expenses by the ratio of matching
funds to total deposits received as of 90 days after the candidate's
date of ineligibility, in order to determine the amount the candidate
must repay for using matching funds for non-qualified campaign
expenses.
The new rule generates a repayment ratio that more accurately
reflects the mix of public funds and private contributions received
during the campaign, particularly for a candidate who receives
significant amounts of private contributions after his or her date of
ineligibility. By taking private contributions received within 90 days
of DOI into account when determining a candidate's repayment ratio, the
new rule will likely reduce the radio, thereby reducing the amount of
the candidate's repayment.
This approach is also more consistent with the statute when applied
to a candidate who does not receive matching payments until after his
or her date of ineligibility. Section 9038(b)(2) of the Matching
Payment Act requires a candidate who uses public funds for non-
qualified campaign expenses to repay a portion of the public funds he
or she received to the Treasury. However, when section 8038.2(b)(2) of
the current regulations is applied to a candidate who does not receive
matching payments until after his or her DOI, it arguably generates a
repayment ratio of zero. Thus, it does not require the candidate to
make a repayment, even if the candidate incurred numerous non-qualified
campaign expenses.
The new rule takes these post-DOI matching payments into account,
thereby generating a ratio that is greater than zero and more
accurately reflects the mix is greater than zero and more accurately
reflects the mix of matching payments and private contributions
actually received. As a result, publicly-funded candidates that incur
non-qualified campaign expenses will be required to make a repayment,
even if they do not receive any public funds until after their date of
ineligibility.
In approving this approach for the final rules, the Commission
rejected an alternative approach set out in the NPRM. The alternative
approach would treat all matching funds certified in response to
matching payment submissions received before the candidate's DOI as if
they were certified before the candidate's DOI. This would result in a
repayment ratio of greater than zero that could be used to determine a
repayment amount under section 9038(b)(2) of the statute. However, this
approach would only address the zero repayment situation outlined
above. Since determining the repayment ratio 90 days after DOI
addresses both situations, the Commission has incorporated this
approach into the final rules.
In an effort to improve clarity, the final rules break the last
three sentences of this section into two separate paragraphs. The
Commission received no comments on this provision.
Income Derived From the Use of Surplus Public Funds
Paragraph 9038.2(b)(4) has been revised to indicate that the
Commission may determine that income resulting from any use of surplus
public funds after the candidate's DOI, less taxes, paid, shall be paid
to the Treasury. This change parallels the changes made to sections
9004.5 and 9007.2(b)(4), discussed above.
Further Streamlining the Audit Process
The amendments to the audit process contained in this section
follow those made to section 9007.2(d), above.
Conforming Amendments
A conforming amendment has been added to paragraph 9038.2(c)(1), to
clarify that the repayment procedures followed by the Commission in
connection with an 11 CFR part 9038 examination or audit also apply to
an 11 CFR part 9039 examination or audit. See discussion of Part 9039,
below.
The amendments to paragraph (d) of this section are identical to
those made to 11 CFR 9007.2, discussed above.
Section 9038.4 Extensions of Time
The amendment to this section follows that made to section 9007.3,
above.
Section 9038.5 Petitions for Rehearing; Stays of Repayment
Determinations
The amendments to this section follow those made to section 9007.5,
above.
Section 9038.7 Administrative Record
This section generally follows new section 9007.7.
Part 9039--Review and Investigation Authority
Section 9039.3 Examinations and Audits; Investigations
The Commission's review and investigatory authority for
administering the matching fund program is set forth at 26 U.S.C.
Sec. 9039(b). In carrying out these responsibilities, the Commission
must perform a continuing review of candidate and committee reports and
submissions, and other relevant information. Regulations implementing
these requirements are found at 11 CFR part 9039.
For the most part the Commission's review is routine, carried out
in accordance with the eligibility, audit and repayment procedures
contained elsewhere in the regulations. Section 9039(b) and its
implementing regulations provide authority to conduct audits and
investigations in situations other than those addressed by 26 U.S.C.
Sec. 9038, 11 CFR part 9038, 2 U.S.C. Sec. 437g and 11 CFR part 111. To
date, most of these situations have involved issues relating to a
candidate's continuing eligibility or the amount of his or her
entitlement during the course of the campaign, although they can also
involve a post-election inquiry.
Section 9039.3 of the regulations describes how examinations,
audits and investments are conducted in these inquiries. However, the
prior section did not address the actions that may be taken at the
conclusion of any such action. The Commission is therefore adopting new
paragraph 9039.3(b)(4) for that purpose.
This new paragraph states that, if the Commission decides to take
no further action in a part 9039 case, the candidates(s) and
committee(s) involved will be so notified. If the Commission decides to
take further action, such action will follow as closely as possible the
procedures already in place for comparable situations. Specifically, if
the inquiry results in an adjustments to the amount of certified
matching funds, the procedures set forth at 11 CFR 9036.5 shall be
followed. If the inquiry coincides with an audit undertaken pursuant to
11 CFR 9038.1, the information obtained in the inquiry will be utilized
as part of the repayment
[[Page 31871]]
determination. If the inquiry results in an initial or additional
repayment determination, whether or not this coincides with a
Commission audit, the procedures set forth at 11 CFR 9038.2, 9038.4 and
9038.5 shall be followed.
The new rules also include conforming amendments to 11 CFR
9033.1(b)(7), 9036.5(a), and 9038.2(c)(1).
Additional Issues
The Commission considered other proposals in the course of this
rulemaking that it did not ultimately incorporate into the final rules.
A summary of these proposals follows.
Convention Expenses of Ineligible Candidates
The Commission also sought comments in the NPRM on whether expenses
incurred by losing primary election candidates in attending their
party's national nominating convention should be considered a qualified
campaign expense under 11 CFR 9032.9. Such attendance can provide a
defeated candidate the opportunity to continue to fundraise and to
maintain contact with his or her pledged convention delegates.
The Commission has decided for several reasons not to take this
action. Qualified campaign expenses are defined in the Matching Payment
Act at 26 U.S.C. Sec. 9032(9)(A) as those ``incurred by a candidate, or
by his authorized committee, in connection with his campaign for
nomination for election.'' This definition seemingly does not apply to
those no longer seeking the presidential nomination.
Also, the purpose of the 10% rule set forth at 11 CFR 9033.5(b),
under which a candidate becomes ineligible for additional funding on
the 30th day following the date of the second consecutive primary
election in which he or she receives less than 10% of the popular vote,
is to discontinue funding of candidates who have not received
substantial support following their initial establishment of
eligibility. Allowing them to obtain additional funding at a later
point in the process would undercut this purpose.
Under 11 CFR 9034.1(b), candidates can already count fundraising
expenses incurred following their DOI, including those incurred at a
national nominating convention, as qualified campaign expenses as part
of their winding down costs. The Commission notes, however, that only
those expenses directly related to fundraising qualify as qualified
campaign expenses under this section. Creating an additional window of
eligibility during the wind down period could substantially lengthen
and complicate the audit process.
Treating Matching Payments as an Entitlement
One commenter urged the Commission to treat the matching payment
program as more of an entitlement program. This commenter argued that
the entitlement of a candidate who remains eligible for matching
payments until the nominating convention should not be limited by the
candidate's net outstanding campaign obligations. Instead, such a
candidate should be entitled to receive matching funds for all
matchable contributions received, up to fifty percent of the
expenditure limitation. See 26 U.S.C. Sec. 9034(b), 11 CFR 9034.1(d).
The commenter said that the Commission should match all qualifying
contributions submitted by such a candidate for matching, up to fifty
percent of the limitation, and then seek a ratio surplus repayment once
all campaign obligations have been satisfied.
However, this approach is inconsistent with the Matching Payment
Act. Although the Act limits a candidate's overall entitlement to fifty
percent of the expenditure limitation, the Act also further limits
entitlement for candidates who become ineligible. Ineligible candidates
are limited to matching payments for their net outstanding campaign
obligations. 26 U.S.C. Sec. 9033(c)(2). See 11 CFR 9034.1(b). All
candidates for the nomination become ineligible when the party makes
its nomination, because they can no longer be ``seeking'' a nomination
that has already been awarded. See 26 U.S.C. Sec. 9033(b)(2). Thus, a
candidate's post-convention entitlement is limited to his or her NOCO,
even if the candidate was eligible at the time the convention began.
If the commenter's suggestion were adopted, a candidate who was
still eligible at the time of the convention could submit a large
matching payment request after the nomination was awarded and have that
request fully matched, even if the campaign had no debts outstanding at
the time the funds were certified. The funds received would be treated
as surplus funds rather than funds received in excess of entitlement.
Thus, the committee would only be required to repay a portion of the
funds under the surplus repayment rules. Such a result would frustrate
the purposes of the Matching Payment Act, which requires a full
repayment of any funds received by a candidate who has no further
entitlement on the date of certification. 26 U.S.C. Sec. 9038(b)(1).
See 11 CFR 9038.2(b)(1).
The Commission also notes that this issue is the subject of ongoing
litigation.
Certification of No Effect Pursuant to 5 U.S.C. Sec. 605(b) (Regulatory
Flexibility Act)
The attached final rules, if promulgated, will not have a
significant economic impact on a substantial number of small entities.
The basis for this certification is that few, if any, small entities
will be affected by these final rules. Further, any small entities
affected are already required to comply with the requirements of the
Presidential Election Campaign Fund Act and the Presidential Primary
Matching Payment Account Act in these areas.
List of Subjects
11 CFR Part 106
Campaign funds, Political candidate, Political committee and
parties, Reporting and recordkeeping requirements.
11 CFR Parts 9002-9004
Campaign funds, Elections, Political candidates.
11 CFR Parts 9006-9007
Administrative practice and procedure, Campaign funds, Elections,
Political candidates, Reporting requirements.
11 CFR Part 9008
Campaign funds, Political committees and parties, Reporting and
recordkeeping requirements.
11 CFR Parts 9032-9034
Campaign funds, Elections, Political candidate.
11 CFR Parts 9036-9039
Administrative practice and procedure, Campaign funds, Political
candidates.
For the reasons set out in the preamble, subchapters A, E and F of
chapter I of title 11 of the Code of Federal Regulations are amended as
follows:
PART 106--ALLOCATIONS OF CANDIDATE AND COMMITTEE ACTIVITIES
1. The authority citation for part 106 continues to read as
follows:
Authority: 2 U.S.C. 438(a)(8), 441a(b), 441a(g).
2. Section 106.2 is amended by adding a sentence to the end of
paragraph (a)(1), to read as follows:
[[Page 31872]]
Sec. 106.2 State allocation of expenditures incurred by authorized
committees of presidential primary candidates receiving matching funds.
(a) * * *
(1) * * * Expenditures required to be allocated to the primary
election under 11 CFR 9034.4(e) shall also be allocated to particular
states in accordance with this section.
* * * * *
PART 9002--DEFINITIONS
3. The authority citation for part 9002 continues to read as
follows:
Authority: 26 U.S.C. 9002 and 9009(b).
4. Paragraph (c) of Sec. 9002.11 is amended by revising the first
sentence to read as follows:
Sec. 9002.11 Qualified campaign expense.
* * * * *
(c) Except as provided in 11 CFR 9034.4(e), expenditures incurred
either before the beginning of the expenditure report period or after
the last day of a candidate's eligibility will be considered qualified
campaign expenses if they meet the provisions of 11 CFR 9004.4(a). * *
*
PART 9003--ELIGIBILITY FOR PAYMENTS
5. The authority citation for part 9003 continues to read as
follows:
Authority: 26 U.S.C. 9003 and 9009(b).
6. In Sec. 9003.1, the introductory text of paragraph (b) is
republished, paragraphs (b)(4) and (b)(9) are revised, and new
paragraph (b)(10) is added, to read as follows:
Sec. 9003.1 Candidate and committee agreements.
* * * * *
(b) Conditions. The candidates shall:
* * * * *
(4) Agree that they and their authorized committee(s) will keep and
furnish to the Commission all documentation relating to receipts and
disbursements including any books, records (including bank records for
all accounts), all documentation required by this subchapter (including
those required to be maintained under 11 CFR 9003.5), and other
information that the Commission may request. If the candidate or the
candidate's authorized committee maintains or uses computerized
information containing any of the categories of data listed in 11 CFR
9003.6(a), the committee will provide computerized magnetic media, such
as magnetic tapes or magnetic diskettes, containing the computerized
information that meets the requirements of 11 CFR 9003.6(b) at the
times specified in 11 CFR 9007.1(b)(1). Upon request, documentation
explaining the computer system's software capabilities shall be
provided, and such personnel as are necessary to explain the operation
of the computer system's software and the computerized information
prepared or maintained by the committee shall also be made available.
* * * * *
(9) Agree that they and their authorized committee(s) shall pay any
civil penalties included in a conciliation agreement or otherwise
imposed under 2 U.S.C. 437g against the candidates, any authorized
committees of the candidates or any agent thereof.
(10) Agree that any television commercial prepared or distributed
by the candidate or the candidate's authorized committee(s) will be
prepared in a manner which ensures that the commercial contains or is
accompanied by closed captioning of the oral content of the commercial
to be broadcast in line 21 of the vertical blanking interval, or is
capable of being viewed by deaf and hearing impaired individuals via
any comparable successor technology to line 21 of the vertical blanking
interval.
7. Section 9003.3 is revised to read as follows:
Sec. 9003.3 Allowable contributions.
(a) Legal and accounting compliance fund--major party candidates.
(1) Sources. (i) A major party candidate 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 candidate 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.
(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.
(B) Contributions to the GELAC shall be subject to the limitations
and prohibitions of 11 CFR parts 110, 114, and 115.
(C) Contributions shall be deposited in the GELAC only if they are
designated in writing for the GELAC, or transferred pursuant to
paragraph (a)(1) (ii), (iii), (iv) or (v) of this section. Any
contribution which otherwise could be matched pursuant to 11 CFR 9034.2
shall not be considered designated in writing for the GELAC unless the
contributor specifically redesignates it for the GELAC or unless it is
accompanied by a proper designation for the GELAC. Any contribution
that is designated in writing or redesignated for the GELAC shall not
be matched pursuant to 11 CFR 9034.2.
(ii)(A) Contributions made during the matching payment period that
do not exceed the contributor's limit for the primary election may be
redesignated for the GELAC and subsequently transferred to the GELAC
before the nomination only if--
(1) The contributions represent funds in excess of any amount
needed to pay remaining primary expenses;
(2) The contributions have not been submitted for matching;
(3) The redesignations are received within 60 days of the
Treasurer's receipt of the contributions; and
(4) The requirements of 11 CFR 110.1(b) (5) and (l) regarding
redesignation are satisfied.
(B) All contributions redesignated and deposited pursuant to
paragraph (a)(1)(ii)(A) of this section shall be subject to the
contribution limitations applicable for the general election pursuant
to 11 CFR 110.1(b)(2)(i).
(iii) Funds received during the matching payment period that are
remaining in a candidate's primary election account after the
nomination may be transferred to the GELAC without regard to the
contribution limitations of 11 CFR part 110 and used for any purpose
permitted under this section, only if the funds are in excess of any
amount needed to pay remaining net outstanding campaign obligations
under 11 CFR 9034.1(b) and any amount required to be reimbursed to the
Presidential Primary Matching Payment Account under 11 CFR 9038.2. The
excess funds so transferred may include contributions made before the
beginning of the expenditure report period, which contributions do not
exceed the contributor's limit for the primary election. Such
contributions need not be redesignated by the contributors for the
GELAC.
(iv) Contributions that are made after the beginning of the
expenditure report period but which are not designated in writing for
the GELAC may be redesignated for the GELAC and transferred to the
GELAC only if--
(A) The funds are in excess of any amount needed to pay remaining
net outstanding campaign obligations under 11 CFR 9034.1(b) and any
amount required to be reimbursed to the
[[Page 31873]]
Presidential Primary Matching Payment Account under 11 CFR 9038.2;
(B) The contributions have not been submitted for matching; and
(C) The candidate obtains the contributor's redesignation in
accordance with 11 CFR 110.1.
(v) Contributions made with respect to the primary election that
exceed the contributor's limit for the primary election may be
redesignated for the GELAC and transferred to the GELAC if the
candidate obtains the contributor's redesignation for the GELAC in
accordance with 11 CFR 110.1.
(vi) For purposes of this section, a contribution shall be
considered to be designated in writing for the GELAC if--
(A) The contribution is made by check, money order, or other
negotiable instrument which clearly indicates that it is made with
respect to the GELAC; or
(B) The contribution is accompanied by a writing, signed by the
contributor, which clearly indicates that it is made with respect to
the GELAC.
(2) Uses. (i) Contributions to the GELAC shall be used only for the
following purposes:
(A) To defray the cost of legal and accounting services provided
solely to ensure compliance with 2 U.S.C. 431 et seq. and 26 U.S.C.
9001 et seq. in accordance with paragraph (a)(2)(ii) of this section;
(B) To defray in accordance with paragraph (a)(2)(ii)(A) of this
section, that portion of expenditures for payroll, overhead, and
computer services related to ensuring compliance with 2 U.S.C. 431 et
seq. and 26 U.S.C. 9001 et seq.;
(C) To defray any civil or criminal penalties imposed pursuant to 2
U.S.C. 437g or 26 U.S.C. 9012;
(D) To make repayments under 11 CFR 9007.2;
(E) To defray the cost of soliciting contributions to the GELAC;
(F) To defray the cost of producing, delivering and explaining the
computerized information and materials provided pursuant to 11 CFR
9003.6 and explaining the operation of the computer system's software;
(G) To make a loan to an account established pursuant to 11 CFR
9003.4 to defray qualified campaign expenses incurred prior to the
expenditure report period or prior to receipt of Federal funds,
provided that the amounts so loaned are restored to the GELAC; and
(H) To defray unreimbursed costs incurred in providing
transportation and services for the Secret Service and national
security staff pursuant to 11 CFR 9004.6.
(ii)(A) Expenditures for payroll (including payroll taxes),
overhead and computer services, a portion of which are related to
ensuring compliance with Title 2 of the United States Code and Chapter
95 of Title 26 of the United States Code, shall be initially paid from
the candidate's Federal fund account under 11 CFR 9005.2 and may be
later reimbursed by the compliance fund. For purposes of paragraph
(a)(2)(i)(B) of this section, a candidate may use contributions to the
GELAC to reimburse his or her Federal fund account an amount equal to
10% of the payroll and overhead expenditures of his or her national
campaign headquarters and state offices.
(B) Overhead expenditures include, but are not limited to rent,
utilities, office equipment, furniture, supplies and all telephone
charges except for telephone charges related to a special use such as
voter registration and get out the vote efforts.
(C) If the candidate wishes to claim a larger compliance exemption
for payroll or overhead expenditures, the candidate shall establish
allocation percentages for each individual who spends all or a portion
of his or her time to perform duties which are considered necessary to
ensure compliance with title 2 of the United States Code or chapter 95
of title 26 of the United States Code. The candidate shall keep
detailed records to support the derivation of each percentage. Such
records shall indicate which duties are considered compliance and the
percentage of time each person spends on such activity.
(D) In addition, a candidate may use contributions to the GELAC to
reimburse his or her Federal fund account an amount equal to 50% of the
costs (other than payroll) associated with computer services. Such
costs include but are not limited to rental and maintenance of computer
equipment, data entry services not performed by committee personnel,
and related supplies.
(E) If the candidate wishes to claim a larger compliance exemption
for costs associated with computer services, the candidate shall
establish allocation percentages for each computer function that is
considered necessary, in whole or in part, to ensure compliance with 2
U.S.C. 431 et seq., and 26 U.S.C. 9001 et seq. The allocation shall be
based on a reasonable estimate of the costs associated with each
computer function, such as the costs for data entry services performed
by persons other than committee personnel and processing time. The
candidate shall keep detailed records to support such calculations. The
records shall indicate which computer functions are considered
compliance-related and shall reflect which costs are associated with
each computer function.
(F) The Commission's Financial Control and Compliance Manual for
General Election Candidates Receiving Public Funding contains some
accepted alternative allocation methods for determining the amount of
salaries and overhead expenditures that may be considered exempt
compliance costs.
(G) Reimbursement from the GELAC may be made to the separate
account maintained for federal funds under 11 CFR 9005.2 for legal and
accounting compliance services disbursements that are initially paid
from the separate federal funds account. Such reimbursement must be
made prior to any repayment determination by the Commission pursuant to
11 CFR 9007.2. Any amounts so reimbursed to the Federal funds account
may not subsequently be transferred back to the GELAC.
(iii) Amounts paid from the GELAC for the purposes permitted by
paragraphs (a)(2)(i) (A) through (F) and (H) of this section shall not
be subject to the expenditure limits of 2 U.S.C. 441a(b) and 11 CFR
110.8. (See also 11 CFR 100.8(b)(15).) When the proceeds of loans made
in accordance with paragraph (a)(2)(i)(G) of this section are expended
on qualified campaign expenses, such expenditures shall count against
the candidate's expenditure limit.
(iv) Contributions to or funds deposited in the GELAC may not be
used to retire debts remaining from the presidential primaries, except
that, if after payment of all expenses set out in paragraph (a)(2)(i)
of this section, there are excess campaign funds, such funds may be
used for any purpose permitted under 2 U.S.C. 439a and 11 CFR part 113,
including payment of primary election debts.
(3) Deposit and disclosure. (i) Amounts received pursuant to
paragraph (a)(1) of this section shall be deposited and maintained in a
GELAC account separate from the account described in 11 CFR 9005.2 and
shall not be commingled with any money paid to the candidate by the
Secretary pursuant to 11 CFR 9005.2.
(ii) The receipts to and disbursements from the GELAC account shall
be reported in a separate report in accordance with 11 CFR
9006.1(b)(2). All contributions made to the GELAC account shall be
recorded in accordance with 11 CFR 102.9. Disbursements made from the
GELAC account shall be documented in the same manner provided in 11 CFR
9003.5.
(b) Contributions to defray qualified campaign expenses--major
party
[[Page 31874]]
candidates. (1) A major party candidate or his or her authorized
committee(s) may solicit contributions to defray qualified campaign
expenses to the extent necessary to make up any deficiency in payments
received from the Fund due to the application of 11 CFR 9005.2(b).
(2) Such contributions may be deposited in a separate account or
may be deposited with federal funds received under 11 CFR 9005.2.
Disbursements from this account shall be made only to defray qualified
campaign expenses and to defray the cost of soliciting contributions to
such account. All disbursements from this account shall be documented
in accordance with 11 CFR 9003.5 and shall be reported in accordance
with 11 CFR 9006.1.
(3) A candidate may make transfers to this account from his or her
GELAC, or from the candidate's primary election account in accordance
with paragraph (a)(1)(iii) of this section.
(4) The contributions received under this section shall be subject
to the limitations and prohibitions of 11 CFR Parts 110, 114 and 115
and shall be aggregated with all contributions made by the same persons
to the candidate's GELAC under paragraph (a) of this section for the
purposes of such limitations.
(5) Any costs incurred for soliciting contributions to this account
shall not be considered expenditures to the extent that the aggregate
of such costs does not exceed 20 percent of the expenditure limitation
under 11 CFR 9003.2(a)(1). These costs shall, however, be reported as
disbursements in accordance with 11 CFR Part 104 and 11 CFR 9006.1. For
purposes of this section, a candidate may exclude from the expendute
limitation an amount equal to 10% of the payroll (including payroll
taxes) and overhead expenditures of his or her national campaign
headquarters and state offices as exempt fundraising costs. The
candidate may claim a larger fundraising exemption by establishing
allocation percentages for employees using the method described in
paragraph (a)(2)(ii)(C) of this section.
(6) Any costs incurred for legal and accounting services which are
provided solely to ensure compliance with 2 U.S.C. 431 et seq. and 26
U.S.C. 9001 et seq. shall not count against the candidate's expenditure
limitation. A candidate may exclude from the expenditure limitation the
amounts described in paragraphs (a)(2)(ii) (A) and (D) of this section
for payroll, overhead or computer costs or a larger amount under
paragraphs (a)(2)(ii) (C) and (E) of this section.
(7) The Commission's Financial Control and Compliance Manual for
General Election Candidates Receiving Public Funding contains some
accepted alternative allocation methods for determining the amount of
salaries and overhead expenditures that may be considered exempt
compliance costs or exempt fundraising costs.
(c) Contributions to defray qualified campaign expenses--minor and
new party candidates. (1) A minor or new party candidate may solicit
contributions to defray qualified campaign expenses which exceed the
amount received by such candidate from the Fund, subject to the limits
of 11 CFR 9003.2(b).
(2) The contributions received under this section shall be subject
to the limitations and prohibitions of 11 CFR parts 110, 114 and 115.
(3) Such contributions may be deposited in a separate account or
may be deposited with federal funds received under 11 CFR 9005.2.
Disbursements from this account shall be made only for the following
purposes:
(i) To defray qualified campaign expenses;
(ii) To make repayments under 11 CFR 9007.2;
(iii) To defray the cost of soliciting contributions to such
account;
(iv) To defray the cost of legal and accounting services provided
solely to ensure compliance with 2 U.S.C. 431 et seq. and 26 U.S.C.
9001 et seq.;
(v) To defray the cost of producing, delivering and explaining the
computerized information and materials provided pursuant to 11 CFR
9003.6 and explaining the operation of the computer system's software.
(4) All disbursements from this account shall be documented in
accordance with 11 CFR 9003.5 and shall be reported in accordance with
11 CFR part 104 and Sec. 9006.1. The candidate shall keep and maintain
a separate record of disbursements made to defray exempt legal and
accounting costs under paragraphs (c) (6) and (7) of this section and
shall report such disbursements in accordance with 11 CFR part 104 and
11 CFR 9006.1.
(5) Any costs incurred for soliciting contributions to this account
shall not be considered expenditures to the extent that the aggregate
of such costs does not exceed 20 percent of the expenditure limitation
under 11 CFR 9003.2(a)(1). These costs shall, however, be reported as
disbursements in accordance with 11 CFR Part 104 and 9006.1. For
purposes of this section, a candidate may exclude from the expenditure
limitation the amount of payroll costs described in paragraph (b)(5) of
this section.
(6) Any costs incurred for legal and accounting services which are
provided solely to ensure compliance with 2 U.S.C. 431 et seq. and 26
U.S.C. 9001 et seq. shall not count against the candidate's expenditure
limitation. A candidate may exclude from the expenditure limitation the
amounts described in paragraphs (a)(2)(ii) (A) and (D) of this section
for payroll, overhead or computer costs or a larger amount under
paragraphs (a)(2)(ii) (C) and (E) of this section.
(7) The Commission's Financial Control and Compliance Manual for
General Election Candidates Receiving Public Funding contains some
accepted alternative allocation methods for determining the amount of
salaries and overhead expenditures that may be considered exempt
compliance costs or exempt fundraising costs.
8. Section 9003.4 is amended by revising the last sentence of
paragraph (a), and adding a new sentence to the end of the paragraph
(a), to read as follows:
Sec. 9003.4 Expenses incurred prior to the beginning of the
expenditure report period or prior to receipt of Federal funds.
(a) Permissible expenditures. (1) * * * Examples of such
expenditures include but are not limited to: Expenditures for
establishing financial accounting systems and expenditures for
organizational planning. Expenditures for polling that are incurred
before the start of the expenditure report period are attributed as
provided in 11 CFR 9034.4(e)(2).
* * * * *
9. Section 9003.5 is revised to read as follows:
Sec. 9003.5 Documentation of disbursements.
(a) Burden of proof. Each candidate shall have the burden of
providing that disbursements made by the candidate or his or her
authorized committee(s) or persons authorized to make expenditures on
behalf of the candidate or authorized committee(s) are qualified
campaign expenses as defined in 11 CFR 9002.11. The candidate and his
or her authorized committee(s) shall obtain and furnish to the
Commission on request any evidence regarding qualified campaign
expenses made by the candidate, his or her authorized committees and
agents or persons authorized to make expenditures on behalf of the
candidate or committee(s) as provided in paragraph (b) of this section.
(b) Documentation required.
[[Page 31875]]
(1) For disbursements in excess of $200 to a payee, the candidate
shall present a canceled check negotiated by the payee and either:
(i) A receipted bill from the payee that states that purpose of the
disbursement; or
(ii) If such a receipt is not available,
(A) One of the following documents generated by the payee: a bill,
invoice, or voucher that states the purpose of the disbursement; or
(B) Where the documents specified in paragraph (b)(1)(ii)(A) of
this section are not available, a voucher or contemporaneous memorandum
from the candidate or the committee that states the purpose of the
disbursement; or
(iii) Where the supporting documentation required in paragraphs
(b)(1) (i) or (ii) of this section is not available, the candidate or
committee may present collateral evidence to document the qualified
campaign expense. Such collateral evidence may include, but is not
limited to:
(A) Evidence demonstrating that the expenditure is part of an
identifiable program or project which is otherwise sufficiently
documented such as a disbursement which is one of a number of
documented disbursements relating to a campaign mailing or to the
operation of a campaign office; or
(B) Evidence that the disbursement is covered by a pre-established
written campaign committee policy, such as a dairy travel expense
policy.
(iv) If the purpose of the disbursement is not stated in the
accompanying documentation, it must be indicated on the canceled check.
(2) For all other disbursements, the candidate shall present:
(i) A record disclosing the full name and mailing address of the
payee, the amount, date and purpose of the disbursement, if made from a
petty cash fund; or
(ii) A canceled check negotiated by the payee that states the full
name and mailing address of the payee, and the amount, date and purpose
of the disbursement.
(3) For purposes of this section:
(i) Payee means the person who provides the goods or services to
the candidate or committee in return for the disbursement; except that
an individual will be considered a payee under this section if he or
she receives $1000 or less advanced for travel and/or subsistence and
if the individual is the recipient of the goods or services purchased.
(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.
(c) Retention of records. The candidate shall retain records with
respect to each disbursement and receipt, including bank records,
vouchers, worksheets, receipts, bills and accounts, journals, ledgers,
fundraising solicitation material, accounting systems documentation,
and any related materials documenting campaign receipts and
disbursements, for a period of three years pursuant to 11 CFR 102.9(c),
and shall present these records to the Commission on request.
(d) List of capital and other assets. (1) Capital assets The
candidate or committee shall maintain a list of all capital assets
whose purchase price exceeded $2000 when acquired by the campaign. The
list shall include a brief description of each capital asset, the
purchase price, the date it was acquired, the method of disposition and
the amount received in disposition. For purposes of this section,
``capital asset'' shall be defined in accordance with 11 CFR
9004.9(d)(1).
(2) Other assets. The candidate or committee shall maintain a list
of other assets acquired for use in fundraising or as collateral for
campaign loans, if the aggregate value of such assets exceeds $5000.
The list shall include a brief description of each such asset, the fair
market value of each asset, the method of disposition and the amount
received in disposition. The fair market value of other assets shall be
determined in accordance with 11 CFR 9004.9(d)(2).
PART 9004--ENTITLEMENT OF ELIGIBLE CANDIDATES TO PAYMENTS; USE OF
PAYMENTS
10. The authority citation for part 9004 continues to read as
follows:
Authority: 26 U.S.C. 9004 and 9009(b).
11. Section 9004.4 is amended by revising paragraph (a), by adding
new paragraph (b)(8), and by removing paragraph (c), to read as
follows:
Sec. 9004.4 Use of payments.
(a) Qualified campaign expenses. An eligible candidate shall use
payments received under 11 CFR part 9005 only for the following
purposes:
(1) to defray qualified campaign expenses;
(2) To repay loans that meet the requirements of 11 CFR 100.7
(a)(1) or (b)(11) or to otherwise restore funds (other than
contributions received pursuant to 11 CFR 9003.3 (b) or (c) and
expended to defray qualified campaign expenses) used to defray
qualified campaign expenses;
(3) To restore funds expended in accordance with 11 CFR 9003.4 for
qualified campaign expenses incurred by the candidate prior to the
beginning of the expenditure report period.
(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; or
(ii) Costs 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.
(iii) 100% of salary, overhead and computer expenses incurred after
the end of the expenditure report period may be paid from a legal and
accounting compliance fund established pursuant to 11 CFR 9003.3, and
will be presumed to be solely to ensure compliance with 2 U.S.C. 431 et
seq. and 26 U.S.C. 9001 et seq.
(5) Gifts and monetary bonuses. Gifts and monetary bonuses shall be
considered qualified campaign expenses, provided that:
(i) Gifts for committee employees, consultants and volunteers in
recognition for campaign-related activities or services do not exceed
$150 total per individual and the total of all gifts does not exceed
$20,000; and
(ii) All monetary bonuses for committee employees and consultants
in recognition for campaign-related activities or services;
(A) Are provided for pursuant to a written contract made prior to
the date of the election; and
(B) Are paid during the expenditure report period.
(b) * * *
(8) Lost or Misplaced Items. The cost of lost or misplaced 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; the type of equipment involved;
and the number and value of items that were lost.
12. Section 9004.5 is revised to read as follows:
[[Page 31876]]
Sec. 9004.5 Investment of public funds; other uses resulting in
income.
Investment of public funds or any other use of public funds that
results in income is permissible, provided that an amount equal to all
net income derived from such a use, less Federal, State and local taxes
paid on such income, shall be paid to the Secretary. Any net loss from
an investment or other use of public funds will be considered a non-
qualified campaign expense and an amount equal to the amount of such
loss shall be repaid to the United States Treasury as provided under 11
CFR 9007.2(b)(2)(i).
13. Section 9004.6 is revised to read as follows:
Sec. 9004.6 Expenditures for transportation and services made
available to media personnel; reimbursements.
(a) General. (1) Expenditures by an authorized committee for
transportation, ground services or facilities (including air travel,
ground transportation, housing, meals, telephone service, and
typewriters) made available to media personnel, Secret Service
personnel or national security staff will be considered qualified
campaign expenses, and, except for costs relating to Secret Service
personnel or national security staff, will be subject to the overall
expenditure limitations of 11 CFR 9003.2 (a)(1) and (b)(1).
(2) Subject to the limitation in paragraphs (b) and (c) of this
section, committees may seek reimbursement for these expenses, and may
deduct reimbursements received from media representatives from the
amount of expenditures subject to the overall expenditure limitations
of 11 CFR 9003.2 (a)(1) and (b)(1). Expenses for which the committee
receives no reimbursement will be considered qualified campaign
expenses, and, with the exception of those expenses relating to Secret
Service personnel and national security staff, will be subject to the
overall expenditure limitation.
(b) Reimbursement limits. (1) The amount of reimbursement sought
from a media representative under paragraph (a)(2) of this section
shall not exceed 110% of the media representative's pro rata share (or
a reasonable estimate of the media representative's pro rata share) of
the actual cost of the transportation and services made available. Any
reimbursement received in excess of this amount shall be disposed of in
accordance with paragraph (d)(1) of this section.
(2) For the purpose of this section, a media representative's pro
rata share shall be calculated by dividing the total actual cost of the
transportation and services provided by the total number of individuals
to whom such transportation and services are made available. For
purposes of this calculation, the total number of individuals shall
include committee staff, media personnel, Secret Service personnel,
national security staff and any other individuals to whom such
transportation and services are made available, except that, when
seeking reimbursement for transportation costs paid by the committee
under 11 CFR 9004.7(b)(5)(i)(C), the total number of individuals shall
not include national security staff.
(c) Deducation of reimbursements from expenditures subject to the
overall expenditure limitation. (1) The committee may deduct from the
amount of expenditures subject to the overall expenditure limitation:
(i) The amount of reimbursements received from media
representatives in payment for the transportation and services
described in paragraph (a) of this section, up to the actual cost of
the transportation and services provided to media representatives; and
(ii) An additional amount of the reimbursements received from media
representatives, representing the administrative costs incurred by the
committee in providing these services to the media representative and
seeking reimbursement for them, equal to:
(A) Three percent of the actual cost of transportation and services
provided to the media representatives under this section; or
(B) An amount in excess of 3% representing the administrative costs
actually incurred by the committee in providing services to the media
representatives, provided that the committee is able to document the
total amount of administrative costs actually incurred.
(2) For the purpose of this paragraph, ``administrative costs''
includes all costs incurred by the committee in making travel
arrangements and seeking reimbursement, whether these services are
performed by committee staff or by independent contractors.
(d) Disposal of excess reimbursements. If the committee receives
reimbursements in excess of the amount deductible under paragraph (c)
of this section, it shall dispose of the excess amount in the following
manner:
(1) Any reimbursement received in excess of 110% of the actual pro
rata cost of the transportation and services made available to a media
representative shall be returned to the media representative.
(2) Any amount in excess of the amount deductible under paragraph
(c) of this section that is not required to be returned to the media
representative under paragraph (d)(1) of this section shall be paid to
the Treasury.
(e) Reporting. The total amount paid by an authorized committee for
the services and facilities described in paragraph (a)(1) of this
section, plus the administrative costs incurred by the committee in
providing these services and facilities and seeking reimbursement for
them, shall be reported as an expenditure in accordance with 11 CFR
104.3(b)(2)(i). Any reimbursement received by such committee under
paragraph (b)(1) of this section shall be reported in accordance with
11 CFR 104.3(a)(3)(ix).
14. Section 9004.7 is revised to read as follows:
Sec. 9004.7 Allocation of travel expenditures.
(a) Notwithstanding the provisions of 11 CFR 106.3, expenditures
for travel relating to a Presidential or Vice Presidential candidate's
campaign by any individual, including a candidate, shall, pursuant to
the provisions of paragraph (b) of this section, be qualified campaign
expenses and be reported by the candidate's authorized committee(s) as
expenditures.
(b)(1) For a trip which is entirely campaign-related, the total
cost of the trip shall be a qualified campaign expense and a reportable
expenditure.
(2) For a trip which includes campaign-related and non-campaign
related stops, that portion of the cost of the trip allocable to
campaign activity shall be a qualified campaign expense and a
reportable expenditure. Such portion shall be determined by calculating
what the trip would have cost from the point of origin of the trip to
the first campaign-related stop and from the stop through each
subsequent campaign-related stop to the point of origin. If any
campaign activity, other than incidental contacts, is conducted at a
stop, that stop shall be considered campaign-related. Campaign activity
includes soliciting, making, or accepting contributions, and expressly
advocating the election or defeat of the candidate. Other factors,
including the setting, timing and statements or expressions of the
purpose of an event, and the substance of the remarks or speech made,
will also be considered in determining whether a stop is campaign-
related.
(3) For each trip, an itinerary shall be prepared and such
itinerary shall be made available by the committee for Commission
inspection. The itinerary shall show the time of arrival and departure
and the type of events held.
[[Page 31877]]
(4) For trips by government conveyance or by charter, a list of all
passengers on such trip, along with a designation of which passengers
are and which are not campaign-related, shall be made available for
Commission inspection. When required to be created, a copy of the
government's or charter company's official manifest shall also be
maintained and made available by the committee.
(5)(i) If any individual, including a candidate, uses a government
airplane for campaign-related travel, the candidate's authorized
committee shall pay the appropriate government entity an amount equal
to:
(A) The lowest unrestricted and non-discounted first class
commercial air fare available for the time traveled, in the case of
travel to a city served by a regularly scheduled commercial airline
service; or
(B) The lowest unrestricted and non-discounted coach commercial air
fare available for the time traveled, in the case of travel to a city
served by regularly scheduled coach airline service, but not regularly
scheduled first class airline service; or
(C) In the case of travel to a city not served by a regularly
scheduled commercial airline service, the commercial charter rate for
an airplane sufficient in size to accommodate the campaign-related
travelers, including the candidate, plus the news media and the Secret
Service.
(ii) If a government airplane is flown to a campaign-related stop
where it will pick up passengers, or from a campaign-related stop where
it left off passengers, the candidate's authorized committee shall pay
the appropriate government entity an amount equal to the greater of the
amount billed or the amount required under paragraph (b)(5)(i) of this
section for one passenger.
(iii) If any individual, including a candidate, uses a government
conveyance, other than an airplane, for campaign-related travel, the
candidate's authorized committee shall pay the appropriate government
entity an amount equal to the commercial rental rate for a conveyance
sufficient in size to accommodate the campaign-related travelers,
including the candidate, plus the news media and the Secret Service.
(iv) If any individual, including a candidate, uses accommodations,
including lodging and meeting rooms, during campaign-related travel,
and the accommodations are paid for by a government entity, the
candidate's authorized committee shall pay the appropriate government
entity an amount equal to the usual and normal charge for the
accommodations, and shall maintain documentation supporting the amount
paid.
(v) For travel by airplane, the committee shall maintain
documentation of the lowest unrestricted nondiscounted air fare
available for the time traveled, including the airline, flight number
and travel service providing that fare or the charter rate, as
appropriate. For travel by other conveyances, the committee shall
maintain documentation of the commercial rental rate for a conveyance
of sufficient size, including the provider of the conveyance and the
size, model and make of the conveyance.
(6) Travel expenses of a candidate's spouse and family when
accompanying the candidate on campaign-related travel may be treated as
qualified campaign expenses and reportable expenditures. If the spouse
or family members conduct campaign-related activities, their travel
expenses shall be qualified campaign expenses and reportable
expenditures.
(7) If any individual, including a candidate, incurs expenses for
campaign-related travel, other than by use of government conveyance or
accommodations, an amount equal to that portion of the actual cost of
the conveyance or accommodations which is allocable to all passengers,
including the candidate, who are traveling for campaign purposes shall
be a qualified campaign expense and shall be reported by the committee
as an expenditure.
(i) If the trip is by charter, the actual cost for each passenger
shall be determined by dividing the total operating cost for the
charter by the total number of passengers transported. The amount which
is a qualified campaign expense and a reportable expenditure shall be
calculated in accordance with the formula set forth at 11 CFR
9004.7(b)(2) on the basis of the actual cost per passenger multiplied
by the number of passengers traveling for campaign purposes.
(ii) If the trip is by non-charter commercial transportation, the
actual cost shall be calculated in accordance with the formula set
forth at 11 CFR 9004.7(b)(2) on the basis of the commercial fare. Such
actual cost shall be a qualified campaign expense and a reportable
expenditure.
(8) Travel on corporate airplanes and other corporate conveyances
is governed by 11 CFR 114.9(e).
15. Section 9004.9 is amended by revising paragraph (a)(1)(iii),
adding paragraph (a)(4) and revising paragraph (d)(1), to read as
follows:
Sec. 9004.9 Net outstanding qualified campaign expenses.
(a) * * *
(1) * * *
(iii) An estimate of the necessary winding down costs, as defined
under 11 CFR 9004.4(a)(4), submitted in the format required by
paragraph (a)(4) of this section; less
* * * * *
(4) The amount submitted as an estimate of necessary winding down
costs under paragraph (a)(1)(iii) of this section shall be broken down
by expense category and quarterly or monthly time period. This
breakdown shall include estimated costs for office space rental, staff
salaries, legal expenses, accounting expenses, office supplies,
equipment rental, telephone expenses, postage and other mailing costs,
printing and storage. The breakdown shall estimate the costs that will
be incurred in each category from the time the statement is submitted
until the expected termination of the committee's political activity.
* * * * *
(d)(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 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 11 CFR 9004.9(d)(2). 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 may be considered to be the
total original cost of such items when acquired less 40%, to account
for depreciation, except that items acquired after the date of
ineligibility must be valued at their fair market value on the date
acquired.
* * * * *
PART 9006--REPORTS AND RECORDKEEPING
16. The authority citation for part 9006 continues to read as
follows:
Authority: 2 U.S.C. 434 and 26 U.S.C. 9006(b).
17. Section 9006.3 is added to read as follows:
Sec. 9006.3 Alphabetized schedules.
If the authorized committee(s) of a candidate file a schedule of
itemized receipts, disbursements, or debts and
[[Page 31878]]
obligations pursuant to 11 CFR 104.3 that was generated directly or
indirectly from computerized files or records, the schedule shall list
in alphabetical order the sources of the receipts, the payees or the
creditors, as appropriate. In the case of individuals, such schedule
shall list all contributors, payees, and creditors in alphabetical
order by surname.
PART 9007--EXAMINATIONS AND AUDITS; REPAYMENTS
18. The authority citation for part 9007 continues to read as
follows:
Authority: 26 U.S.C. 9007 and 9009(b).
19. Section 9007.1 is amended by revising paragraphs (b)(2)(iii),
(c), (d) and (e) and adding new paragraph (f) to read as follows:
Sec. 9007.1 Audits.
* * * * *
(b) * * *
(2) * * *
(iii) Exit conference. At the conclusion of the fieldwork,
Commission staff will hold an exit conference to discuss with committee
representatives the staff's preliminary findings and recommendations
which the staff anticipates it will present to the Commission for
approval. Commission staff will prepare a written Exit Conference
Memorandum that discusses these findings and recommendations. A copy of
the Exit Conference Memorandum will be given to committee
representatives at the exit conference. These preliminary staff
findings may include an evaluation of procedures and systems employed
by the candidate and committee to comply with applicable provisions of
the Federal Election Campaign Act, the Presidential Election Campaign
Fund Act and Commission regulations; the accuracy of statements and
reports filed with the Commission by the candidate and committee; and
preliminary calculations regarding future repayments to the United
States Treasury. Commission staff will advise committee representatives
at this conference of the committee's opportunity to respond to these
proposed findings, the projected timetable regarding the issuance of
the audit report and any repayment determination, the committee's
opportunity for an administrative review of any repayment
determination, and the procedures involved in Commission repayment
determinations under 11 CFR 9007.2.
* * * * *
(c) Committee response to the Exit Conference Memorandum. The
candidate and his or her authorized committee may submit in writing
within 60 calendar days after the exit conference, legal and factual
materials disputing or commenting on the proposed findings contained in
the Exit Conference Memorandum. In addition, the committee shall submit
any additional documentation requested by Commission staff. Such
materials may be submitted by counsel if the candidate so desires.
(d) Approval and issuance of the audit report. (1) Before voting on
whether to approve and issue an audit report, the Commission will
consider any written legal and factual materials timely submitted by
the candidate or his or her authorized committee in accordance with
paragraph (c) of this section. The Commission-approved audit report may
address issues other than those contained in the Exit Conference
Memorandum. In addition, this report will contain a repayment
determination made by the Commission pursuant to 11 CFR 9007.2(c)(1).
(2) The audit report may contain issues that warrant referral to
the Office of General Counsel for possible enforcement proceedings
under 2 U.S.C. 437g and 11 CFR Part 111.
(3) Addenda to the audit report may be approved and issued by the
Commission from time to time as circumstances warrant and as additional
information becomes available. Such addenda may be based on follow-up
fieldwork conducted under paragraph (b)(3) of this section, and/or
information ascertained by the Commission in the normal course of
carrying out its supervisory responsibilities. The procedures set forth
in paragraphs (c) and (d) (1) and (2) of this section will be followed
in preparing such addenda. The addenda will be placed on the public
record as set forth in paragraph (e) of this section. Such addenda may
also include additional repayment determination(s).
(e) Public release of audit report. (1) The Commission will
consider the audit report in an open session agenda document. The
Commission will provide the candidate and the committee with copies of
any agenda document to be considered in an open session 24 hours prior
to releasing the agenda document to the public.
(2) Following Commission approval of the audit report, the report
will be forwarded to the committee and released to the public. The
Commission will provide the candidate and committee with copies of the
audit report approved by the Commission 24 hours before releasing the
report to the public.
(f)(1)Sampling. In conducting an audit of contributions pursuant to
this section, the Commission may utilize generally accepted statistical
sampling techniques to quantify, in whole or in part, the dollar value
of related audit findings. A projection of the total amount of
violations based on apparent violations identified in such a sample may
become the basis, in whole or in part, of any audit finding.
(2) A committee in responding to a sample-based finding shall
respond only to the specific sample items used to make the projection.
If the committee demonstrates that any apparent errors found among the
sample items were not errors, the Commission shall make a new
projection based on the reduced number of errors in the sample.
(3) Within 30 days of service of the Final Audit Report, the
committee shall submit a check to the United States Treasury for the
total amount of any excessive or prohibited contributions not refunded,
reattributed or redesignated in a timely manner in accordance with 11
CFR 103.3(b) (1), (2) or (3); or take any other action required by the
Commission with respect to sample-based findings.
20. In Sec. 9007.2, paragraphs (a) (2) and (3) are revised,
paragraph (a)(4) added, the introductory text of paragraph (b) is
republished, paragraph (b)(4) is revised, paragraphs (c) and (d) are
revised, and the first two sentences of paragraph (f), the first
sentence of paragraph (g), and paragraph (i) are revised to read as
follows:
Sec. 9007.2 Repayments.
(a) * * *
(2) The Commission will notify the candidate of any repayment
determinations made under this section as soon as possible, but not
later than 3 years after the day of the presidential election. The
Commission's issuance of the audit report to the candidate under 11 CFR
9007.1(d) will constitute notification for purposes of this section.
(3) Once the candidate receives notice of the Commission's
repayment determination under this section, the candidate should give
preference to the repayment over all other outstanding obligations of
his or her committee, except for any federal taxes owed by the
committee.
(4) Repayments may be made only from the following sources:
personal funds of the candidate (without regard to the limitations of
11 CFR 9003.2(c)), contributions and federal funds in the committee's
account(s), and any additional funds raised subject to the limitations
and prohibitions of the
[[Page 31879]]
Federal Election Campaign Act of 1971, as amended.
* * * * *
(b) Bases for repayment. The Commission may determine that an
eligible candidate of a political party who has received payments from
the fund must repay the United States Treasury under any of the
circumstances described in paragraphs (b) (1) through (5) of this
section.
* * * * *
(4) Income on investment or other use of payments from the Fund. If
the Commission determines that a candidate received any income as a
result of an investment or other use of payments from the fund pursuant
to 11 CFR 9004.5, it shall so notify the candidate, and such candidate
shall pay to the United States Treasury an amount equal to the amount
determined to be income, less any Federal, State or local taxes on such
income.
* * * * *
(c) Repayment determination procedures. The Commission's repayment
determination will be made in accordance with the procedures set forth
at paragraphs (c)(1) through (c)(4) of this section.
(1) Repayment determination. The Commission will provide the
candidate with a written notice of its repayment determination(s). This
notice will be included in the Commission's audit report prepared
pursuant to 11 CFR 9007.1(d) and will set forth the legal and factual
reasons for such determination(s), as well as the evidence upon which
any such determination is based. The candidate shall repay to the
United States Treasury in accordance with paragraph (d) of this
section, the amount which the Commission has determined to be
repayable.
(2) Administrative review of repayment determination. If a
candidate disputes the Commission's repayment determination(s), he or
she may request an administrative review of the determination(s) as set
forth in paragraph (c)(2)(i) of this section.
(i) Submission of written materials. A candidate who disputes the
Commission's repayment determination(s) shall submit in writing, within
60 calendar days after service of the Commission's notice, legal and
factual materials demonstrating that no repayment, or a lesser
repayment, is required. Such materials may be submitted by counsel if
the candidate so desires. The candidate's failure to timely raise an
issue in written materials presented pursuant to this paragraph will be
deemed a waiver of the candidate's right to raise the issue at any
future stage of proceedings including any petition for review filed
under 26 U.S.C. 9011(a).
(ii) Oral hearing. A candidate who submits written materials
pursuant to paragraph (c)(2)(i) of this section may at the same time
request in writing that the Commission provide such candidate with an
opportunity to address the Commission in open session to demonstrate
that no repayment, or a lesser repayment, is required. The candidate
should identify in this request the repayment issues he or she wants to
address at the oral hearing. If the Commission decides by an
affirmative vote of four (4) of its members to grant the candidate's
request, it will inform the candidate of the date and time set for the
oral hearing. At the date and time set by the Commission, the candidate
or candidate's designated representative will be allotted an amount of
time in which to make an oral presentation to the Commission based upon
the legal and factual materials submitted under paragraph (c)(2)(ii) of
this section. The candidate or representative will also have the
opportunity to answer any questions from individual members of the
Commission.
(3) Repayment determination upon review. In deciding whether to
revise any repayment determination(s) following an administrative
review pursuant to paragraph (c)(2) of this section, the Commission
will consider any submission made under paragraph (c)(2)(i) of this
section and any oral hearing conducted under paragraph (c)(2)(ii) of
this section, and may also consider any new or additional information
from other sources. A determination following an administrative review
that a candidate must repay a certain amount will be accompanied by a
written statement of reasons supporting the Commission's
determination(s). This statement will explain the legal and factual
reasons underlying the Commission's determination(s) and will summarize
the results of any investigation(s) upon which the determination(s) are
based.
(d) Repayment period. (1) Within 90 calendar days of service of the
notice of the Commission's repayment determination(s), the candidate
shall repay to the United States Treasury the amounts which the
Commission has determined to be repayable. Upon application by the
candidate, the Commission may grant an extension of up to 90 calendar
days in which to make repayment.
(2) If the candidate requests an administrative review of the
Commission's repayment determination(s) under paragraph (c)(2) of this
section, the time for repayment will be suspended until the Commission
has concluded its administrative review of the repayment
determination(s). Within 30 calendar days after service of the notice
of the Commission's post-administrative review repayment
determination(s), the candidate shall repay to the United States
Treasury the amounts which the Commission has determined to be
repayable. Upon application by the candidate, the Commission may grant
an extension of up to 90 calendar days in which to make repayment.
(3) Interest shall be assessed on all repayments made after the
initial 90-day repayment period established at paragraph (d)(1) of this
section or the 30-day repayment period established at paragraph (d)(2)
of this section. The amount of interest due shall be the greater of:
(i) An amount calculated in accordance with 28 U.S.C. 1961 (a) and
(b); or
(ii) The amount actually earned on the funds set aside or to be
repaid under this section.
* * * * *
(f) Additional repayments. Nothing in this section will prevent the
Commission from making additional repayment determinations on one or
more of the bases set forth at 11 CFR 9007.2(b) after it has made a
repayment determination on any such basis. The Commission may make
additional repayment determinations where there exist facts not used as
the basis for any previous determination. * * *
(g) Newly-discovered assets. If, after any repayment determination
made under this section, a candidate or his or her authorized
committee(s) receives or becomes aware of assets not previously
included in any statement of net outstanding qualified campaign
expenses submitted pursuant to 11 CFR 9004.9, the candidate or his or
her authorized committee(s) shall promptly notify the Commission of
such newly-discovered assets. * * *
* * * * *
(i) Petitions for rehearing; stays pending appeal. The candidate
may file a petition for rehearing of a repayment determination in
accordance with 11 CFR 9007.5(a). The candidate may request a stay of a
repayment determination in accordance with 11 CFR 9007.5(c) pending the
candidate's appeal of that repayment determination.
21. Section 9007.3 is amended by adding a new sentence to the end
of paragraph (c), to read as follows:
[[Page 31880]]
Sec. 9007.3 Extensions of time.
* * * * *
(c) * * * If a candidate seeks an extension of any 60-day response
period under 11 CFR Part 9007, the Commission may grant no more than
one extension to that candidate, which extension shall not exceed 15
days.
* * * * *
22. Section 9007.5 is amended by revising paragraphs (a), (b),
(c)(1)(ii) and the introductory text of paragraph (c)(4) to read as
follows:
Sec. 9007.5 Petitions for rehearing; stays of repayment
determinations.
(a) Petitions for rehearing. (1) Following the Commission's
repayment determination or a final determination that a candidate is
not entitled to all or a portion of post-election funding under 11 CFR
9004.9(f), the candidate may file a petition for rehearing setting
forth the relief desired and the legal and factual basis in support. To
be considered by the Commission, petitions for rehearing must:
(i) Be filed within 20 calendar days following service of the
Commission's repayment determination or final determination;
(ii) Raise new questions of law or fact that would materially alter
the Commission's repayment determination or final determination; and
(iii) Set forth clear and convincing grounds why such questions
were not and could not have been presented during the original
determination process.
(2) If a candidate files a timely petition under this section
challenging a Commission repayment determination, the time for
repayment will be suspended until the Commission serves notice on the
candidate of its determination on the petition. The time periods for
making repayment under 11 CFR 9007.2(d) shall apply to any amounts
determined to be repayable following the Commission's consideration of
a petition for rehearing under this section.
(b) Effect of failure to raise issues. The candidate's failure to
raise an argument in a timely fashion during the original determination
process or in a petition for rehearing under this section, as
appropriate, shall be deemed a waiver of the candidate's right to
present such arguments in any future stage of proceedings including any
petition for review filed under 26 U.S.C. 9011(a). An issue is not
timely raised in a petition for rehearing if it could have been raised
earlier in response to the Commission's original determination.
(c) * * *
(1) * * *
(ii) A request for a stay shall be made in writing and shall be
filed within 30 calendar days after service of the Commission's
decision on a petition for rehearing under paragraph (a) of this
section or, if no petition for rehearing is filed, within 30 calendar
days after service of the Commission's repayment determination under 11
CFR 9007.2(c).
* * * * *
(4) All stays shall require the payment of interest on the amount
at issue. The amount of interest due shall be calculated from the date
30 days after service of the Commission's repayment determination under
11 CFR 9007.2(c)(4) and shall be the greater of:
* * * * *
23. Section 9007.7 is added to read as follows:
Sec. 9007.7 Administrative record.
(a) The Commission's administrative record for final determinations
under 11 CFR 9004.9 and 9005.1, and for repayment determinations under
11 CFR 9007.2, consists of all documents and materials submitted to the
Commission for its consideration in making those determinations. The
administrative record will include the certification of the
Commission's vote(s), the audit report that is sent to the committee
(for repayment determinations), the statement(s) of reasons, and the
candidate agreement. The committee may include documents or materials
in the administrative record by submitting them within the time periods
set forth at 11 CFR 9004.9(f)(2)(ii), 9005.1(b)(2), 9005.1(c)(4),
9007.1(c) and 9007.2(c)(2), as appropriate.
(b) The Commission's administrative record for determinations under
11 CFR 9004.9, 9005.1 and 9007.2 does not include:
(1) Documents and materials in the files of individual
Commissioners or employees of the Commission that do not constitute a
basis for the Commission's decisions because they were not circulated
to the Commission and were not referenced in documents that were
circulated to the Commission;
(2) Transcripts or audio tapes of Commission discussions other than
transcripts or audio tapes of oral hearings pursuant to 11 CFR
9007.2(c)(2), although such transcripts or tapes may be made available
under 11 CFR parts 4 or 5; or
(3) Documents properly subject to privileges such as an attorney-
client privilege, or items constituting attorney work product.
(c) The administrative record identified in paragraph (a) of this
section is the exclusive record for the Commission's determinations
under 11 CFR 9004.9, 9005.1 and 9007.2
PART 9008--FEDERAL FINANCING OF PRESIDENTIAL NOMINATING CONVENTIONS
24. The authority citation for part 9008 continues to read as
follows:
Authority: 2 U.S.C. 437, 438(a)(6), 26 U.S.C. 9008, 9009(b).
25. Section 9008.12 is amended by revising the last sentence of
paragraph (a)(2) to read as follows:
Sec. 9008.12 Repayments.
(a) * * *
(2) * * * The Commission's issuance of an audit report to the
committee will constitute notification for purposes of the three year
period.
* * * * *
PART 9032--DEFINITIONS
26. The authority citation for part 9032 continues to read as
follows:
Authority: 26 U.S.C. 9032 and 9039(b).
27. Section 9032.9 is amended by revising the first sentence of
paragraph (c) to read as follows:
Sec. 9032.9 Qualified campaign expense.
* * * * *
(c) Except as provided in 11 CFR 9034.4(e), expenditures incurred
either before the beginning of the expenditure report period or after
the last day of a candidate's eligibility will be considered qualified
campaign expenses if they meet the provisions of 11 CFR 9034.4(a). * *
*
* * * * *
PART 9033--ELIGIBILITY FOR PAYMENTS
28. The authority citation for part 9033 is revised to read as
follows:
Authority: 26 U.S.C. 9003(e), 9033 and 9039(b).
29. Section 9033.1 is amended by republishing the introductory text
of paragraph (b), by revising paragraph (b)(5), by adding a new second
sentence to paragraph (b)(7), by revising paragraph (b)(11), and by
adding new paragraph (b)(12), to read as follows:
Sec. 9033.1 Candidate and committee agreements.
* * * * *
(b) Conditions. The candidate shall agree that:
* * * * *
(5) The candidate and the candidate's authorized committee(s) will
keep and furnish to the Commission all
[[Page 31881]]
documentation relating to disbursements and receipts including any
books, records (including bank records for all accounts), all
documentation required by this section (including those required to be
maintained under 11 CFR 9033.11), and other information that the
Commission may request. If the candidate or the candidate's authorized
committee maintains or uses computerized information containing any of
the categories of data listed in 11 CFR 9033.12(a), the committee will
provide computerized magnetic media, such as magnetic tapes or magnetic
diskettes, containing the computerized information at the times
specified in 11 CFR 9038.1(b)(1) that meet the requirements of 11 CFR
9033.12(b). Upon request, documentation explaining the computer
system's software capabilities shall be provided, and such personnel as
are necessary to explain the operation of the computer system's
software and the computerized information prepared or maintained by the
committee shall be made available.
* * * * *
(7) * * * The candidate and the candidate's authorized
committee(s) shall also provide any material required in connection
with an audit, investigation, or examination conducted pursuant to 11
CFR part 9039. * * *
* * * * *
(11) The candidate and the candidate's authorized committee(s) will
pay an civil penalties included in a conciliation agreement or
otherwise imposed under 2 U.S.C. 437g against the candidate, any
authorized committees of the candidate or any agent thereof.
(12) Any television commercial prepared or distributed by the
candidate or the candidate's authorized committee(s) will be prepared
in a manner which ensures that the commercial contains or is
accompanied by closed captioning of the oral content of the commercial
to be broadcast in line 21 of the vertical blanking interval, or is
capable of being viewed by deaf and hearing impaired individuals via
any comparable successor technology to line 21 of the vertical blanking
interval.
30. Section 9033.4 is amended by removing paragraph (b) and
redesignating paragraph (c) as paragraph (b).
31. Section 9033.11 is revised to read as follows:
Sec. 9033.11 Documentation of disbursements.
(a) Burden of proof.Each candidate shall have the burden of proving
that disbursements made by the candidate or his or her authorized
committee(s) or persons authorized to make expenditures on behalf of
the candidate or authorized committee(s) are qualified campaign
expenses as defined in 11 CFR 9032.9. The candidate and his or her
authorized committee(s) shall obtain and furnish to the Commission on
request any evidence regarding qualified campaign expenses made by the
candidate, his or her authorized committees and agents or persons
authorized to make expenditures on behalf of the candidate or
committee(s) as provided in paragraph (b) of this section.
(b) Documentation required.
(1) For disbursements in excess of $200 to a payee, the candidate
shall present a canceled check negotiated by the payee and either:
(i) A receipted bill from the payee that states the purpose of the
disbursement; or
(ii) If such a receipt is not available,
(A) One of the following documents generated by the payee: a bill,
invoice, or voucher that states the purpose of the disbursement; or
(B) Where the documents specified in paragraph (b)(1)(ii)(A) of
this section are not available, a voucher or contemporaneous memorandum
from the candidate or the committee that states the purpose of the
disbursement; or
(iii) Where the supporting documentation required in paragraphs
(b)(1) (i) or (ii) of this section is not available, the candidate or
committee may present collateral evidence to document the qualified
campaign expense. Such collateral evidence may include, but is not
limited to:
(A) Evidence demonstrating that the expenditure is part of an
identifiable program or project which is otherwise sufficiently
documented such as a disbursement which is one of a number of
documented disbursements relating to a campaign mailing or to the
operation of a campaign office; or
(B) Evidence that the disbursement is covered by a pre-established
written campaign committee policy, such as a daily travel expense
policy.
(iv) If the purpose of the disbursement is not stated in the
accompanying documentation, it must be indicated on the canceled check.
(2) For all other disbursements, the candidate shall present:
(i) A record disclosing the full name and mailing address of the
payee, the amount, date and purpose of the disbursement, if made from a
petty cash fund; or
(ii) A canceled check negotiated by the payee that states the full
name and mailing address of the payee, and the amount, date and purpose
of the disbursement.
(3) For purposes of this section:
(i) Payee means the person who provides the goods or services to
the candidate or committee in return for the disbursement; except that
an individual will be considered a payee under this section if he or
she receives $1000 or less advanced for travel and/or subsistence and
if the individual is the recipient of the goods or services purchased.
(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.
(c) Retention of records. The candidate shall retain records with
respect to each disbursement and receipt, including bank records,
vouchers, worksheets, receipts, bills and accounts, journals, ledgers,
fundraising solicitation material, accounting systems documentation,
and any related materials documenting campaign receipts and
disbursements, for a period of three years pursuant to 11 CFR 102.9(c),
and shall present these records to the Commission on request.
(d) List of capital and other assets.
(1) Capital assets. The candidate or committee shall maintain a
list of all capital assets whose purchase price exceeded $2000 when
acquired by the campaign. The list shall include a brief description of
each capital asset, the purchase price, the date it was acquired, the
method of disposition and the amount received in disposition. For
purposes of this section, ``capital asset'' shall be defined in
accordance with 11 CFR 9034.5(c)(1).
(2) Other assets. The candidate or committee shall maintain a list
of other assets acquired for use in fundraising or as collateral for
campaign loans, if the aggregate value of such assets exceeds $5000.
The list shall include a brief description of each such asset, the fair
market value of each asset, the method of disposition and the amount
received in disposition. The fair market value of other assets shall be
determined in accordance with 11 CFR 9034.5(c)(2).
PART 9034--ENTITLEMENTS
32. The authority citation for part 9034 continues to read as
follows:
Authority: 26 U.S.C. 9034 and 9039(b).
33. Section 9034.4 is amended by revising paragraphs (a) and
(b)(3), by adding new paragraph (b)(8), by removing and reserving
paragraph (c), by revising paragraph (d)(2), and by adding new
paragraph (e), to read as follows:
[[Page 31882]]
Sec. 9034.4 Use of contributions and matching payments.
(a) Qualified campaign expenses--
(1) General. Except as provided in paragraph (b)(3) of this
section, all contributions received by an individual from the date he
or she becomes a candidate and all matching payments received by the
candidate shall be used only to defray qualified campaign expenses or
to repay loans or otherwise restore funds (other than contributions
which were received and expended to defray qualified campaign
expenses), which were used to defray qualified campaign expenses.
(2) Testing the waters. Even though incurred prior to the date an
individual becomes a candidate, payments made in accordance with the 11
CFR 100.8(b)(1) for the purpose of determining whether an individual
should become a candidate shall be considered qualified campaign
expenses if the individual subsequently becomes a candidate and shall
count against that candidate's limits under 2 U.S.C. 441a(b).
(3) Winding down costs.
(i) Costs associated with the termination of political activity,
such as the costs of 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 shall be considered qualified campaign
expenses. A candidate may receive and use matching funds for these
purposes either after he or she has notified the Commission in writing
of his or her withdrawal from the campaign for nomination or after the
date of the party's nominating convention, if he or she has not
withdrawn before the convention.
(ii) If the candidate has become ineligible due to the operation of
11 CFR 9033.5(b), he or she may only receive matching funds to defray
costs incurred before the candidate's date of ineligibility, for goods
and services to be received before the date of ineligibility and for
which written arrangement or commitment was made on or before the
candidate's date of ineligibility, until the candidate is eligible to
receive winding down costs under paragraph (a)(3)(i) of this section.
(iii) 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.
(4) Taxes. Federal income taxes paid by the committee on non-exempt
function income, such as interest, dividends and sale of property,
shall be considered qualified campaign expenses. These expenses shall
not, however, count against the state or overall expenditure limits of
11 CFR 9035.1(a).
(5) Gifts and monetary bonuses. Gifts and monetary bonuses shall be
considered qualified campaign expenses, provided that:
(i) Gifts for committee employees, consultants and volunteers in
recognition for campaign-related activities or services do not exceed
$150 total per individual and the total of all gifts does not exceed
$20,000; and
(ii) All monetary bonuses for committee employees and consultants
in recognition for campaign-related activities or services:
(A) Are provided for pursuant to a written contract made prior to
the date of ineligibility; and
(B) Are paid no later than thirty days after the date of
ineligibility.
(b) * * *
(3) General election and post-ineligibility expenditures. Any
expenses incurred after a candidate's date of ineligibility, as
determined under 11 CFR 9033.5, are not qualified campaign expenses
except to the extent permitted under 11 CFR 9034.4(a)(3). In addition,
any expenses incurred before the candidate's date of ineligibility for
goods and services to be received after the candidate's date of
ineligibility, or for property, services, or facilities used to benefit
the candidate's general election campaign, are not qualified campaign
expenses.
* * * * *
(8) Lost or misplaced items. The cost of lost or misplaced 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; the type of equipment involved;
and the number and value of items that were lost.
(c) [Reserved]
(d) * * *
(2) General election. If a candidate has received matching funds,
all transfers from the candidate's primary election account to a legal
and accounting compliance fund established for the general election
must be made in accordance with 11 CFR 9003.3(a)(1).
(e) Attribution of expenditures between the primary and the general
election limits. The following rules apply to candidates who receive
public funding in both the primary and the general election.
(1) General rule. Any expenditure for goods or services that are
used exclusively for the primary election campaign shall be attributed
to the limits set forth at 11 CFR 9035.1. Any expenditure for goods or
services that are used exclusively for the general election campaign
shall be attributed to the limits set forth at 11 CFR 110.8(a)(2), as
adjusted under 11 CFR 110.9(c).
(2) Polling expenses. Polling expenses shall be attributed
according to when the results of the poll are received. If the results
are received on or before the date of the candidate's nomination, the
expenses shall be considered primary election expenses. If results are
received from a single poll both before and after the date of the
candidate's nomination, the costs shall be allocated between the
primary and the general election limits based on the percentage of
results received during each period.
(3) State or national campaign offices. Overhead expenditures and
payroll costs incurred in connection with state or national campaign
offices, shall be attributed according to when the usage occurs or the
work is performed. For purposes of this section, overhead expenditures
shall have the same meaning as set forth in 11 CFR 106.2(b)(2)(iii)(D).
Expenses for usage of offices or work performed on or before the date
of the candidate's nomination shall be attributed to the primary
election, except for periods when the office is used only by persons
working exclusively on general election campaign preparations.
(4) Campaign materials. Expenditures for campaign materials,
including bumper stickers, campaign brochures, buttons, pens and
similar items, that are purchased by the primary election campaign
committee and later transferred to and used by the general election
committee shall be attributed to the general election limits. Materials
transferred to but not used by the general election committee shall be
attributed to the primary election limits.
(5) Media production costs. For media communications that are
broadcast or published both before and after the date of the
candidate's nomination, 50% of the media production costs shall be
attributed to the primary election limits,
[[Page 31883]]
and 50% to the general election limits. Distribution costs, including
such costs as air time and advertising space in newspapers, shall be
paid for 100% by the primary or general election campaign depending on
when the communication is broadcast or distributed.
(6) Campaign Communications. (i) Solicitations. The costs of a
solicitation shall be attributed to the primary election or to the
GELAC, depending on the purpose of the solicitation. If a candidate
solicits funds for both the primary election and for the GELAC in a
single communication, 50% of the cost of the solicitation shall be
attributed to the primary election, and 50% to the GELAC.
(ii) Other communications. Except as provided in paragraph (e)(5)
of this section, the costs of a campaign communication that does not
include a solicitation shall be attributed to the primary or general
election limits based on the date on which the communication is
broadcast, published or mailed. The cost of a communication that is
broadcast, published or mailed before the date of the candidate's
nomination shall be attributed to the primary election limits.
(7) Travel costs. Expenditures for campaign-related transportation,
food, and lodging by any individual, including a candidate, shall be
attributed according to when the travel occurs. If the travel occurs on
or before the date of the candidate's nomination, the cost is a primary
election expense. Travel to and from the convention shall be attributed
to the primary election. Travel by a person who is working exclusively
on general election campaign preparations shall be considered a general
election expense even if the travel occurs before the candidate's
nomination.
34. Section 9034.5 is amended by revising paragraphs (b), (c)(1)
and (f) to read as follows:
Sec. 9034.5 Net outstanding campaign obligations.
* * * * *
(b) Liabilities. (1) The amount submitted as the total of
outstanding campaign obligations under paragraph (a)(1) of this section
shall not include any accounts payable for non-qualified campaign
expenses nor any amounts determined or anticipated to be required as
repayment under 11 CFR part 9038 or any amounts paid to secure a surety
bond under 11 CFR 9038.5.
(2) The amount submitted as estimated necessary winding down costs
under paragraph (a)(1) of this section shall be broken down by expense
category and quarterly or monthly time period. This breakdown shall
include estimated costs for office space rental, staff salaries, legal
expenses, accounting expenses, office supplies, equipment rental,
telephone expenses, postage and other mailing costs, printing and
storage. The breakdown shall estimate the costs that will be incurred
in each category from the time the statement is submitted until the
expected termination of the committee's political activity.
(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 11 CFR 9034.5(c)(2). 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 the total
original cost of such items when acquired less 40%, to account for
depreciation, except that items received after the date of
ineligibility must be valued at their fair market value on the date
received.
* * * * *
(f)(1) With each submission for matching fund payments filed after
the candidate's date of ineligibility, the candidate shall certify
that, as of the close of business on the last business day preceding
the date of submission for matching funds, his or her remaining net
outstanding campaign obligations equal or exceed the amount submitted
for matching.
(2) A candidate who makes a submission for matching fund payments
after his or her date of ineligibility shall also submit a revised
statement of net outstanding campaign obligations. This revised
statement shall be due before the next regularly scheduled payment
date, on a date to be determined and published by the Commission. This
statement shall reflect the financial status of the campaign as of the
close of business three business days before the due date of the
statement. The revised statement shall also contain a brief explanation
of each change in the committee's assets and obligations from the
previous statement.
(3) After a candidate's date of ineligibility, if the candidate
does not receive the entire amount of matching funds on a regularly
scheduled payment date due to a shortfall in the matching payment
account, the candidate shall also submit a revised statement of net
outstanding campaign obligations. The revised statement shall be filed
on a date to be determined and published by the commission, which will
be before the next regularly scheduled payment date.
35. Section 9034.6 is revised to read as follows:
Sec. 9034.6 Expenditures for transportation and services made
available to media personnel; reimbursements.
(a) General. (1) Expenditures by an authorized committee for
transportation, ground services or facilities (including air travel,
ground transportation, housing, meals, telephone service, and
typewriters) made available to media personnel, Secret Service
personnel or national security staff will be considered qualified
campaign expenses, and, except for costs relating to Secret Service
personnel or national security staff, will be subject to the overall
expenditure limitations of 11 CFR 9035.1(a).
(2) Subject to the limitations in paragraphs (b) and (c) of this
section, committees may seek reimbursement for these expenses, and may
deduct reimbursements received from media representatives from the
amount of expenditures subject to the overall expenditure limitation of
11 CFR 9035.1(a). Expenses for which the committee receives no
reimbursement will be considered qualified campaign expenses, and, with
the exception of those expenses relating to Secret Service personnel
and national security staff, will be subject to the overall expenditure
limitation.
(b) Reimbursement limits. (1) The amount of reimbursement sought
from a media representative under paragraph (a)(2) of this section
shall not exceed 110% of the media representative's pro rata share (or
a reasonable estimate of the media representative's pro rata share) of
the actual cost of the transportation and services made available. Any
reimbursement received in excess of this amount shall be disposed of in
accordance with paragraph (d)(1) of this section.
(2) For the purposes of this section, a media representative's pro
rata share shall be calculated by dividing the total actual cost of the
transportation and services provided by the total number of individuals
to whom such transportation and services are made available. For
purposes of this calculation, the total number of individuals shall
include committee staff, media personnel, Secret Service
[[Page 31884]]
personnel, national security staff and any other individuals to whom
such transportation and services are made available, except that, when
seeking reimbursement for transportation costs paid by the committee
under 11 CFR 9034.7(b)(5)(i)(C), the total number of individuals shall
not include national security staff.
(c) Deduction of reimbursements from expenditures subject to the
overall expenditure limitations.
(1) The Committee may deduct from the amount of expenditures
subject to the overall expenditure limitation:
(i) The amount of reimbursements received from media
representatives in payment for the transportation and services
described in paragraph (a) of this section, up to the actual cost of
the transportation and services provided to media representatives; and
(ii) An additional amount of the reimbursements received from media
representatives, representing the administrative costs incurred by the
committee in providing these services to the media representatives and
seeking reimbursement for them, equal to:
(A) Three percent of the actual cost of transportation and services
provided to the media representatives under this section; or
(B) An amount in excess of 3% representing the administrative costs
actually incurred by the committee in providing services to the media
representatives, provided that the committee is able to document the
total amount of administrative costs actually incurred.
(2) For the purposes of this paragraph, ``administrative costs''
includes all costs incurred by the committee in making travel
arrangements and seeking reimbursement, whether these services are
performed by committee staff or by independent contractors.
(d) Disposal of excess reimbursements. If the committee receives
reimbursements in excess of the amount deductible under paragraph (c)
of this section, it shall dispose of the excess amount in the following
manner:
(1) Any reimbursement received in excess of 110% of the actual pro
rata cost of the transportation and services made available to a media
representative shall be returned to the media representative.
(2) Any amount in excess of the amount deductible under paragraph
(c) of this section that is not required to be returned to the media
representative under paragraph (d)(1) of this section shall be paid to
the Treasury.
(e) Reporting. The total amount paid by an authorized committee for
the services and facilities described in paragraph (a)(1) of this
section, plus the administrative costs incurred by the committee in
providing these services and facilities and seeking reimbursement for
them, shall be reported as an expenditure in accordance with 11 CFR
104.3(b)(2)(i). Any reimbursement received by such committee under
paragraph (b)(1) of this section shall be reported in accordance with
11 CFR 104.3(a)(3)(ix).
36. Section 9034.7 is revised to read as follows:
Sec. 9034.7 Allocation of travel expenditures.
(a) Notwithstanding the provisions of 11 CFR 106.3, expenditures
for travel relating to the campaign of a candidate seeking nomination
for election to the office of President by any individual, including a
candidate, shall, pursuant to the provisions of paragraph (b) of this
section, be qualified campaign expenses and be reported by the
candidate's authorized committee(s) as expenditures.
(b)(1) For a trip which is entirely campaign-related, the total
cost of the trip shall be a qualified campaign expense and a reportable
expenditure.
(2) For a trip which includes campaign-related and non-campaign
related stops, that portion of the cost of the trip allocable to
campaign activity shall be a qualified campaign expense and a
reportable expenditure. Such portion shall be determined by calculating
what the trip would have cost from the point of origin of the trip to
the first campaign-related stop and from that stop through each
subsequent campaign-related stop, back to the point of origin. If any
campaign activity, other than incidental contacts, is conducted at a
stop, that stop shall be considered campaign-related. Campaign activity
includes soliciting, making, or accepting contributions, and expressly
advocating the election or defeat of the candidate. Other factors,
including the setting, timing and statements or expressions of the
purpose of an event and the substance of the remarks or speech made,
will also be considered in determining whether a stop is campaign-
related.
(3) For each trip, an itinerary shall be prepared and such
itinerary shall be made available by the committee for Commission
inspection. The itinerary shall show the time of arrival and departure
and the type of event held.
(4) For trips by government conveyance or by charter, a list of all
passengers on such trip, along with a designation of which passengers
are and which are not campaign-related, shall be made available for
Commission inspection. When required to be created, a copy of the
government's or the charter company's official manifest shall also be
maintained and made available by the committee.
(5)(i) If any individual, including a candidate, uses a government
airplane for campaign-related travel, the candidate's authorized
committee shall pay the appropriate government entity an amount equal
to:
(A) The lowest unrestricted and non-discounted first class
commercial air fare available for the time traveled, in the case of
travel to a city served by a regularly scheduled commercial airline
service; or
(B) The lowest unrestricted and non-discounted coach commercial air
fare available for the time traveled, in the case of travel to a city
served by regularly scheduled coach airline service, but not regularly
scheduled first class airline service; or
(C) In the case of travel to a city not served by a regularly
scheduled commercial airline service, the commercial charter rate for
an airplane sufficient in size to accommodate the campaign-related
travelers, including the candidate, plus the news media and the Secret
Service.
(ii) If a government airplane is flown to a campaign-related stop
where it will pick up passengers, or from a campaign-related stop where
it left off passengers, the candidate's authorized committee shall pay
the appropriate government entity an amount equal to the greater of the
amount billed or the amount required under paragraph (b)(5)(i) of this
section for one passenger.
(iii) If any individual, including a candidate, uses a government
conveyance, other than an airplane, for campaign-related travel, the
candidate's authorized committee shall pay the appropriate government
entity an amount equal to the commercial rental rate for a conveyance
sufficient in size to accommodate the campaign-related travelers,
including the candidate, plus the news media and the Secret Service.
(iv) If any individual, including a candidate, uses accommodations,
including lodging and meeting rooms, during campaign-related travel,
and the accommodations are paid for by a government entity, the
candidate's authorized committee shall pay the appropriate government
entity an amount equal to the usual and normal charge for the
accommodations, and shall maintain documentation supporting the amount
paid.
(v) For travel by airplane, the committee shall maintain
documentation of the lowest unrestricted nondiscounted air fare
available for the time traveled,
[[Page 31885]]
including the airline, the flight number and travel service providing
that fare or the charter rate, as appropriate. For travel by other
conveyances, the committee shall maintain documentation of the
commercial rental rate for a conveyance of sufficient size, including
the provider of the conveyance and the size, model and make of the
conveyance.
(6) Travel expenses of a candidate's spouse and family when
accompanying the candidate on campaign-related travel may be treated as
qualified campaign expenses and reportable expenditures. If the spouse
or family members conduct campaign-related activities, their travel
expenses will be treated as qualified campaign expenses and reportable
expenditures.
(7) If any individual, including a candidate, incurs expenses for
campaign-related travel, other than by use of government conveyance or
accommodations, an amount equal to that portion of the actual cost of
the conveyance or accommodations which is allocable to all passengers,
including the candidate, who are traveling for campaign purposes will
be a qualified campaign expense and shall be reported by the committee
as an expenditure.
(i) If the trip is by charter, the actual cost for each passenger
shall be determined by dividing the total operating cost for the
charter by the total number of passengers transported. The amount which
is a qualified campaign expense and a reportable expenditure shall be
calculated in accordance with the formula set forth at 11 CFR
9034.7(b)(2) on the basis of the actual cost per passenger multiplied
by the number of passengers traveling for campaign purposes.
(ii) If the trips is by non-charter commercial transportation, the
actual cost shall be calculated in accordance with the formula set
forth at 11 CFR 9034.7(b)(2) on the basis of the commercial fare. Such
actual cost shall be a qualified campaign expense and a reportable
expenditure.
(8) Travel on corporate airplanes and other corporate conveyances
is governed by 11 CFR 114.9(e).
PART 9036--REVIEW OF SUBMISSION AND CERTIFICATION OF PAYMENTS BY
COMMISSION
37. The authority citation for part 9036 continues to read as
follows:
Authority: 26 U.S.C. 9036 and 9039(b).
38. Section 9036.2 is amended by revising paragraph (b)(1)(ii) and
adding a new sentence to the end of paragraph (b)(1)(vi), to read as
follows:
Sec. 9036.2 Additional submissions for matching fund payments.
* * * * *
(b) * * *
(1) * * *
(ii) The candidate is required to submit an alphabetical list of
contributors (either solely in magnetic media from or in both printed
and magnetic media forms), but not segregated by State as required in
the threshold submission;
* * * * *
(vi) * * * 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 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.
* * * * *
39. In section 9036.5, the introductory text of paragraph (a) is
revised to read as follows:
Sec. 9036.5 Resubmissions.
(a) Alternative resubmission methods. Upon receipt of the
Commission's notice of the results of the submission review pursuant to
11 CFR 9036.4(b), or of an inquiry pursuant to 11 CFR 9039.3 that
results in a downward adjustment to the amount of certified matching
funds, a candidate may choose to:
* * * * *
PART 9037--PAYMENTS AND REPORTING
40. The authority citation for part 9037 continues to read as
follows:
Authority: 26 U.S.C. 9037 and 9039(b).
41. Section 9037.4 is added to read as follows:
Sec. 9037.4 Alphabetized schedules.
If the authorized committee(s) of a candidate file a schedule of
itemized receipts, disbursements, or debts and obligations pursuant to
11 CFR 104.3 that was generated directly or indirectly from
computerized files or records, the schedule shall list in alphabetical
order the sources of the receipts, the payees or the creditors, as
appropriate. In the case of individuals, such schedule shall list all
contributors, payees, and creditors in alphabetical order by surname.
PART 9038--EXAMINATIONS AND AUDITS
42. The authority citation for part 9038 continues to read as
follows:
Authority: 26 U.S.C. 9038 and 9039(b).
42A. The part heading is revised as set forth above.
43. Section 9038.1 is amended by revising paragraphs (b)(2)(iii),
(c), (d) and (e) and adding new paragraph (f) to read as follows:
Sec. 9038.1 Audit.
* * * * *
(b) * * *
(2) * * *
(iii) Exit conference. At the conclusion of the fieldwork,
Commission staff will hold an exit conference to discuss with committee
representatives the staff's preliminary findings and recommendations
which the staff anticipates it will present to the Commission for
approval. Commission staff will prepare a written Exit Conference
Memorandum that discusses these findings and recommendations. A copy of
the Exit Conference Memorandum will be given to committee
representatives at the exit conference. These findings may include an
evaluation of procedures and systems employed by the candidate and
committee to comply with applicable provisions of the Federal Election
Campaign Act, the Presidential Matching Payment Account Act and
Commission regulations; the accuracy of statements and reports filed
with the Commission by the candidate and committee; and preliminary
calculations regarding future repayments to the United States Treasury.
Commission staff will advise committee representatives at this
conference of the committee's opportunity to respond to these proposed
findings, the projected timetable regarding the issuance of the audit
report and any repayment determination, the committee's opportunity for
an administrative review of any repayment determination, and the
procedures involved in Commission repayment determinations under 11 CFR
9038.2.
* * * * *
(c) Committee Response to the Exit Conference Memorandum. The
candidate and his or her authorized committee may submit in writing
within 60 calendar days after the exit conference, legal and factual
materials disputing or commenting on the proposed findings contained in
the Exit Conference Memorandum. In addition, the committee shall submit
any additional documentation requested by
[[Page 31886]]
Commission staff. Such materials may be submitted by counsel if the
candidate so desires.
(d) Approval and issuance of audit report. (1) Before voting on
whether to issue and approve an audit report, the Commission will
consider any written legal and factual materials timely submitted by
the candidate or his or her authorized committee in accordance with
paragraph (c) of this section. The Commission-approved audit report may
address issues other than those contained in the Exit Conference
Memorandum. In addition, this report will contain a repayment
determination made by the Commission pursuant to 11 CFR 9038.2(c)(1).
(2) The audit report may contain issues that warrant referral to
the Office of General Counsel for possible enforcement proceedings
under 2 U.S.C. 437g and 11 CFR part 111.
(3) Addenda to the audit report may be approved and issued by the
Commission from time to time as circumstances warrant and as additional
information becomes available. Such addenda may be based on follow-up
fieldwork conducted under paragraph (b)(3) of this section, and/or
information ascertained by the Commission in the normal course of
carrying out its supervisory responsibilities. The procedures set forth
in paragraphs (c) and (d) (1) and (2) of this section will be followed
in preparing such addenda. The addenda will be placed on the public
record as set forth in paragraph (e) of this section. Such addenda may
also include additional repayment determination(s).
(e) Public release of audit report. (1) The Commission will
consider the audit report in an open session agenda document. The
Commission will provide the candidate and the committee with copies of
any agenda document to be considered in an open session 24 hours prior
to releasing the agenda document to the public.
(2) Following Commission approval of the audit report, the report
will be forwarded to the committee and released to the public. The
Commission will provide the candidate and committee with copies of the
audit report approved by the Commission 24 hours before releasing the
report to the public.
(f)(1) Sampling. In conducting an audit of contributions pursuant
to this section, the Commission may utilize generally accepted
statistical sampling techniques to quantify, in whole or in part, the
dollar value of related audit findings. A projection of the total
amount of violations based on apparent violations identified in such a
sample may become the basis, in whole or in part, of any audit finding.
(2) A committee in responding to a sample-based finding concerning
excessive or prohibited contributions shall respond only to the
specific sample items used to make the projection. If the committee
demonstrates that any apparent errors found among the sample items were
not errors, the Commission shall make a new projection based on the
reduced number of errors in the sample.
(3) Within 30 days of service of the Final Audit Report, the
committee shall submit a check to the United States Treasury for the
total amount of any excessive or prohibited contributions not refunded,
reattributed or redesignated in a timely manner in accordance with 11
CFR 103.3(b) (1), (2) or (3); or take any other action required by the
Commission with respect to sample-based findings.
44. Section 9038.2 is amended by revising paragraphs (a) (2) and
(3), (b)(2)(iii), (b)(4), (c), (d), (f), and the first sentence of
paragraph (g), and by adding paragraphs (a)(4) and (i), to read as
follows:
Sec. 9038.2 Repayments.
(a) * * *
(2) The Commission will notify the candidate of any repayment
determinations made under this section as soon as possible, but not
later than 3 years after the close of the matching payment period. The
Commission's issuance of the audit report to the candidate under 11 CFR
9038.1(d) will constitute notification for purchases of this section.
(3) Once the candidate receives notice of the Commission's
repayment determination under this section, the candidate should given
preference to the repayment over all other outstanding obligations of
his or her committee, except for any federal taxes owned by the
committee.
(4) Repayments may be made only from the following sources:
personal funds of the candidate (without regard to the limitations of
11 CFR 9035.2), contributions and federal funds in the committee's
account(s), and any additional funds raised subject to the limitations
and prohibitions of the Federal Election Campaign Act of 1971, as
amended.
* * * * *
(b) * * *
(2) * * *
(iii) The amount of any repayment sought under this section shall
bear the same ratio to the total amount determined to have been used
for non-qualified campaign expenses as the amount of matching funds
certified to the candidate bears to the candidate's total deposits, as
of 90 days after the candidate's date of ineligibility. For the
purposes of this paragraph (b)(2)(iii)--
(A) Total deposits is defined in accordance with 11 CFR
9038.3(c)(2); and
(B) In seeking repayment for non-qualified campaign expenses from
committees that have received matching fund payments after the
candidate's date of ineligibility, the Commission will review committee
expenditures to determine at what point committee accounts no longer
contain matching funds. In doing this, the Commission will review
committee expenditures from the date of the last matching fund payment
to the candidate, using the assumption that the last payment has been
expended on a last-in, first-out basis.
* * * * *
(4) Surplus; income derived from the use of surplus public funds.
The Commission may determine that the candidate's net outstanding
campaign obligations, as defined in 11 CFR 9034.5, reflect a surplus.
The Commission may determine that the net income derived from an
investment or other use of surplus public funds after the candidates's
date of ineligibility, less Federal, State and local paid on such
income, shall be paid to the Treasury.
(c) Repayment determination procedures. The Commission's repayment
determination will be made in accordance with the procedures set forth
at paragraphs (c)(1) through (c)(4) of this section.
(1) Repayment determination. The Commission will provide the
candidate with a written notice of its repayment determination(s). This
notice will be included in the Commission's audit report prepared
pursuant to 11 CFR 9038.1(d), or inquiry report pursuant to 11 CFR
9039.3, and will set forth the legal and factual reasons for such
determination(s), as well as the evidence upon which any such
determination is based. The candidate shall repay to the United States
Treasury in accordance with paragraph (d) of this section, the amount
which the Commission has determined to be repayable.
(2) Administrative review of repayment determination. If a
candidate disputes the Commission's repayment determination(s), he or
she may request an administrative review of the determination(s) as set
forth in paragraph (c)(2)(i) of this section.
(i) Submission of written materials. A candidate who disputes the
[[Page 31887]]
Commission's repayment determination(s) shall submit in writing, within
60 calendar days after service of the Commission's notice, legal and
factual materials demonstrating that no repayment, or a lesser
repayment, is required. Such materials may be submitted by counsel if
the candidate so desires. The candidate's failure to timely raise an
issue in written materials presented pursuant to this paragraph will be
deemed a waiver of the candidate's right to raise the issue at any
future stage of proceedings including any petition for review filed
under 26 U.S.C. 9041(a).
(ii) Oral hearing. A candidate who submits written materials
pursuant to paragraph (c)(2)(i) of this section may at the same time
request in writing that the Commission provide such candidate with an
opportunity to address the Commission in open session to demonstrate
that no repayment, or a lesser repayment, is required. The candidate
should identify in this request the repayment issues he or she wants to
address at the oral hearing. If the Commission decides by an
affirmative vote of four (4) of its members to grant the candidate's
request, it will inform the candidate of the date and time set for the
oral hearing. At the date and time set by the Commission, the candidate
or candidate's designated representative will be allotted an amount of
time in which to make an oral presentation to the Commission based upon
the legal and factual materials submitted under paragraph (c)(2)(ii) of
this section. The candidate or representative will also have the
opportunity to answer any questions from individual members of the
Commission.
(3) Repayment determination upon review. In deciding whether to
revise any repayment determination(s) following an administrative
review pursuant to paragraph (c)(2) of this section, the Commission
will consider any submission made under paragraph (c)(2)(i) and any
oral hearing conducted under paragraph (c)(2)(ii), and may also
consider any new or additional information from other sources. A
determination following an administrative review that a candidate must
repay a certain amount will be accompanied by a written statement of
reasons supporting the Commission's determination(s). This statement
will explain the legal and factual reasons underlying the Commission's
determination(s) and will summarize the results of any investigation(s)
upon which the determination(s) are based.
(d) Repayment period. (1) Within 90 calendar days of service of the
notice of the Commission's repayment determination(s), the candidate
shall repay to the United States Treasury the amounts which the
Commission has determined to be repayable. Upon application by the
candidate, the Commission may grant an extension of up to 90 calendar
days in which to make repayment.
(2) If the candidate requests an administrative review of the
Commission's repayment determination(s) under paragraph (c)(2) of this
section, the time for repayment will be suspended until the Commission
has concluded its administrative review of the repayment
determination(s). Within 30 calendar days after service of the notice
of the Commission's post-administrative review repayment
determination(s), the candidate shall repay to the United States
Treasury the amounts which the Commission has determined to be
repayable. Upon application by the candidate, the Commission may grant
an extension of up to 90 calendar days in which to make repayment.
(3) Interest shall be assessed on all repayments made after the
initial 90-day repayment period established at paragraph (d)(1) of this
section or the 30-day repayment period established at paragraph (d)(2)
of this section. The amount of interest due shall be the greater of:
(i) An amount calculated in accordance with 28 U.S.C. 1961 (a) and
(b); or
(ii) The amount actually earned on the funds set aside under this
section.
* * * * *
(f) Additional repayments. Nothing in this section will prevent the
Commission from making additional repayment determinations on one or
more of the bases set forth at 11 CFR 9038.2(b) after it has made a
repayment determination on any such basis. The Commission may make
additional repayment determinations where there exist facts not used as
the basis for any previous determination. Any such additional repayment
determination will be made in accordance with the provisions of this
section.
(g) Newly-discovered assets. If, after any repayment determination
made under this section, a candidate or his or her authorized
committee(s) receives or becomes aware of assets not previously
included in any statement of net outstanding campaign obligations
submitted pursuant to 11 CFR 9034.5, the candidate or his or her
authorized committee(s) shall promptly notify the Commission of such
newly-discovered assets. * * *
* * * * *
(i) Petitions for rehearing; stays pending appeal. The candidate
may file a petition for rehearing of a repayment determination in
accordance with 11 CFR 9038.5(a). The candidate may request a stay of a
repayment determination in accordance with 11 CFR 9038.5(c) pending the
candidate's appeal of that repayment determination.
45. Section 9038.4 is amended by adding a sentence to the end of
paragraph (c), to read as follows:
Sec. 9038.4 Extensions of time.
* * * * *
(c) * * * If a candidate seeks an extension of any 60-day response
period under 11 CFR part 9038, the Commission may grant no more than
one extension to that candidate, which extension shall not exceed 15
days.
* * * * *
46. Section 9038.5 is amended by revising paragraphs (a), (b),
(c)(1)(ii), and the introductory text of (c)(4), to read as follows:
Sec. 9038.5 Petitions for rehearing; stays of repayment
determinations.
(a) Petitions for rehearing. (1) Following the Commission's final
determination under 11 CFR 9033.10 or 9034.5(g) or the Commission's
repayment determination under 11 CFR 9038.2(c), the candidate may file
a petition for rehearing setting forth the relief desired and the legal
and factual basis in support. To be considered by the Commission,
petitions for rehearing must:
(i) Be filed within 20 calendar days after service of the
Commission's final determination or repayment determination;
(ii) Raise new questions of law or fact that would materially alter
the Commission's final determination or repayment determination; and
(iii) Set forth clear and convincing grounds why such questions
were not and could not have been presented during the original
determination process.
(2) If a candidate files a timely petition under this section
challenging a Commission repayment determination, the time for
repayment of the amount at issue will be suspended until the Commission
serves notice on the candidate of its determination on the petition.
The time periods for making repayment under 11 CFR 9038.2(d) shall
apply to any amounts determined to be repayable following the
Commission's consideration of a petition for rehearing under this
section.
[[Page 31888]]
(b) Effect of failure to raise issues. The candidate's failure to
raise an argument in a timely fashion during the original determination
process or in a petition for rehearing under this section, as
appropriate, shall be deemed a waiver of the candidate's right to
present such arguments in any future stage of proceedings including any
petition for review filed under 26 U.S.C. 9041(a). An issue is not
timely raised in a petition for rehearing if it could have been raised
earlier in response to the Commission's original determination.
(c) Stay of repayment determination pending appeal.
(1) * * *
(ii) A request for a stay shall be made in writing and shall be
filed within 30 calendar days after service of the Commission's
decision on a petition for rehearing under paragraph (a) of this
section, or, if no petition for rehearing is filed, within 30 calendar
days after service of the Commission's repayment determination under 11
CFR 9038.2(c).
* * * * *
(4) All stays shall require the payment of interest on the amount
at issue. The amount of interest due shall be calculated from the date
30 days after service of the Commission's repayment determination under
11 CFR 9038.2(c) and shall be the greater of:
* * * * *
47. Section 9038.7 is added to read as follows:
Sec. 9038.7 Administrative record.
(a) The Commission's administrative record for final determinations
under 11 CFR part 9033, sections 9034.5, 9036.5 and part 9039, and for
repayment determinations under 11 CFR 9038.2, consists of all documents
or materials submitted to the Commission for its consideration in
making those determinations. The administrative record will include the
certification of the Commission's vote(s), the audit report that is
sent to the committee (for repayment determinations), the statement(s)
of reasons, and the candidate agreement. The committee may include
documents or materials in the administrative record by submitting them
within the time periods set forth at 11 CFR 9033.3(b), 9033.4(a)(2),
9033.6(c), 9033.7(b), 9033.9(b), 9034.5(g)(2), 9036.5(e), 9038.1(c) and
9038.2(c)(2), as appropriate.
(b) The Commission's administrative record for determinations under
11 CFR part 9033, sections 9034.5, 9036.5 and 9038.2 and part 9039 does
not include:
(1) Documents and materials in the files of individual
Commissioners or employees of the Commission that do not constitute a
basis for the Commission's decisions because they were not circulated
to the Commission and were not referenced in documents that were
circulated to the Commission;
(2) Transcripts or audio tapes of Commission discussions other than
transcripts or audio tapes of oral hearings pursuant to 11 CFR
9038.2(c)(2), although such transcripts or tapes may be made available
under 11 CFR parts 4 or 5; or
(3) Documents properly subject to privileges such as an attorney-
client privilege, or items constituting attorney work product.
(c) The administrative record identified in paragraph (a) of this
section is the exclusive record for the Commission's determinations
under 11 CFR part 9033, Secs. 9034.5, 9036.5 and 9038.2 and part 9039.
PART 9039--REVIEW AND INVESTIGATION AUTHORITY
48. The authority citation for part 9039 continues to read as
follows:
Authority: 26 U.S.C. 9039.
49. Section 9039.3 is amended by adding new paragraph (b)(4), to
read as follows:
Sec. 9039.3 Examination and audits; investigations.
* * * * *
(b) * * *
(4) If, at the close of the inquiry, the Commission determines that
no action or no further action is warranted, the Commission shall so
notify the candidate. If the inquiry results in an adjustment to the
amount of certified matching funds, the procedures set forth at 11 CFR
9036.5 or 9038.1 shall be followed, as appropriate. If the inquiry
coincides with an audit undertaken pursuant to 11 CFR 9038.1, the
information obtained in the inquiry will be utilized in making the
repayment determination. If the inquiry results in an initial or
additional repayment determination, the procedures set forth at 11 CFR
9038.2, 9038.4, and 9038.5 shall be followed.
Dated: June 12, 1995.
Danny L. McDonald,
Chairman.
[FR Doc. 95-14667 Filed 6-15-95; 8:45 am]
BILLING CODE 6715-01-M
