[Federal Register Volume 64, Number 146 (Friday, July 30, 1999)]
[Rules and Regulations]
[Pages 41266-41273]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-19515]
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FEDERAL ELECTION COMMISSION
11 CFR Parts 100 and 114
[Notice 1999-12]
Definition of ``Member'' of a Membership Organization
AGENCY: Federal Election Commission.
ACTION: Final rules and transmittal of regulations to Congress.
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SUMMARY: The Commission has revised its rules governing who qualifies
as a ``member'' of a membership organization. An incorporated
membership organization or labor organization can solicit contributions
from its members to a separate segregated fund (``SSF'') established by
the organization, and can include express electoral advocacy in
communications to its members. Unincorporated membership organizations
can similarly make internal communications to their members but cannot
establish SSF's. The revisions largely address the internal
characteristics of an organization that, when coupled with certain
financial or organizational attachments, are sufficient to confer
membership status.
DATES: Further action, including the publication of a document in the
Federal Register announcing an effective date, will be taken after
these regulations have been before Congress for 30 legislative days
pursuant to 2 U.S.C. 438(d).
FOR FURTHER INFORMATION CONTACT: Ms. Rosemary C. Smith, Acting
Assistant General Counsel, or Ms. Rita A. Reimer, Attorney, 999 E
Street N.W., Washington, DC 20463, (202) 694-1650 or (800) 424-9530.
SUPPLEMENTARY INFORMATION: Although the Federal Election Campaign Act
of 1971 as amended (``FECA'' or ``Act''), 2 U.S.C. 431 et seq.,
prohibits direct corporate contributions in connection with federal
campaigns, 2 U.S.C. 441b(a), it permits corporations, including
incorporated membership organizations, to solicit contributions from
their restricted class to a separate segregated fund. In the case of
incorporated membership organizations, the restricted class consists of
the
[[Page 41267]]
members of each association, their executive and administrative
personnel, and their families. These contributions can be used for
federal political purposes. The Act also allows membership
organizations to communicate with their members on any subject,
including communications that include express electoral advocacy. 2
U.S.C. 441b(b)(2)(A), 441b(b)(4)(C). The Commission's implementing
regulations defining who is a ``member'' of a membership organization
are found at 11 CFR 100.8(b)(4)(iv) and 11 CFR 114.1(e).
The Commission's original ``member'' rules, which had been adopted
in 1977, were the subject of a 1982 United States Supreme Court
decision, FEC v. National Right to Work Committee (``NRWC''), 459 U.S.
196 (1982). In 1993, following a series of advisory opinions in this
area, the Commission revised the text of the rules to reflect that
decision. 58 FR 45770 (Aug. 30, 1993), effective Nov. 10, 1993. 58 FR
59640. The revised rules were held to be unduly restrictive by the
United States Court of Appeals for the District of Columbia Circuit in
Chamber of Commerce of the United States (``Chamber'') v. FEC, 69 F.3d
600 (D.C. Cir. 1995), amended on denial of rehearing, 76 F.3d 1234
(D.C. Cir. 1996). This rulemaking followed.
History of the Rulemaking
On February 24, 1997, the Commission received a Petition for
Rulemaking from James Bopp, Jr., on behalf of the National Right to
Life Committee, Inc. The Petition urged the Commission to revise its
member rules to reflect the Chamber decision. The Commission published
a Notice of Availability (``NOA'') in the Federal Register on March 29,
1997, 62 F.R. 13355, and received two comments in response.
On July 31, 1997, the Commission published in the Federal Register
an Advance Notice of Proposed Rulemaking (``ANPRM'') addressing these
rules. 62 FR 40982. Because the Chamber decision, the petition for
rulemaking, and the comments received in response to the NOA provided
few specific suggestions as to how the rules should be amended to
comport with the decision, the Commission did not propose specific
amendments to the rules. Rather, it sought general guidance on the
factors to be considered in determining the existence of this
relationship. The Commission received 14 comments in response to the
ANPRM.
On December 22, 1997, the Commission published a Notice of Proposed
Rulemaking (``NPRM'') on this matter, 62 FR 66832, and received 22
comments in response. On April 29, 1998, the Commission held a public
hearing on this rulemaking at which 10 witnesses testified.
The 1997 NPRM sought comments on three alternative proposals,
referenced as Alternatives A, B, and C. None of the alternatives
proposed any changes to the three preliminary requirements, or to the
provisions in the current rules that recognize as members persons who
have a stronger financial interest in an organization than the payment
of annual dues, such as those who own or lease seats on stock exchanges
or boards of trade. 11 CFR 100.8(b)(4)(iv)(B)(1), 114.1(e)(2)(i), AO
1997-5.
Under Alternative A, all persons who paid $50 in annual dues or met
specified organizational attachments would be considered members. The
NPRM suggested such attachments as the voting rights contained in the
current rules; the right to serve on policy-making boards of the
organization; eligibility to be elected to the governing positions in
the organization; and the possibility of disciplinary action against
the member by the organization. A lesser dues obligation coupled with
weaker organizational attachments would also be sufficient for this
purpose.
Alternative B distinguished between the types of organizations
addressed by the Chamber decision, i.e., those formed to further
business or economic interests or to implement a system of self-
discipline or self-regulation within a line of commerce; and
ideological, social welfare, and political organizations. Persons
paying any amount of annual dues would be considered members of the
first category of organizations, while annual dues of $200 or more
would be required for membership in the second category, unless the
purported members had the same voting rights required by the current
rule.
Under Alternative C, an organization that qualified as a membership
organization by meeting the three preliminary requirements could
consider as members all persons who paid the amount of annual dues set
by the organization, regardless of amount.
The 1997 NPRM also proposed that direct membership in any level of
a multi-tiered organization be construed as membership in all tiers of
the organization for purposes of these rules.
As was the case with the ANPRM, the comments and testimony received
in response to the NPRM expressed a wide range of views--there was no
consensus on how best to address this situation. After further
consideration, the Commission sought comments on a slightly different
approach, one that would address more fully the attributes of
membership organizations, in addition to members' required financial or
organizational attachments. The Commission accordingly published a
second NPRM that focused primarily on characteristics of membership
organizations. 63 F.R. 69224 (Dec. 16, 1998).
The Commission received 25 comments in response to the second NPRM.
Commenters included the Alliance for Justice; the American Federation
of Labor and Congress of Industrial Organizations (``AFL-CIO''); the
American Federation of State, County and Municipal Employees
(``AFSCME''); the American Hotel and Motel Association (``AH&MA''); the
American Medical Association; the Americans Back in Charge Foundation;
the American Society of Association Executives (``ASAE''); Peter A.
Bagatelos; Camille Bradford; the Hon. Thomas M. Davis; the Free Speech
Coalition; Harmon, Curran, Spielberg & Eisenberg; the Internal Revenue
Service; the James Madison Center for Free Speech; the National
Association of Business Political Action Committees (``NABPAC''); the
National Association of Realtors; the National Citizens Legal Network
(``NCLN''); the National Education Association (``NEA''); the National
Lumber and Building Material Dealers Association (``NLBMDA''); the
National Right to Work Committee; the National Rural Electric
Cooperative Association; the National Telephone Cooperative
Association; Vigo G. Nielsen, Jr.; Daniel M. Schember; and the United
States Chamber of Commerce.
The Commission held a hearing on this NPRM on March 17, 1999, at
which 13 witnesses testified. Witnesses included representatives of the
Alliance for Justice; the AFL-CIO; AFSCME; AH&MA; the Americans Back in
Charge Foundation; ASAE; the Free Speech Coalition; the James Madison
Center for Free Speech; NABPAC; NCLN; NEA; Ms. Bradford; and Mr.
Schember.
Explanation and Justification
Background
In its NRWC decision, the Supreme Court rejected an argument by a
nonprofit, noncapital stock corporation, whose articles of
incorporation stated that it had no members, that it should be able to
treat as members individuals who had at one time responded, not
necessarily financially, to an NRWC advertisement, mailing, or personal
contact. The Supreme Court rejected
[[Page 41268]]
this definition of ``member,'' saying that to accept it ``would
virtually excise from the statute the restriction of solicitation to
`members.' '' 459 U.S. at 203. The Court determined that ``members'' of
nonstock corporations should be defined, at least in part, by analogy
to stockholders of business corporations and members of labor unions.
Viewing the question from this perspective meant that ``some relatively
enduring and independently significant financial or organizational
attachment is required to be a `member' '' for these purposes. Id. at
204. The NRWC's asserted members did not qualify under this standard
because they played no part in the operation or administration of the
corporation, elected no corporate officials, attended no membership
meetings, and exercised no control over the expenditure of their
contributions. Id. at 206. The 1993 revisions to the Commission's rules
were intended to incorporate this standard.
The Current Rules
The current rules require an organization to meet three preliminary
requirements before it can qualify as a membership organization. These
requirements are that it (1) expressly provide for ``members'' in its
articles and by-laws; (2) expressly solicit members; and (3) expressly
acknowledge the acceptance of membership, such as by sending a
membership card or including the member on a membership newsletter
list. 11 C.F.R. 100.8(b)(4)(iv)(A), 114.1(e)(1). If these preliminary
requirements are met, a person may qualify as a member either by having
a significant financial attachment to the membership organization (not
merely the payment of dues), or the right to vote directly for all
members of the organization's highest governing body. However, in most
instances a combination of regularly-assessed dues and the right to
vote directly or indirectly for at least one member of the
organization's highest governing body is required. The term
``membership organization'' includes membership organizations, trade
organizations, cooperatives, corporations without capital stock, and
local, national and international labor organizations that meet the
requirements set forth in these rules.
The Chamber of Commerce Decision
The United States District Court for the District of Columbia held
that the current rules were not arbitrary, capricious or manifestly
contrary to the statutory language, and therefore deferred to what the
court found to be a valid exercise of the Commission's regulatory
authority. Chamber of Commerce of the United States v. FEC, Civil
Action No. 94-2184 (D.D.C. Oct. 28, 1994) (1994 WL 615786). However,
the Court of Appeals for the D.C. Circuit reversed this ruling.
The case was jointly brought by the Chamber of Commerce and the
American Medical Association (``AMA''), two organizations that do not
provide their asserted ``members'' with the voting rights necessary to
confer this status under the current rules. The appellate court held
that the ties between these members and the Chamber and the AMA are
nonetheless sufficient to comply with the Supreme Court's NRWC
criteria, and therefore concluded that the Commission's rules are
invalid because they define the term ``member'' in an unduly
restrictive fashion. 69 F.3d at 604.
The Chamber is a nonprofit corporation whose members include 3,000
state and local chambers of commerce, 1,250 trade and professional
groups, and 215,000 ``direct business members.'' The members pay annual
dues ranging from $65 to $100,000 and may participate on any of 59
policy committees that determine the Chamber's position on various
issues. However, the Chamber's Board of Directors is self perpetuating
(that is, Board members elect their successors); so no member entities
have either direct or indirect voting rights for any members of the
Board.
The AMA challenged the exclusion from the definition of member
44,500 ``direct'' members, those who do not belong to a state medical
association. Direct members pay annual dues ranging from $20 to $420;
receive various AMA publications; and participate in professional
programs put on by the AMA. They are also bound by and subject to
discipline under the AMA's Principles of Medical Ethics. However, since
state medical associations elect members of the AMA's House of
Delegates, that organization's highest governing body, direct members
do not satisfy the voting criteria set forth in the current rules.
The Chamber court, in an Addendum to the original decision, noted
that the Commission ``still has a good deal of latitude in
interpreting'' the term ``member.'' 76 F.3d at 1235. However, in its
original decision, the court held the rules to be arbitrary and
capricious as applied to the Chamber, since under the current rules
even those paying $100,000 in annual dues cannot qualify as members. As
for the AMA, the rule excludes members who pay up to $420 in annual
dues and, among other organizational attachments, are subject to
sanctions under the Principles of Medical Ethics. The court explained
that this latter attachment ``might be thought, [] for a professional,
[to be] the most significant organizational attachment.'' 69 F.3d at
605 (emphasis in original).
Section 100.8(b)(4) Membership Organizations
First, the Commission has replaced the term ``membership
association'' wherever it appears in this section with the term
``membership organization.'' The Commission believes it is appropriate
to refer to the covered entities as ``membership organizations''
because that is the term used in the Act. See, 2 U.S.C. 431(9)(B)(iii)
and 441b(b)(4)(C). ``Membership organization'' is also referred to in
11 CFR 100.8(b)(4), which describes the entities entitled to the
``internal communication'' exception to the Act's definition of
expenditure.
The NPRM proposed adding unincorporated associations to the
definition of membership organizations, for purposes of 11 CFR 100.8
only. The comments on this proposal were mixed. Some supported the
idea, while others argued against it, saying that it might exceed the
Commission's authority by blurring the statutory distinction between
corporations and other entities contained in the FECA.
The Commission is expanding the definition of membership
organization to include unincorporated associations because it believes
this is consistent with congressional intent. It is clear from the
placement of the exception at 2 U.S.C. 431(9)(B)(iii), i.e., in the
Act's ``definition'' section, that Congress intended to allow
noncorporate and non-labor union organizations to avail themselves of
the internal membership communication exception. By including the
internal communications exception in the definition of ``expenditure,''
the statute allows noncorporate and non-union membership organizations
to communicate with their members without subjecting them to the normal
prohibitions and reporting requirements.
Paragraph (b)(4) lists the types of entities entitled to the
expenditure exemption and the types of communications (i.e., express
advocacy) that an exempted organization may engage in without those
communications being classified as an expenditure. It currently states
that entities ``organized primarily for the purpose of influencing the
nomination for election, or election, of any individual to Federal
office'' are not
[[Page 41269]]
entitled to the membership communications exemption.
The Commission has decided to move this language to new paragraph
11 CFR 100.8(b)(4)(iv)(A)(6), the provision in 11 CFR 100.8 that
explicitly defines a ``membership organization.'' This change insures
that organizations primarily organized to influence a Federal election
cannot, by definition, be classified as membership organizations under
the Act.
The NPRM proposed further revising this section to include only
communications ``subject to the direction and control of [the
membership organization] and not any other person.'' Several commenters
expressed concern that this provision could infringe on
constitutionally protected free speech rights, and lead to unwarranted
Commission intrusion into an organization's internal workings. The
Commission is not including this language in the final rule because it
has determined that the current language, which encompasses ``[a]ny
cost incurred for any communication by a membership organization to its
members,'' sufficiently addresses its concern that an organization not
be used as a conduit by a candidate or other outside entity seeking to
influence unlawfully a Federal election.
Section 100.8(b)(4)(iv)(A) Attributes of Membership Organizations
Paragraph (b)(4)(iv)(A) of this section addresses the attributes of
membership organizations. Since the purpose of the Act's ``membership
communications'' exception is to allow bona fide membership
organizations to engage in political communications with their members,
these rules are intended to prevent individuals from establishing
``sham'' membership organizations in an effort to circumvent the Act's
contribution and expenditure limits. For this reason, the Commission
believes it is appropriate to focus on the structure of the membership
organization as well as on who qualifies as a member.
Accordingly, revised paragraph (A)(1) states that a membership
organization shall be composed of members vested with the power and
authority to operate or administer the organization pursuant to the
organization's articles, bylaws, constitution or other formal
organizational documents. The Commission believes it is axiomatic that
membership organizations should be composed of members, and that
members should have the power to operate or administer the
organization. This language is a combination of that contained in
proposed paragraphs (A)(1) and (A)(3) of the December, 1998 NPRM (63
F.R. 69224). Proposed paragraph (A)(3) of the December, 1998 NPRM
required that the organization ``be self governing, such that the power
and authority to direct and control the organization is vested in some
of all members.'' The phrases ``self-governing'' and ``direct and
control'' were removed in favor of the revised language noted above.
The Commission notes that organizations would be able to delegate
administrative and related responsibilities to smaller committees or
other groups of members; the new rule does not require that all members
approve all organization actions. Additionally, membership
organizations with self-perpetuating boards of directors will be
considered to have met this requirement if all members of the board are
themselves members of the organization, as long as the organization has
chosen this structure and it meets all other requirements of these
regulations.
With regard to the requirement in paragraph (A)(2) that the
qualifications and requirements for membership be expressly stated, the
Commission notes that this provision would not preclude the
organizational documents from delegating the responsibility to set
specific requirements, such as the amount of dues or other
qualifications or requirements, to the board of directors or other
committees or groups of members.
The term ``constitution'' was also added to paragraphs (A)(1),
(A)(2) and (A)(3) as a ``formal organizational document'' in response
to several comments noting that many membership organizations
considered constitutions to be their primary organizing document.
One commenter asked the Commission to drop the requirement that
membership organizations ``shall be composed of members,'' arguing that
some membership organizations include non-members and might find it
difficult to distinguish between the two. Since the FECA specifically
refers to ``members,'' and limits communications and solicitations to
members, the Commission believes it is appropriate to include this
requirement in the rules. Please note, this does not mean that
organizations that permit non-members to participate in certain aspects
of their operations will lose their status as a membership organization
pursuant to the FECA, although they cannot solicit from or send express
advocacy communications to such non members.
Some commenters pointed out that covered organizations may have to
amend their bylaws to comply with these new requirements; and that this
can be a lengthy process for those organizations which, for example,
must approve the proposed changes at consecutive annual meetings. The
Commission may consider such organizations to be in compliance with
these rules while steps are underway, in accordance with the
organization's rules, to come into compliance, assuming that the other
requirements of the rules are met, as long as necessary changes are
made at the first opportunity available under the organization's rules.
Revised paragraph (A)(3) states that membership organizations shall
make their articles, bylaws or other formal organizational documents
available to their members. As noted above, the Supreme Court's
language in the NRWC decision, 459 U.S. at 204, pointed to the need for
members of membership organizations to have ``relatively enduring and
independently significant financial or organizational attachments'' to
the organization. Those attachments can hardly be meaningful if the
members are unaware of their rights and obligations. This requirement
is therefore a corollary to that found at revised paragraph (A)(1),
that members constitute the organization.
The NPRM proposed that such documents be made ``freely'' available
to members, a term some commenters thought implied that the documents
would have to be provided free of charge. They argued that this could
prove costly for small organizations with lengthy organizational
documents.
The Commission did not intend by its use of the word ``freely'' to
indicate that the documents would have to be made available ``free of
charge.'' Rather, organizations may impose reasonable copying and
delivery fees for this service. They may also make these documents
available at their headquarters or other offices, where members
choosing to do so may consult and copy them.
Labor organizations also asserted that the Commission has no
authority to impose requirements in addition to those contained in the
Labor-Management Reporting and Disclosure Act of 1959 (``LMRDA'') and
other Federal labor laws. The Commission believes that the revised
rules largely comport with the LMRDA's requirements. However, the FECA
and the Federal labor laws were enacted for different purposes, and the
Commission cannot be bound by other statutes that would limit its
authority in enforcing and interpreting the FECA.
New paragraphs (A)(4) and (5) contain the two preliminary
requirements that formerly appeared in paragraphs (A)(2)
[[Page 41270]]
and (3). These paragraphs state that membership organizations shall
expressly solicit members, and expressly acknowledge the acceptance of
membership, such as by sending a membership card or including the
member on a membership newsletter list. New paragraph (A)(4) has been
revised slightly to clarify that an organization must expressly solicit
persons to become members of the organization.
New paragraph (A)(6) contains the language moved from the
introductory text of 11 CFR 100.8(b)(4), supra. It states that
organizations primarily organized for the purpose of influencing the
nomination for election, or election, of any individual for Federal
office cannot qualify as membership organizations for purposes of these
rules.
Section 100.8(b)(4)(iv)(B) Definition of ``member'' of a membership
organization
The Commission interprets the Supreme Court's requirement in the
NRWC decision that members of membership organizations have a
``relatively enduring and independently significant financial or
organizational'' attachment, supra, to mean that members must have a
long term and continuous bond with the organization itself. The new
rules define this as either a meaningful ownership or investment stake;
the payment of dues on a regular basis; or direct participatory rights
in the governance of the organization.
The introductory language of paragraph (b)(4)(iv)(B), which states
that members must satisfy the requirements for membership in a
membership organization and affirmatively accept the organization's
invitation to become a member, has not been changed. Nor has paragraph
(B)(1), which confers membership on those having some significant
financial attachment to the organization, such as a significant
investment or ownership stake.
One commenter objected to this provision, saying that it would
allow wealthy individuals and other entities to purchase memberships,
and that the payment of dues should be sufficient for this purpose.
However, this provision addresses the situation where a member may pay
several hundred thousand dollars to purchase a seat on a stock
exchange, for example, but does not pay dues.
Paragraph (B)(2) requires members to pay membership dues at least
annually, of a specific amount predetermined by the organization.
Commenters largely agreed with the Commission's proposal not to set any
minimum amount of dues, because this varies so widely from organization
to organization. The term ``at least'' has been added to the language
proposed in the NPRM to address situations where dues are paid more
frequently, i.e., bi-weekly or monthly, as is true of most labor
organizations.
Several commenters expressed concern over the annual dues
requirement, noting that, despite an organization's best efforts, not
all members renew their memberships within a twelve-month period. These
commenters raised the question of whether the annual dues standard
would require organizations to exclude, for FECA purposes, any members
who are late in paying dues. As long as organizations maintain and
enforce an annual (or more frequent) dues requirement, payments within
a flexible window or subject to a reasonable grace period would meet
this requirement.
Paragraph (B)(3) defines significant organizational attachment to
include (i) the affirmation of membership on at least an annual basis,
and (ii) direct participatory rights in the governance of the
organization. The regulation cites as examples of such rights the right
to vote directly or indirectly for at least one individual on the
membership organization's highest governing board; the right to vote on
policy questions where the highest governing body of the membership
organization is obligated to abide by the results; the right to approve
the organization's annual budget; or the right to participate directly
in similar aspects of the organization's governance.
The Commission notes that these requirements apply only to those
members who do not pay annual dues, or whose financial attachment to
the organization is not a significant investment or ownership stake.
This allays the concern of some commenters that, as the proposal was
originally drafted, members might be required to annually affirm their
membership in addition to paying annual dues.
As with the annual dues requirement, the Commission intends to give
organizations some flexibility in interpreting the phrase ``annual
affirmation.'' For example, such activities as attending and signing in
at a membership meeting or responding to a membership questionnaire
would satisfy this requirement. The organization would not have to send
out a mailing form for this purpose unless a member did not pay dues
and had no other significant contact with the organization over the
period in question.
Several commenters objected to the annual affirmation requirement
proposed in the NPRM, and the Commission has substantially loosened
this in an effort to address their concerns. It has not eliminated it
entirely, however, because the Commission is bound by the Supreme
Court's requirement that there be a significant or relatively enduring
attachment between the member and the organization.
Section 100.8(b)(4)(iv)(C) Case-by-case Determinations
The Commission is revising paragraph (b)(4)(iv)(C) of this section,
which provides for case-by-case determinations of membership status
through the advisory opinion (``AO'') process for those who do not
precisely meet the requirements set forth in paragraph (B), to
specifically state that it applies to retired members, in addition to
the student and lifetime members addressed in the former version.
The NPRM proposed adding new paragraph (b)(4)(iv)(D) to address the
status of retired union members who had paid dues for a period of at
least ten years. Some unions commented that they could not easily
determine which retired members met this criterion. Other commenters
urged the Commission to treat all retired members the same, regardless
of whether they had retired from a union or from some other
organization.
It is apparent from these comments that membership organizations
have a wide range of relationships with their retired members. For this
reason the Commission has decided that it is best to address this
situation through the advisory opinion process, as is true of student,
lifetime, honorary and similar member categories. In addition, please
note that the Commission has addressed the question of retired members
in AOs 1995-14, 1995-13, and 1987-5, which continue to provide guidance
to similarly-situated organizations.
For instance, the most permissive advisory opinion, AO 1987-5,
approved a life membership policy including members who had paid dues
for ten years and reached age 65. That opinion also involved the
retention of voting rights, which would not be essential under the new
rules. These new rules include separate annual dues and organizational
attachment tests as alternatives. Members who possess the requisite
voting rights and affirm membership at least annually would qualify as
members regardless of whether they ever paid dues.
[[Page 41271]]
Section 100.8(b)(4)(iv)(D) Labor Organizations
This provision, which has not been revised, states that,
notwithstanding the requirements of paragraphs (b)(4)(iv)(B)(1) through
(3) of this section, members of a local union are considered to be
members of any national or international union of which the local union
is a part and of any federation with which the local, national, or
international union is affiliated.
The NPRM proposed deleting this language and replacing it with the
provision relating to retired union members that has now been
incorporated into the case-by-case determination process. At the time
the NPRM was published, the Commission believed that unions with
several organized levels would fall within the provisions relating to
multi-tiered organizations contained in new paragraph
100.8(b)(4)(iv)(E) of this section, infra. However, some of the labor
organizations that commented pointed out that their particular
organizational structure did not precisely fit this model. The
Commission is therefore retaining the current language to insure that
unions continue to be treated as Congress intended in drafting this
portion of the FECA. See FEC v. Sailors' Union of the Pacific Political
Fund, 824 F. Supp. 492, 495 (N.D. Cal. 1986), aff'd 828 F.2d 502 (9th
Cir. 1987).
Section 100.8(b)(4)(iv)(E) Multi-tiered Organizations
This provision, which was originally proposed in the 1997 NPRM,
states that, in the case of a membership organization which has a
national federation structure or has several levels, including, for
example, national, state and/or local affiliates, a person who
qualifies as a member of any entity within the federation or of any
affiliate by meeting the requirements of paragraphs (b)(4)(iv)(B) (1),
(2), (3), or (4) of this section, shall also qualify as a member of all
affiliates for purposes of these rules. It further states that the
factors set forth in the Commission's affiliation rules at 11 CFR
100.5(g)(2), (3) and (4) shall be used to determine whether entities
are affiliated for purposes of this paragraph.
The commenter who first recommended this approach noted that a
person who joins one tier of a multi-tiered organization clearly
demonstrates an intention to associate with the entire organization.
This new approach will also make enforcement easier and prevent what
could otherwise be a large number of requests for advisory opinions
from multi-tiered organizations. No comments were received opposing
this change.
Section 100.8(b)(4)(iv)(F) Inapplicability of State Law
Paragraph (b)(4)(iv)(F) provides that, for purposes of these rules,
the status of a membership organization shall be determined pursuant to
paragraph (b)(4)(iv) of this section and not by provisions of State law
governing unincorporated associations, trade associations,
cooperatives, corporations without capital stock or labor
organizations. Several commenters objected to this proposal, arguing
that the Commission should defer to State law in this area.
Where an organization does not have ``members'' under that
definition of state law, the right to vote for directors, and to
exercise other rights normally given to members, is typically vested in
the directors themselves. The board of directors thus elects its own
successors, and in that sense is a self-perpetuating, autonomous board.
State law, however, also typically gives an organization that
elects not to have ``members'' as defined by state law the right to
have other persons affiliated with the organization under such terms
and conditions as the organizational documents or directors provide,
and to call those persons ``members'' if the organization wishes to do
so. In that circumstance, if the terms and conditions of membership
satisfied these regulations, those persons would be ``members'' for
purposes of the FECA, even if they were not ``members'' as defined
under state law.
The Commission does not believe that the vagaries of state law
should determine whether or not an organization has members for
purposes of the FECA. Therefore, the regulations make it clear that the
determination of whether an organization has members for purposes of
the FECA will be determined under these regulations, and not by the
definitions of state law that may either include or exclude persons as
members of an organization for reasons unrelated to the FECA.
Section 114.1(e) Definition of Membership Organization for Purposes of
Corporate and Labor Organization Activity
Revised section 114.1(e) is identical to revised section
100.8(b)(4)(iv). Please note, however, that the reference to
unincorporated associations which appears in revised 11 CFR 100.8(b)(4)
applies only to Part 100 and not to Part 114, since part 114 addresses
only activities by corporations and labor organizations.
Section 114.8(g) Federations of Trade Associations
As was the case with rural cooperatives, the 1998 NPRM proposed the
repeal of 11 CFR 114.8(g), relating to federations of trade
associations, because it believed these provisions would be encompassed
by the proposed multi-tier language. While no commenter addressed this
change, the Commission notes that parts of this section address
additional issues that are beyond the scope of the present rulemaking.
For example, there is a difference in the trade association context
between the groups that can be solicited for contributions to the trade
association's SSF and those who can get other election-influencing
messages that are not SSF solicitations. For this reason, the
Commission is retaining the current language without revision.
Other Issues
Rural Cooperatives
The Commission's rules at 11 CFR 114.7(k) allow certain rural
cooperatives to, inter alia, solicit from and make express advocacy
electoral communications to not only their own members, but the members
of the cooperative's regional, state or local affiliates. The 1998 NPRM
proposed repealing this provision and addressing this situation through
11 CFR 100.8(b)(4)(iv)(E), the general multi-tiered organization
provision discussed above. However, one of the rural electric
cooperatives that commented stated that the structure of most rural
cooperatives does not readily correspond to the multi-tiered model
envisioned in that section. The Commission is therefore retaining 11
CFR 114.7(k), to insure continued coverage of rural cooperatives under
these rules.
Advisory Opinions Superseded
AO 1991-24 addressed the efforts of the Credit Union National
Association, Inc. (``CUNA'') and the Wisconsin Credit Union League to
make partisan communications across multiple tiers of the organization.
While the Commission approved the proposed procedures, these rules
increase the options available to these and comparably situated multi
tiered organizations. In AO 1993-24, the Commission determined that
certain persons were not members of the National Rifle Association for
purposes of the former rules because they did not have the required
voting rights. The new rules supersede that portion of the AO that
[[Page 41272]]
requires voting rights to establish membership.
The Regulatory Flexibility Act
One commenter disputed the Commission's certification under the
Regulatory Flexibility Act, 5 U.S.C. 605(b), in the NPRM that the
proposed rule would not have a significant economic impact on a
substantial number of small entities. While the Commission does not
concur with that assessment, it nevertheless has taken steps to allay
this commenter's concerns by clarifying that (1) organizations may
charge reasonable copying and mailing fees for making their
organizational documents available to their members; and (2)
organizations may follow their usual procedures in revising their
bylaws or other documents, if these rules require this action.
Certification of no Effect Pursuant to 5 U.S.C. 605(b) [Regulatory
Flexibility Act]
These rules do not have a significant economic impact on a
substantial number of small entities. The basis for this certification
is that the rules would broaden the current definition of who qualifies
as a member of a membership association, thus expanding the opportunity
for such associations to send electoral advocacy communications and
solicit contributions to their separate segregated funds. The increased
costs of such activity, if any, do not qualify as ``significant'' for
purposes of this requirement.
List of Subjects
11 CFR Part 100
Elections.
11 CFR Part 114
Business and industry, Elections, Labor.
For the reasons set out in the preamble, Subchapter A, Chapter I of
Title 11 of the Code of Federal Regulations is amended as follows:
PART 100--SCOPE AND DEFINITIONS (2 U.S.C. 431)
1. The authority citation for Part 100 continues to read as
follows:
Authority: 2 U.S.C. 431, 438(a)(8).
2. Section 100.8 is amended by revising paragraphs (b)(4)
introductory text and (b)(4)(iv) to read as follows:
Sec. 100.8 Expenditure (2 U.S.C. 431(9)).
* * * * *
(b) * *
(4) Any cost incurred for any communication by a membership
organization, including a labor organization, to its members, or any
cost incurred for any communication by a corporation to its
stockholders or executive or administrative personnel, is not an
expenditure, except that the costs directly attributable to such a
communication that expressly advocates the election or defeat of a
clearly identified candidate (other than a communication primarily
devoted to subjects other than the express advocacy of the election or
defeat of a clearly identified candidate) shall, if those costs exceed
$2,000 per election, be reported to the Commission on FEC Form 7 in
accordance with 11 CFR 104.6.
* * * * *
(iv) (A) For purposes of paragraph (b)(4) of this section
membership organization means an unincorporated association, trade
association, cooperative, corporation without capital stock, or a
local, national, or international labor organization that:
(1) Is composed of members, some or all of whom are vested with the
power and authority to operate or administer the organization, pursuant
to the organization's articles, bylaws, constitution or other formal
organizational documents;
(2) Expressly states the qualifications and requirements for
membership in its articles, bylaws, constitution or other formal
organizational documents;
(3) Makes its articles, bylaws, constitution or other formal
organizational documents available to its members;
(4) Expressly solicits persons to become members;
(5) Expressly acknowledges the acceptance of membership, such as by
sending a membership card or including the member's name on a
membership newsletter list; and
(6) Is not organized primarily for the purpose of influencing the
nomination for election, or election, of any individual for Federal
office.
(B) For purposes of paragraph (b)(4) of this section, the term
members includes all persons who are currently satisfying the
requirements for membership in a membership organization, affirmatively
accept the membership organization's invitation to become a member, and
either:
(1) Have some significant financial attachment to the membership
organization, such as a significant investment or ownership stake; or
(2) Pay membership dues at least annually, of a specific amount
predetermined by the organization; or
(3) Have a significant organizational attachment to the membership
organization which includes: affirmation of membership on at least an
annual basis and direct participatory rights in the governance of the
organization. For example, such rights could include the right to vote
directly or indirectly for at least one individual on the membership
organization's highest governing board; the right to vote on policy
questions where the highest governing body of the membership
organization is obligated to abide by the results; the right to approve
the organization's annual budget; or the right to participate directly
in similar aspects of the organization's governance.
(C) Notwithstanding the requirements of paragraph (b)(4)(iv)(B) of
this section, the Commission may determine, on a case-by-case basis,
that persons who do not precisely meet the requirements of the general
rule, but have a relatively enduring and independently significant
financial or organizational attachment to the organization, may be
considered members for purposes of this section. For example, student
members who pay a lower amount of dues while in school, long term dues
paying members who qualify for lifetime membership status with little
or no dues obligation, and retired members may be considered members of
the organization.
(D) Notwithstanding the requirements of paragraphs (b)(4)(iv)(B)(1)
through (3) of this section, members of a local union are considered to
be members of any national or international union of which the local
union is a part and of any federation with which the local, national,
or international union is affiliated.
(E) In the case of a membership organization which has a national
federation structure or has several levels, including, for example,
national, state, regional and/or local affiliates, a person who
qualifies as a member of any entity within the federation or of any
affiliate by meeting the requirements of paragraphs (b)(4)(iv)(B)(1),
(2), or (3) of this section shall also qualify as a member of all
affiliates for purposes of paragraph (b)(4)(iv) of this section. The
factors set forth at 11 CFR 100.5(g)(2), (3) and (4) shall be used to
determine whether entities are affiliated for purposes of this
paragraph.
(F) The status of a membership organization, and of members, for
purposes of paragraph (b)(4) of this section, shall be determined
pursuant to paragraph (b)(4)(iv) of this section and not by provisions
of state law governing unincorporated associations, trade associations,
cooperatives, corporations
[[Page 41273]]
without capital stock, or labor organizations.
* * * * *
PART 114--CORPORATE AND LABOR ORGANIZATION ACTIVITY
3. The authority citation for Part 114 continues to read as
follows:
Authority: 2 U.S.C. 431(8)(B), 431(9)(B), 432, 437d(a)(8),
438(a)(8), and 441b.
4. Section 114.1 is amended by revising paragraph (e) to read as
follows:
Sec. 114.1 Definitions.
* * * * *
(e)(1) For purposes of this part membership organization means a
trade association, cooperative, corporation without capital stock, or a
local, national, or international labor organization that:
(i) Is composed of members, some or all of whom are vested with the
power and authority to operate or administer the organization, pursuant
to the organization's articles, bylaws, constitution or other formal
organizational documents;
(ii) Expressly states the qualifications and requirements for
membership in its articles, bylaws, constitution or other formal
organizational documents;
(iii) Makes its articles, bylaws, constitution, or other formal
organizational documents available to its members upon request;
(iv) Expressly solicits persons to become members;
(v) Expressly acknowledges the acceptance of membership, such as by
sending a membership card or including the member's name on a
membership newsletter list; and
(vi) Is not organized primarily for the purpose of influencing the
nomination for election, or election, of any individual to Federal
office.
(2) For purposes of this part, the term members includes all
persons who are currently satisfying the requirements for membership in
a membership organization, affirmatively accept the membership
organization's invitation to become a member, and either:
(i)Have some significant financial attachment to the membership
organization, such as a significant investment or ownership stake; or
(ii) Pay membership dues at least annually, of a specific amount
predetermined by the organization; or
(iii) Have a significant organizational attachment to the
membership organization which includes: affirmation of membership on at
least an annual basis; and direct participatory rights in the
governance of the organization. For example, such rights could include
the right to vote directly or indirectly for at least one individual on
the membership organization's highest governing board; the right to
vote directly for organization officers; the right to vote on policy
questions where the highest governing body of the membership
organization is obligated to abide by the results; the right to approve
the organization's annual budget; or the right to participate directly
in similar aspects of the organization's governance.
(3) Notwithstanding the requirements of paragraph (e)(2) of this
section, the Commission may determine, on a case-by-case basis, that
persons who do not precisely meet the requirements on the general rule,
but have a relatively enduring and independently significant financial
or organizational attachment to the organization, may be considered
members for purposes of this section. For example, student members who
pay a lower amount of dues while in school, long term dues paying
members who qualify for lifetime membership status with little or no
dues obligation, and retired members of the organization may be
considered members for purposes of these rules.
(4) Notwithstanding the requirements of paragraphs (e)(2)(i)
through (iii) of this section, members of a local union are considered
to be members of any national or international union of which the local
union is a part and of any federation with which the local, national,
or international union is affiliated.
(5) In the case of a membership organization which has a national
federation structure or has several levels, including, for example,
national, state, regional and/or local affiliates, a person who
qualifies as a member of any entity within the federation or of any
affiliate by meeting the requirements of paragraphs (e)(2)(i), (ii), or
(iii) of this section shall also qualify as a member of all affiliates
for purposes of this part. The factors set forth at 11 CFR 100.5
(g)(2), (3) and (4) shall be used to determine whether entities are
affiliated for purposes of this paragraph.
(6) The status of a membership organization, and of members, for
purposes of this part, shall be determined pursuant to paragraph (e)(1)
of this section and not by provisions of state law governing trade
associations, cooperatives, corporations without capital stock, or
labor organizations.
* * * * *
Dated: July 27, 1999.
Scott E. Thomas,
Chairman, Federal Election Commission.
[FR Doc. 99-19515 Filed 7-29-99; 8:45 am]
BILLING CODE 6715-01-P
