[Federal Register Volume 62, Number 147 (Thursday, July 31, 1997)]
[Proposed Rules]
[Pages 40982-40985]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-20094]
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FEDERAL ELECTION COMMISSION
11 CFR Parts 100 and 114
[Notice 1997--12]
Definition of ``Member'' of a Membership Association
AGENCY: Federal Election Commission.
ACTION: Advance notice of proposed rulemaking.
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SUMMARY: The Commission is seeking comments on how to revise its rules
governing who is a ``member'' of a
[[Page 40983]]
membership association following the decision of the United States
Court of Appeals for the District of Columbia Circuit in Chamber of
Commerce of the United States v. Federal Election Commission. The
Commission is not proposing specific amendments to the rules at this
time but is rather attempting to obtain general guidance on the factors
to be considered in determining this relationship.
DATES: Comments are due on September 2, 1997.
ADDRESSES: All comments should be addressed to Susan E. Propper,
Assistant General Counsel, and must be submitted in either written or
electronic form. Written comments should be sent to the Federal
Election Commission, 999 E Street, NW., Washington, DC 20463. Faxed
comments should be sent to (202) 219-3923, with printed copy follow-up.
Electronic mail comments should be sent to members@fec.gov and should
include the full name, electronic mail address and postal service
address of the commenter. Additional information on electronic
submission is provided below.
FOR FURTHER INFORMATION CONTACT: Ms. Susan E. Propper, Assistant
General Counsel, or Ms. Rita A. Reimer, Attorney, 999 E Street NW.,
Washington, DC 20463, (202) 219-3690 or (800) 424-9530.
SUPPLEMENTARY INFORMATION: The Federal Election Campaign Act of 1971 as
amended (``FECA'' or ``Act'') permits membership associations to
solicit contributions from their members for a separate segregated fund
(``SSF''), which contributions can be used for federal political
purposes. The Act also allows membership associations 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 implementing regulations defining who is a
``member'' of a membership association are found at 11 CFR
100.8(b)(4)(iv) and 11 CFR 114.1(e).
On August 30, 1993, the Commission published the text of revisions
to these regulations. 58 FR 45770. The revised rules became effective
on November 10, 1993. 58 FR 59640. The rules provide that either a
significant financial attachment to the membership association (not
merely the payment of dues) or the right to vote directly for all
members of the association's highest governing body is sufficient in
and of itself to confer membership rights. 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 association's highest
governing body is required. The term ``membership association''
includes membership organizations, trade associations, cooperatives,
corporations without capital stock, and local, national and
international labor organizations that meet the requirements set forth
in these rules.
These rules were adopted in response to the Supreme Court's ruling
in Federal Election Commission v. National Right to Work Committee
(``NRWC''), 459 U.S. 196 (1982), and a series of Advisory Opinions
(``AO'') adopted by the Commission following that decision. NRWC
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, and thus solicit funds to its SSF
from, individuals who had at one time responded, not necessarily
financially, to an NRWC advertisement, mailing, or personal contact.
The Supreme Court rejected this definition of ``member,'' saying that
to accept it ``would virtually excise from the statute the restriction
of solicitation to `members.''' Id. 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 recent revisions to the Commission's rules
were intended to incorporate this standard.
The United States District Court for the District of Columbia held
that the revised ``member'' 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
(``Chamber'') v. Federal Election Commission, Civil Action No. 94-2184
(D.D.C. Oct. 28, 1994)(1994 WL 615786). However, the United States
Court of Appeals for the District of Columbia Circuit reversed. 69 F.3d
600 (D.C.Cir. 1995), amended on denial of rehearing, 76 F.3d 1234
(D.C.Cir. 1996).
The case was jointly brought by the Chamber of Commerce and the
American Medical Association (``AMA''), two associations that do not
provide their asserted ``members'' with the voting rights necessary to
confer this status under the current rules. The court held that the
ties between these members and the Chamber and the AMA are sufficient
to comply with the Supreme Court's NWRC criteria, and therefore
concluded that the Commission's rules are invalid because they define
the term ``member'' in an unduly restrictive fashion. 69 F.2d 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 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 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 of Commerce 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).
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
rules defining who is a member of a membership
[[Page 40984]]
association to reflect the Chamber of Commerce decision.
The Commission published a Notice of Availability (``NOA'') in the
Federal Register on March 29, 1997. 62 FR 13355. The Commission
received two comments in response to the NOA.
Other than its comments on the Chamber's and the AMA's member
attachments that it found sufficient to comply with the Supreme Court's
NRWC criteria, the Chamber of Commerce court provided little guidance
on how the current rules should be revised to comply with this ruling.
Both of these associations present specific and somewhat unique
circumstances that do not necessarily lend themselves to
generalizations applicable to the broader membership association
community. Nor did the Petition for Rulemaking suggest alternative
language for this purpose.
The Commission has therefore decided to issue an Advance Notice of
Proposed Rulemaking (``ANPRM''), seeking general comments on how best
to effectuate this decision. After analyzing the comments received in
response to the ANPRM, the Commission may issue a Notice of Proposed
Rulemaking (``NPRM'') seeking comments on specific regulatory language.
The current rules provide a ``safe harbor'' for membership
associations, since those who meet the requirements set forth in these
rules clearly enjoy ``member'' status. Associations can also seek
advisory opinions pursuant to 2 U.S.C. 437f and 11 CFR part 112 to
determine how the rules, as interpreted in the Chamber of Commerce
decision, apply to their particular situations. This has already been
done by certain entities, including the Chicago Mercantile Exchange
(``CME'' or the ``Exchange''). See discussion of AO 1997-5, infra.
The Commission notes that there are three preliminary requirements
an entity must meet before it qualifies as a ``membership association''
for purposes of these rules: It must expressly provide for ``members''
in its articles and by-laws; 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. 11 CFR 100.8(b)(4)(iv)(A), 114.1(e)(1). These requirements were
not challenged in the litigation and the Commission does not anticipate
that it will propose any changes to this language.
The Chamber of Commerce, in commenting on the NOA, argued that
these three requirements should in and of themselves be sufficient to
confer membership status. However, it may be that these attachments,
standing alone, are insufficient to meet the ``relatively enduring and
independently significant financial or organizational attachment''
standard articulated by the NRWC Court. (The other comment, from the
Internal Revenue Service (``IRS''), stated that a potential rulemaking
on this topic would not conflict with the Internal Revenue Code or any
IRS regulation.)
In addition to retaining these three preliminary requirements, the
Commission believes that the current rules recognizing as members those
who have a stronger financial interest in an association than paying
dues (for example, the ownership of a stock exchange seat) and those
who have the right to vote directly for all members of the
association's highest governing body, should likewise be retained for
those associations that meet either of these requirements. 11 CFR
100.8(b)(4)(iv)(B) (1), (3); 114.1(e)(2) (i), (iii). Thus, the
Commission is seeking comments on what other attachments, or
combination of attachments, should also be sufficient to confer
membership status in lieu of current 100.8(b)(4)(iv)(B)(2) and
114.1(e)(2)(ii).
One approach would be to establish a certain level of annual dues
as in and of itself sufficient for this purpose. Those who paid this
amount would be considered members regardless of whether they had
organizational attachments to the association. One possibility is that
any amount of annual dues set by an association would be a sufficient
financial attachment, regardless of amount. Another possibility is a
$200 per year cut-off point, since $200 is the amount that Congress has
decided is such a significant attachment to a political committee that
itemized disclosure is required for what could be considered
``membership'' in a political committee. The Commission welcomes
comments on this approach as well as suggestions for what level of
annual dues would be appropriate to confer membership status, if this
were to be included in the rules.
For a lesser dues obligation, the rules might list other factors
the Commission would consider per se sufficient to provide the required
organizational attachment, provided that some level of dues was also
required. These could include such attachments as the voting rights
contained in the current rule; the right to serve on policy-making
boards and/or vote on policy issues; eligibility to be elected to
governing positions in the organization; and whether the member may be
subject to disciplinary action by the association. If this approach is
adopted, the Commission would like to make this list as comprehensive
as possible, so that the large majority of covered entities will be
able to quickly determine who qualifies as a member.
On May 16, 1997, the Commission determined in AO 1997-5 that, based
on the facts presented, both owners and lessees of seats on the Chicago
Mercantile Exchange could be considered ``members'' of the CME for
purposes of these rules. The member-owners, by virtue of their
ownership stake, qualify as members under 11 CFR 100.8(b)(4)(iv)(B)(1)
and 114.1(e)(2)(i). In addition, the Commission found, member-lessees
have sufficient rights and obligations to also qualify as members.
These attachments include substantial financial obligations to the CME,
the right to serve on policy-formulating committees, and the
possibility of sanctions by the CME that would impact on their
professional status. AO 1997-5 overruled AO 1988-39 and 1987-31 (in
part), which had concluded that only one membership in the Exchange
existed with respect to each leased membership. The Commission is
seeking comments on whether to incorporate this result into the
regulatory text.
The Commission's rules at 11 CFR 100.8(b)(4)(iv)(B) and 114.1(e)(2)
that require both a financial and an organizational attachment for
members of most membership associations clearly include two-tiered
associations, such as those in which members vote for delegates to a
convention, and those delegates elect those who serve on the
association's highest governing body. At the time of the 1993
amendment, the Commission explained that multi-tiered associations
could solicit across all tiers, as long as the various tiers met the
same criteria that govern solicitations by two-tiered associations.
Explanation and Justification for Regulations on the Definition of
``Member'' of a Membership Association, 58 FR 45770 (1993). In
addition, the Commission authorized farm cooperatives as defined in the
Agricultural Marketing Act of 1929 (12 U.S.C. 1141j) and those entities
eligible for assistance under the Rural Electrical Act of 1936 as
amended (7 U.S.C. 901-950aa-1) to solicit across all tiers even though
the precise attachments set forth at 11 CFR 100.8(b)(4)(iv)(B) and
114.1(e)(2) might not always be present. 11 CFR 114.7(k)(1).
Federations of trade associations had earlier been given this same
right, 11 CFR 114.8(g), as had labor organizations, 11 CFR 114.1(e)(4).
The Chamber of Commerce court, in
[[Page 40985]]
discussing the AMA's organizational attachments, cited these exceptions
as another basis for its ruling that the AMA should be able to cross-
solicit across multiple tiers even where no voting rights were present.
69 F.3d at 606.
If the Commission expands the membership definition, many multi-
tiered associations that may not presently qualify for cross-tier
solicitation would likely be able to do so. The Commission welcomes
comments on whether this should be stated explicitly in the rules, as
well as whether the particular circumstances of certain multi-tiered
associations might justify different standards.
All comments on this ANPRM should be addressed to Susan E. Propper,
Assistant General Counsel, and must be submitted in either written or
electronic form. Written comments should be sent to the Commission's
postal service address: Federal Election Commission, 999 E Street, NW.,
Washington, DC 20463. Faxed comments should be sent to (202) 219-3923.
Commenters submitting faxed comments should also submit a printed copy
to the Commission's postal service address to ensure legibility.
Comments may also be sent by electronic mail to members@fec.gov.
Commenters sending comments by electronic mail should include their
full name, electronic mail address and postal service address within
the text of their comments. All comments, regardless of form, must be
submitted by September 2, 1997.
The Commission also welcomes comments on any related topic.
Dated: July 25, 1997.
John Warren McGarry,
Chairman, Federal Election Commission.
[FR Doc. 97-20094 Filed 7-30-97; 8:45 am]
BILLING CODE 6713-01-P
