1997

Leg islative Recom mendations

Gontents

Part l:Legislative Recommendations to lmprove Efficiency and Effectiveness of CurrentLaw 1

DisclosureElectronic Filing Threshold (1 997)Filing Reports Using Registered or Certified Mail (1997)Waiver Authority (revised 1997) ........Campaign-Cycle Reportin9 ...............Monthly Reporting for Congressional Candidates.Reporting Deadlines for Semiannual, Year-End and Monthly Filers... ..3Commission as Sole Point of Entry for Disclosure Documents (revised 1997) ...........3

...........5Facsimile MachinesState Filing for PresidentialCandidate Committees............... ...................5Contributions and Expenditures ............. ........6Election Period Limitations for Contributions to Candidates ..................... 6Application of $25,000 Annual Limit........... ......... 6Certification of Voting Age Population Figures and Cost-of-Living Adjustment......... ......................7Enforcement IFines for Reporting Violations (1997) IExpedited Enforcement Procedures and lnjunctive Authority (1997) ........ ISubpoena and Reason-to-Believe Notification Signature Authority (1997) .................. IEnsuring lndependent Authority of FEC in All Litigation .............. ........... 10Enhancement of Criminal Provisions ............... 11

State Expenditure Limits for Publicly Financed Presidential Primary Campaigns (revised 1997) ......... .......... 12Fundraising Limitation for Publicly Financed Presidential Primary Campaigns ......... 13EligibilityThreshold for Public Financing .......... 13Eligibility Requirements for Public Financing ....................... 14

Part ll:General Legislative Recommendat¡ons

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DisclosureCandidates and Principal Campaign CommitteesPACs Created by Candidates .........Require Monthly Filing for Certain Multicandidate Committees ..............Reporting of Last-Minute lndependent Expenditures...........Reporting and Recordkeeping of Payments to Persons Providing Goods and ServicesExcluding Political Committees from Protection of the Bankruptcy CodeFundraising Projects Operated by U nauthorized Committees ................Disclaimer Notices (revised 1997)Fraudulent Solicitation of Funds......

151515151616161718181920Draft Committees

Gontributions and Expenditureslssue Advocacy Advertising (1997)Candidate's Use of Campaign Funds (revised 1997)Disposition of Excess Campaign FundsDistinguishing Official Travel from Campaign Travel ........Coordinated Party Expenditures ....Volunteer Participation in Exempt Activity..Contributions from Minors .....Application of Contribution Limitations to Family Members....Lines of Credit and Other Loans Obtained by CandidatesEnforcementAudits for CauseModifying Standard of "Reason to Believe" FindingProtection for Those Who File Complaints or Give Testimony (revised 1997)Public Financing .......Supplemental Funding for Publicly Funded CandidatesMiscellaneous ..........-.Funds and Services from Private Sources

Part lll:Conforming Legislative RecommendationsDisclosureDefinition of Political Committee (1997) ......Point of Entry for Pseudonym Lists .............Contributions and ExpendituresBroader Prohibition Against Force and ReprisalsNonprofit Corporations and Express Advocacy ..

HonorariumAcceptance of Cash Contributions........Public FinancingApplicability of Title Vl to Recipients of Payments from the Presidential Election Campaign FundEnforcement of Nonwillful ViolationsContributions to Presidential NomineesWho Receive Public Funds in the General Election.......,MiscellaneousEx Officio Members of Federal Election Commission

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1

Part ILegislativeRecommendations toImprove Efficiency andEffectivenessof Current Law

Disclosure

Electronic Filing Threshold (1 997)

Section: 2 U.S.C. $434(a)

Recom me ndatio n : The Commission recommendsthat Congress give the FEC authority to requirecommittees with a certain level of financial activityto file FEC reports electronically.

Explanation; Public Law 104-79, effective Decem-ber 28, 1995, authorized the electronic f iling of dis-closure reports with the FEC. Starting January1997, political committees (except for Senate cam-paigns) may opt to file FEC repofts electronically.

The FEC has created the electronic filing programand is moving towards providing software to com-mittees in order to assist committees that wish tofile reports electronically. To maximize the benefitsof electronic filing, Congress should consider requir-ing committees that meet a certain threshold offinancial activity to file reports electronically. TheFEC would receive, process and disseminate thedata from electronically filed reports more easilyand efficiently, resulting in better use of Commis-sion resources. Moreover, information in the FEC'sdatabase would be standardized for committees ata certain threshold, thereby enhancing public disclo-sure of campaign finance information. ln addition,committees, once participating in the electronicfiling program, should find it easier to complete andfile reports.

Filing Reports Using Registered or Certified Mail(1ee7)

Section:2 U.S.C. Sa3a(aX2XAXi), (aX4XA)(ii) and (aXs)

Becommendation: The Commission recommendsthat Congress delete the option to file campaignfinance reports via registered or certified mail whenthe report is postmarked by a specific date. ln-stead, Congress should consider simply requiringpolitical committees to file their reports with theCommission (or the Secretary of the Senate) by thedue date of the report.

Explanation; Section 434 ol the Act permits commit-tees to file their reports by registered or certifiedmail, provided that the report is postmarked by aceftain date. (ln the cases of a quarterly, monthly,semi-annual or post general report, the report mustbe postmarked by the due date if sent by registeredor certified mail. ln the case of a pre-primary or pre-general election report, the report must be post-marked 15 days before the election.)

ln the 1996 election cycle, because of the extrahandling required, the PostalService often deliv-ered reports filed via registered or certified mail tothe FEC more than a week after the report's duedate. The delayed delivery presented an obstacleto full public disclosure of campaign finances imme-diately before the the 1996 eleclion. Moreover,there is little likelihood of improvement in futureelection cycles because of continuing staff reduc-tions within the Postal Service.

To minimize this delay in disclosure, Congressshould eliminate the option in the law that allowscommittees to rely on the poslmark of a registeredor certified mailed report. lnstead, Congress shouldsimply require that reports be filed with the FEC (orthe Secretary of the Senate) by the due date speci-fied in the law. This approach would result in moreeffective public disclosure of campaign finance in-formation, because reports would be available for

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review at an earlier point before the election. ltwould also simplify the law and eliminate confusionabout the appropriate due date for a report.

Waiver Authority (revised 1997)Section:2 U.S.C. $434

Reco m me ndatio n : The Commission recommendsthat Congress give the Commission the authority toadjust the filing requirements or to grant generalwaivers or exemptions from the reporting require-ments of the Act.

Explanation' ln cases where reporting requirementsare excessive or unnecessary, it would be helpful if

the Commission had authority to suspend the re-porting requirements of the Act. For example, theCommission has encountered several problemsrelating to the reporting requirements of authorizedcommittees whose respective candidates were noton the election ballot. The Commission had to con-sider whether the election-year reporting require-ments were fully applicable to candidate commit-tees operating under one of the following circum-stances:. The candidate withdraws from nomination prior to

having his or her name placed on the ballot.. The candidate loses the primary and therefore is

not on the general election ballot.. The candidate is unchallenged and his or her

name does not appear on the election ballot.

Unauthorized committees also face unnecessaryreporting requirements. For example, the Act re-quires monthly filers to file Monthly reports on the20th day of each month. lf sent by certified mail, thereport must be postmarked by the 20th day of themonth. The Act also requires monthly filers to file aPre-General election report 12 days before the gen-

eral election. lf sent by certified or registered mail,the Pre-General report must be postmarked by the1Sth day before the election. As a result of thesespecific due dates mandated by the law, the 1996October Monthly report, covering September, wasrequired to be postmarked October 20. Meanwhilethe 1996 Pre-General report, covering October 1 -

16, was required to be postmarked October 21, oneday after the October Monthly. A waiver authoritywould enable the Commission to eliminate the re-quirement to file the monthly repon, as long as thecommittee includes the activity in the Pre-GeneralElection Report and files the report on time. Thesame disclosure would be available before the elec-tion, but the committee would only have to file oneof the two reports.

ln other situations, disclosure would be served if theCommission had the authority to adjust the filingrequirements, as is currently allowed for specialelections. For example, runoff elections are oftenscheduled shortly after the primary election. lnmany instances, the close of books for the runoffpre-election report is the day after the primary-thesame day that candidates find out if there is to be arunoff and who will participate. When this occurs,the 12-day pre-election report discloses almost norunoff activity. ln such a situation, the Commissionshould have the authority to adjust the filing require-ments to allow lor a7-day pre-election report (asopposed to a 12-day report), which would providemore relevant disclosure to the public.

Granting the Commission the authority to waiverepofis or adjust the reporting requirements wouldreduce needlessly burdensome disclosure de-mands.

Campaign-Cycle ReportingSection:2 U.S.C. 5434

Recommendation: The Commission recommendsthat Congress revise the law to require authorizedcandidate committees to report on a campaign-to-date basis, rather than a calendar year cycle, as isnow required.

Explanation: Under the current law, authorized com-mittees must track contributions received in twodifferent ways. First, to comply with the law's report-ing requirements, the committee must track

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donations on a calendar year basis. Second, tocomply with the law's contribution limits, the com-mittee must track contributors'donations on a per-election basis. Simplifying the law's reporting re-quirement to allow reporting on a campaign-to-datebasis would make the law's recordkeeping require-ments less burdensome to committees. (Likewise,the Commission recommends that contribution lim-its be placed on a campaign-cycle basis as well.See the recommendation entitled "Election PeriodLimitations.")

This change would also benefit public disclosure ofcampaign finance activity. Currently, contributionsfrom an individual are itemized only if the individualdonates more than $200 in the aggregate during acalendar year. Likewise, disbursements are item-ized only if payments to a specific payee aggregatein excess of $200 during a calendar year. Requiringitemization once contributions from an individual ordisbursements to a payee aggregate in excess of

$200 during the campaign would capture informa-tion of interest to the public that is currently notavailable. Moreover, to determine the actual cam-paign finance activity of a committee, reporters andresearchers must compile the totalfigures fromseveralyear-end reports. ln the case of Senatecampaigns, which may extend over a six-year pe-riod, this change would be particularly helpful.

Monthly Reporting for Congressional Candi-datesSection: 2 U.S.C. $434(aX2)

Reco mmendatio n : The Commission recommendsthat the principal campaign committee of a Con-gressional candidate have the option of filingmonthly reports in lieu of quarterly reports.

Explanation; Political committees, other than princi-pal campaign committees, may choose under theAct to file either monthly or quarterly repofts duringan election year. Committees choose the monthlyoption when they have a high volume of activity.Under those circumstances, accounting and

reporting are easier on a monthly basis becausefewer transactions have taken place during thattime. Consequently, the committee's repofts will bemore accurate.

Principal campaign committees can also have alarge volume of receipts and expenditures. This ispafiicularly true with Senatorial campaigns. Thesecommittees should be able to choose a more fre-quent filing schedule so that their reporting coversless activity and is easier to do.

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

Becommendation: The Commission recommendsthat Congress change the reporting deadline for allsemiannual, year-end and monthly f ilers to 15 daysafter the close of books for the report.

Explanation; Committees are often confused be-cause the filing dates vary from report to report.Depending on the type of commitlee and whether itis an election year, the filing date for a report mayfall on the 1Sth, 20th or 31st of the month. Congressshould require that monthly, quarterly, semiannualand year-end reports are due 15 days after theclose of books of each report. ln addition to simplify-ing reporting procedures, this change would providefor more timely disclosure, particularly in an electionyear. ln light of the increased use of computerizedrecordkeeping by political committees, imposing afiling deadline of the fifteenth of the month wouldnot be unduly burdensome.

Commission as Sole Point of Entryfor Disclosure Documents (revised 1997)Section: 2 U.S.C. 5432(g)

Recommendation: The Commission recommendsthat it be the sole point of entry for all disclosuredocuments filed by federal candidates and politicalcommittees. This would affect Senate candidate

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committees only. Under current law, those commit-tees alone file their reports with the Secretary of theSenate, who then foruvards microfilmed copies tothe FEC.

Explanation; The Commission has offered this rec-ommendation for many years. Public Law 104-79,effective December 28, 1995, changed the point ofentry for reports filed by House candidates from theClerk of the House to the FEC. However, Senatecandidates still must file their reports with the Sec-retary of the Senate, who then forwards the copieson to the FEC. A single point of entry is desirablebecause it would conserve government resourcesand promote public disclosure of campaign financeinformation.

For example, Senate candidates sometimes filerepods mistakenly with the FEC, rather than withthe Secretary of the Senate. Consequently, the FECmust ship the reports back to the Senate. Disclo-sure to the public is delayed and government re-sources are wasted.

Public Law 104-79 also authorized the electronicfiling of disclosure reports with the FEC. StartingJanuary 1997, political action committees, politicalparty committees, House campaigns and Presiden-tial campaigns all may opt to file FEC reports elec-tronically. This filing option is unavailable to Senatecampaigns, though, because the point of entry fortheir reports is the Secretary of the Senate.

ln addition, Public Law 104-79 eliminated the re-quirements for a candidate to file copies of FECreports with his or her State, provided that the Statehas electronic access to reports and statementsfiled with the FEC. ln order to eliminate the Statefiling requirement for Senate candidates, it would benecessary for a State to have electronic access toreports filed with the Secretary of the Senate, aswell as to reports filed with the Federal ElectionCommission. ln other words, unless the FEC be-comes the point of entry for reports filed by Senatecandidates, either the States will need to have the

technological and financial capability to link up elec-tronically with two different federal offices, or Sen-ate candidates must continue to file copies of theirreports with the State.

We also reiterate here the statement we have madein previous years because it remains valid. A singlepoint of entry for all disclosure documents filed bypolitical committees would eliminate any confusionabout where candidates and committees are to filetheir reports. lt would assist committee treasurersby having one office where they would file reports,address correspondence and ask questions. Atpresent, conflicts may arise when more than oneoffice sends out materials, makes requests for addi-tional information and answers questions relating tothe interpretation of the law. A single point of entrywould also reduce the costs to the federal govern-ment of maintaining two different offices, especiallyin the areas of personnel, equipment and data pro-cessing.

The Commission has authority to prepare and pub-lish lists of nonfilers. lt is extremely difficult to ascer-tain who has and who has not filed when repoftsmay have been filed at or are in transit between twodifferent offices. Separate points of entry also makeit difficult for the Commission to track responses tocompliance notices. Many responses and/oramendments may not be received by the Commis-sion in a timely manner, even though they weresent on time by the candidate or committee. Thedelay in transmittal between two offices sometimesleads the Commission to believe that candidatesand committees are not in compliance. A singlepoint of entry would eliminate this confusion.

Finally, the Commission notes that the report of thelnstitute of Politics of the John F. Kennedy Schoolof Government at Harvard University, An Analysisof the lmpact of the Federal Election Campaign Act,1972-78, prepared for the House AdministrationCommittee, recommended that all reports be fileddirectly with the Commission (Committee Print, 96thCong., 1st Sess., a|122 (1 979)).

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Facsimile MachinesSection: 2 U.S.C. S434(bX6XBXiii) and (cX2)

Recommendation: The Commission recommendsthat Congress modify the Act to provide for the ac-ceptance and admissibility of 24-hour notices ofindependent expenditures via telephone facsimiles

Explanation; lndependent expenditures that aremade between 20 days and 24 hours before anelection must be reported within 24 hours. The Actrequires that a last-minute independent expenditurereport must include a certification, under penalty ofperjury, stating whether the expenditure was made"in cooperation, consultation, or concert with, or atthe request or suggestion of, any candidate or anyauthorized committee or agent of such committee."This requirement appears to foreclose the option ofusing a facsimile machine to file the report. Thenext report the committee files, however, whichcovers the reporting period when the expenditurewas made, must also include the certification, stat-ing the same information. Given the time constraintfor filing the report, the requirement to include thecertification on the subsequent report, and the avail-ability of modern technology that would facilitatesuch a filing, Congress should consider allowingsuch filings via telephonically transmitted facsimiles('Tax" machines). This could be accomplished byallowing the committee to fax a copy of the sched-ule disclosing the independent expenditure and thecertification. The original schedule would be filedwith the next report. Acceptance of such a filingmethod would facilitate timely disclosure and sim-plify the process for the filer.

State Filing for PresidentialCandidate CommitteesSection:2 U.S.C. 5439

Recom mendatio n : The Commission recommendsthat Congress consider clarifying the state filingprovisions for Presidential candidate committees tospecify which particular parts of the reports filed bysuch committees with the FEC should also be filed

with states in which the committees make expendi-tures. Consideration should be given to both thebenefits and the costs of state disclosure.

Explanation; Both states and committees have in-quired about the specific requirements for Presiden-tial candidate committees when filing reports withthe states. The statute requires that a copy of theFEC reports shall be filed with all states in which aPresidential candidate committee makes expendi-tures. The question has arisen as to whether the fullrepoft should be filed with the state, or only thoseportions that disclose financial transactions in thestate where the report is filed.

The Commission has considered two alternativesolutions. The first alternative is to have Presidentialcandidate committees file, with each state in whichthey have made expenditures, a copy of the entirereport filed with the FEC. This alternative enableslocal citizens to examine complete reports filed bycandidates campaigning in a state. lt also avoidsreporting dilemmas for candidates whose expendi-tures in one state might influence a primary electionin another.

The second alternative is to require that reports filedwith the states contain all summary pages and onlythose receipts and disbursements schedules thatshow transactions pefiaining to the state in which areport is filed. This alternative would reduce filingand storage burdens on Presidentialcandidatecommittees and states. lt would also make statefiling requirements for Presidential candidate com-mittees similar to those for unauthorized politicalcommittees. Under lhis approach, any person stillinterested in obtaining copies of a full report coulddo so by contacting the Public Disclosure Divisionof the FEC.

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Contributions and Expenditures

Election Period Limitations for Contributions toCandidatesSection:2 U.S.C. $441a

Recom mendatio n : The Commission recommendsthat limits on contributions to candidates be placedon an election cycle basis, rather than the currentper election basis.

Explanation; The contribution limitations affectingcontributions to candidates are structured on a "perelection" basis, thus necessitating dual bookkeepingor the adoption of some other method to distinguishbetween primary and general election contributions.The Commission has had to adopt several rules toclarify which contributions are attributable to whichelection and to assure that contributions are re-ported and used for the proper election. Many en-forcement cases have been generated where con-tributors'donations are excessive vis-a-vis a par-ticular election, but not vis-a-vis the $2,000 total thatcould have been contributed for the cycle. Often thisis due to donors'failure to fully document whichelection was intended. Sometimes the apparent"excessives" lor a particular election turn out to besimple reporting errors where the wrong box waschecked on the reporting form. Yet, substantial re-sources must be devoted to examination of eachtransaction to determine which election is appli-cable. Further, several enforcement cases havebeen generated based on the use of general elec-tion contributions for primary election expenses orvice versa.

Most of these complications would be eliminatedwith adoption of a simple "per cycle" contributionlimit. Thus, multicandidate committees could giveup to $10,000 and all other persons could give up to$2,000 to an authorized committee at any pointduring the election cycle. The Commission andcommittees could get out of the business of deter-mining whether contributions are properly attribut-

able to a particular election, and the difficulty ofassuring that particular contributions are used for aparticular election could be eliminated.

It would be advisable to clarify that if a candidatehas to participate in more than two elections (e.9.,in a post-primary runoff as well as a primary andgeneral), the campaign cycle limit would be $3,000.ln addition, because at the Presidential levelcandi-dates might opt to take public funding in the generalelection and thereby be precluded from acceptingcontributions, the $1,000/5,000 "per election" contri-bution limits should be retained for Presidentialcandidates.

A campaign cycle contribution limit may allow do-nors to target more than $1,000 toward a particularprimary or general election, but this would be tem-pered by the tendency of campaigns to plan theirfundraising and manage their resources so as not tobe left without fundraising capability at a crucialtime.

Application of $25,000 Annual LimitSection: 2 U.S.C. $aa1 a(a)(3)

Recom me ndation : The Commission recommendsthat Congress consider modifying the provision thatlimits individual contributions to $25,000 per calen-dar year so that an individual's contributions countagainst his or her annual limit for the year in whichthey are made.

Explanation: Section aal a(a)(3) now provides that acontribution to a candidate made in a nonelectionyear counts against the individual donor's limit forthe year in which the candidate's election is held.This provision has led to some confusion amongcontributors. For example, a contributor wishing tosupport Candidate Smith in an election year contrib-utes to her in November of the year before the elec-tion. The contributor assumes that the contributioncounts against his limit for the year in which he con-tributed. Unaware that the contribution actuallycounts against the year in which Candidate Smith's

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election is held, the contributor makes other contri-butions during the election year and inadvertentlyexceeds his $25,000 limit. By requiring contributionsto count against the limit of the calendar year inwhich the donor contributes, confusion would beeliminated and fewer contributors would inadvert-ently violate the law. The change would offer theadded advantage of enabling the Commission tobetter monitor the annual limit. Through the use ofour data base, we could more easily monitor contri-butions made by one individual regardless ofwhether they were given to retire the debt of acandidate's previous campaign, to support an up-coming election (two, four or six years in the future)or to support a PAC or party committee. Such anamendment would not alter the per candidate, perelection limits. Nor would it affect the total amountthat any individual could contribute in connectionwith federal elections.

Certification of Voting Age Population Figuresand Cost-of-Living AdjustmentSection:2 U.S.C. $441a(c) and (e)

Recom me ndation : The Commission recommendsthat Congress consider removing the requirementthat the Secretary of Commerce certify to the Com-mission the voting age population of each Congres-sional district. At the same time, Congress shouldestablish a deadline of February 15 for supplyingthe Commission with the remaining informationconcerning the voting age population for the nationas a whole and for each state. ln addition, the samedeadline should apply to the Secretary of Labor,who is required under the Act to provide the Com-mission with figures on the annual adjustment to thecost-of-living index.

Explanation; ln order for the Commission to com-pute the coordinated party expenditure limits andthe state-by-state expenditure limits for Presidentialcandidates, the Secretary of Commerce certifies thevoting age population of the United States and ofeach state. 2 U.S.C. $441a(e). The certification foreach Congressional dislrict, also required under thisprovision, is not needed.

ln addition, under 2 U.S.C. $441a(c), the Secretaryof Labor is required to certify the annual adjustmentin the cost-of-living index. ln both instances, thetimely receipt of these figures would enable theCommission to inform political committees of theirspending limits early in the campaign cycle. Underpresent circumstances, where no deadline exists,the Commission has sometimes been unable torelease the spending limit figures before June.

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Enforcement

Fines for Reporting Violations (1997)Section:2 U.S.C. $4379

Recommendation: The Commission recommendsthat Congress consider granting the Commissionauthority to assess fines on a published schedulefor straightfonryard violations relating to the reportingof receipts and disbursements.

Explanation; ln maintaining a regulatory presencecovering all aspects of the Act, even the mostsimple and straightforward strict liability disclosureviolations, e.9., the late filing or non-filing of re-quired reports, may be addressed only through theexisting enforcement process at 2 U.S.C. $4379.The enforcement procedures provide a number ofprocedural protections, and the Commission has noauthority to impose penalties. lnstead, the Commis-sion can only seek a conciliation agreement, andwithout a settlement can only pursue a de novo civilaction in federal court. This process can be unnec-essarily time and resource consuming for all partiesinvolved when applied to ministerial{ype civilviola-tions that are routinely treated via published fines bymany other states and federal regulatory agencies.Non-del i berate and strai g htf o nrvard repo rti n g viola-tions would not have to be treated as full blownenforcement matters if the Commission had author-ity to assess fines for such violations under a pub-lished fine schedule, subject to a reasonable appealprocedure. Congress could authorize the Commis-sion to promulgate a fine schedule that would con-sider a number of factors (e.9., the election sensitiv-ity of the report and the previous compliance recordof the committee). Addition of such authority wouldintroduce greater certainty to the regulated commu-nity about the consequences of noncompliance withthe Act's filing requirements, as well as lessen costsand lead to efficiencies for all parties, while main-taining the Commission's emphasis on the Act'sdisclosure requirements. The Commission wouldattempt to implement this on a trial basis.

Expedited Enforcement Procedures and lnjunc-tive Authority (1997)Section:2 U.S.C. $a379

Recomme ndatio n : The Commission recommendsthat Congress consider whether the Act shouldprovide for expedited enforcement of complaintsfiled shortly before an election, permit injunctiverelief in certain cases, and allow the Commission toadopt expedited procedures in such instances.l

1 Commissioner Elliott filed the following dissent:The Act presently enables the Commission to seek

injunctive relief after the administrative process has beencompleted and this is more than sufficient. (See 2 U.S.C.$¿szg(aXoXA).)

I am unaware of any complaint filed with the Com-mission which, in my opinion, would meet the four stan-dards set forth in the legislalive recommendations. As-suming a case was submitted which met these standards,I believe it would be inappropriate for the Commission toseek injunctive relief prior to a probable cause finding.

First, the very ability of the Commission to seek aninjunction, especially during the "heat of the campaign,"opens the door to allegations of an arbitrary and politicallymotivated enforcement action by the Commission. TheCommission's decision to seek injunction in one casewhile refusing to do so in another could easily be seen bycandidates and respondents as politicizing the enforce-ment process.

Second, the Commission might easily be floodedwith requests for injunctive relief for issues such as failureto file an October quafierly or a 12-day pre-general re-port. Although the Commission would have the discretionto deny all these requests for injunctive relief, in makingthat decision the Commission would bear the administra-tive burden of an immediate review of the factual issues.

Third, although the courts would be the final arbiteras to whether or not to grant an injunction, the mere deci-sion by the Commission to seek an injunction during thefinal weeks of a campaign would cause a diversion oftime and money and adverse publicity for a candidateduring the most impodant period of the campaign.

For these reasons, I disagree with the recommenda-tion to expand the power of the Commission to seekinjunctive relief except as presently provided for the Act.

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Explanation; The statute now requires that beforethe Commission proceeds in a compliance matter itmust wait 15 days after notifying any potential re-spondent of alleged violations in order to allow thatparty time to file a response. Furthermore, the Actmandates extended time periods for conciliationand response to recommendations for probablecause. Under ordinary circumstances such provi-sions are advisable, but they are detrimentalto thepolitical process when complaints are filed immedi-ately before an election. ln an effort to aved inten-tionalviolations that are committed with the knowl-edge that sanctions cannot be enforced prior to theelection, and to quickly resolve matters for whichCommission action is not warranted, Congressshould consider granting the Commission somediscretion to dealwith such situations on a timelybasis.

Even when the evidence of a violation has beenclear and the potential impact on a campaign hasbeen substantial, without the authority to initiate acivil suit for injunctive relief, the Commission hasbeen unable to act swiftly and effectively in order toprevent a violation. The Commission has felt con-strained from seeking immediate judicial action bythe requirement of the statute that conciliation beattempted before court action is initiated, and thecourts have indicated the Commission has little ifany discretion to deviate from the administrativeprocedures of the statute. Perot'96 and NaturalLaw Party v. FEC ef a/., Nos. 96-2196 and 96-2132(D.D.C. 1996), aff'd, 97 F.3d 553, (D.C. Cir. 1996);RNC v. DNC and FEC, No. 96-2494 (D.D.C. 1996);ln re Carter-Mondale Beelection Committee, lnc.,642F.zd 538 (D.C. Cir. 1980); Common Cause v.

Schmitt,512 F.Supp.489 (D.D.C. 1980), aff'd by anequally divided cout't, 455 U.S. 129 (1982); Durkinfor U.S. Senate v. FEC,2 Fed. Election Camp. Fin.Guide (CCH) 1],e147 (D.N.H. 1e80).

lf Congress allows for expedited handling of compli-ance matters, it should authorize the Commission toimplement changes in such circumstances to expe-dite its enforcement procedures. As part of this

effort, Congress should consider whether the Com-mission should be empowered to promptly initiate acivil suit for injunctive relief in order to preserve thestatus quo when there is clear and convincing evi-dence that a substanlial violation of the Act is aboutto occur. Congress should consider whether theCommission should be authorized to initiate suchcivil action in a United States District Court, underexpressly stated criteria, without awaiting expirationof the 1S-day period for responding to a complaintor the other administrative steps enumerated in thestatute. The person against whom the Commissionbrings the action would enjoy the procedural protec-tions afforded by the courts.

The Commission suggests the following legislativestandards to govern whether it may seek promptinjunctive relief:

1. The complaint sets forlh facts indicating that apotential violation of the Act is occurring or will oc-cur;

2. Failure of the Commission to act expeditiouslywill result in irreparable harm to a party affected bythe potential violation.

3. Expeditious action will not result in undue harmor prejudice to the interests of other persons; and

4. The public interest would be served by expedi-tious handling of the matter.

Subpoena and Reason-to-Believe NotificationSignature Authority (1 997)Sections:2 U.S.C. SS437d(aX3) and a37g(ax2)

Recommendation: The Commission recommendsthat Congress clarify these provisions to permit anymember of the Commission to sign duly-authorizedsubpoenas and notifications of findings of reason-to-believe, rather than limiting signature authority tothe Chairman and Vice Chairman.

Explanation; Section 437d(a)(3) grants the Com-mission the power to issue subpoenas requiring theattendance and testimony of witnesses and theproduction of documentary evidence. This provi-sion specifies that subpoenas be signed by theChairman or Vice Chairman of the agency. ln thoseinstances where the Commission has duly autho-rized the issuance of a subpoena, but neither theChairman nor the Vice Chairman are available tosign, the subpoena is delayed. Providing for thesignature of another member of the Commissionwould enable subpoenas to be issued in a moretimely manner.

Likewise, Sa37g(aX2) requires that the Commis-sion, through its Chairman or Vice Chairman, notifyrespondents of a finding of reason-to-believe in anenforcement matter. For the reasons listed above,it would be beneficialto allow other Members of theCommission to sign such notifications when neitherthe Chairman nor the Vice Chairman are available.

Ensuring lndependent Authority of FEC inAll LitigationSection:2 U.S.C. $Sa37c(0(a) and 4379

Recommendation: Congress has granted the Com-mission authority to conduct its own litigation inde-pendent of the Department of Justice. This indepen-dence is an important component of the statutorystructure designed to ensure nonpartisan adminis-tration and enforcement of the campaign financingstatutes. The Commission recommends that Con-gress make the following four clarifications thatwould help solidify the statutory structure:

1. Congress should clarify that the Commission isexplicitly authorized to petition the Supreme Courtfor certiorariunder Title 2, i.e., to conduct its Su-preme Court litigation.

2. Congress should amend the Act to specify thatlocalcounsel rules (requiring district court litigantsto be represented by counsel located within thedistrict) cannot be applied to the Commission.

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3. Congress should give the Commission explicitauthorization to appear as an amicus curiae incases that affect the administration of the Act, butdo not arise under it.

4. Congress should require the United StatesMarshal's Seruice to serve process, including sum-monses and complaints, on behalf of and at noexpense to the Federal Election Commission.

Explanation; The first recommendation states ex-plicitly that the Commission is authorized to petitionthe Supreme Court for a writ ol certiorariin casesrelating to the Commission's administration of Title2 and to independently conduct its Supreme Courtlitigation under that Title. The Commission explicitlyhas this authority under Title 26 and had a long-standing practice of doing so under Title 2, until theSupreme Court ruled that Title 2 does not grant theCommission such authority. See FEC v. NRA Politi-cal Victory Fund, cert. dismissed for want of jurisdic-tion, 115 S.Ct. 537 (December 6, 1994). Under thisruling, the Commission must now obtain permissionfrom the Solicitor General before seeking certiorariin a Title 2 case. The Solicitor General may declineto authorize this action in cases where the Commis-sion believes Supreme Court review is advisable.Even where acting in accordance with theCommission's recommendation to seek certiorari ina given case, the Solicitor Generalwould still con-trolthe position taken in the case and the argu-ments made on behalf of the Commission. Thistransfer of the Commission's Supreme Court litiga-tion authority to the Solicitor General, who is anappointee of and subject to removal by the Presi-dent, misconstrues Congressional intent in estab-lishing the Commission as a bipadisan and inde-pendent civil enforcement agency. Pertinent provi-sions of Title 2 should be revised to clearly state theCommission's exclusive and independent authorityon allaspects of Supreme Court litigation in allcases it has litigated in the lower courts.

With regard to the second of these recommenda-tions, most district courts have rules requiring thatall litigants be represenled by counsel located within

the district. The Commission, which conducts all ofits litigation nationwide from its offices in Washing-ton, D.C., is unable to comply with those rules with-out compromising its independence by engagingthe local United States Attorney to assist in repre-senting it in courts outside of Washington, D.C.Although most judges have been willing to waiveapplying these localcounsel rules lo the Commis-sion, some have insisted that the Commission ob-tain local representation. An amendment to thestatute specifying that such local counsel rules can-not be applied to the Commission would eliminatethis problem.

Concerning the third recommendation, the FECAexplicitly authorizes the Commission to "appear in

and defend against any action instituted under thisAcl," 2 U.S.C. $a37c(f)( ), and to"initiate...defend...or appeal any civil action...to en-force the provisions of this Act and chapter 95 andchapter 96 of title 26,'2 U.S.C. S437d(aX6). Theseprovisions do not explicitly cover instances in whichthe Commission appears as an amicus curiaeincases that affect the administration of the Act, butdo not arise under it. A clarification of theCommission's role as an amicus curiae would re-move any questions concerning the Commission'sauthority to represent itself in this capacity.

Concerning the final recommendation, prior to itsamendment effective December 1, 1993, Rule4(cXB) of the Federal Rules of Civil Procedure pro-vided that a summons and complaint shall beserved by the United States Marshal's Service onbehalf of the United States or an officer or agencyof the United States. Rule 4, as now amended, re-quires all plaintiffs, including federal governmentplaintiffs such as the Commission, to seek and ob-tain a court order directing that service of processbe effected by the United States Marshal's Service.Given that the Commission must conduct litigationnationwide from its offices in Washington, D.C., it isburdensome and expensive for it to enlist the aid ofa private process seruer or, in the alternative, seekrelief from the court, in every case in which it is a

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plaintiff. Returning the task of serving process forthe Commission to the United States Marshal'sService would alleviate this problem and assist theCommission in carrying out its mission.

Enhancement of Criminal ProvisionsSection:2 U.S.C. $4379(axs)(C) and (d)

Recom me ndatio n : The Commission recommendsthat it have the ability to refer appropriate matters tothe Justice Department for criminal prosecution atany stage of a Commission proceeding.

Explanation; The Commission has noted an up-surge of $441f contribution reimbursementschemes, that may merit heavy criminal sanction.Although there is no prohibition preventing the De-panment of Justice from initiating criminal FECAprosecutions on its own, the vehicle for the Com-mission to bring such matters to the Department'sattention is found at $a379(a)(5)(C), which providesfor referral only after the Commission has foundprobable cause to believe that a criminalviolation ofthe Act has taken place.2Thus, even if it is apparentat an early stage that a case merits criminal referral,the Commission must pursue the matter to theprobable cause stage before referring it to lhe De-partment for criminal prosecution. To conserve theCommission's resources, and to allow the Commis-sion to bring potentially criminal FECA violations tothe Department's attention at the earliest possibletime, the Commission recommends that consider-ation be given to explicitly empower the Commis-sion to refer apparent criminal FECA violations tothe Department at any stage in the enforcementprocess.

2The Commission has the general authority to reportapparent violations to the appropriate law enforcementauthority (see 2 U.S.C. Sa37d(aXg)), but read togetherwith $4379, S437d(aX9) has been interpreted by theCommission to refer to violations of law unrelated to theCommission's FECA jurisdiction.

Random AuditsSection: 2 U.S.C. S438(b)

Becommendation: The Commission recommendsthat Congress consider legislation that would re-quire the Commission to randomly audit politicalcommittees in an effort to promote voluntary compli-ance with the election law and ensure public confi-dence in the election process.

Explanation; ln 1979, Congress amended the FECAto eliminate the Commission's explicit authority toconduct random audits. The Commission is con-cerned that this change has weakened its ability todeter abuse of the election law. Random audits canbe an effective tool for promoting voluntary compli-ance with the Act and, at the same time, reassuringthe public that committees are complying with thelaw. Random audits performed by the IRS offer agood model. As a result of random tax audits, mosttaxpayers try to file accurate returns on time. Taxaudits have also helped create the public perceptionthat tax laws are enforced.

There are many ways to select committees for arandom audit. One way would be to randomly selectcommittees from a poolof alltypes of politicalcom-mittees identified by certain threshold criteria suchas the amount of campaign receipts and, in thecase of candidate committees, the percentage ofvotes won. With this approach, audits might be con-ducted in many states throughout the country.

Another approach would be to randomly select sev-eral Congressional districts and audit all politicalcommittees in those districts (with the exception ofcertain candidates whose popular vote fell below acertain threshold) for a given election cycle. Thissystem might result in concentrating audits in fewergeographical areas.

Such audits should be subject to strict confidential-ity rules. Only when the audits are completedshould they be published and publicized. Commit-tees with no problems should be commended.

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Regardless of how random selections were made, itwould be essential to include alltypes of politicalcommittees-PACs, party committees and candi-date committees-and to ensure an impartial, even-handed selection process.

Public Financing

State Expenditure Limits for Publicly FinancedPresidential Primary Campaigns (revised f 997)Section:2 U.S.C. $441a

Reco m me ndatio n : The Commission recommendsthat the state-by-state limitations on expendituresfor publicly financed Presidential primary candidatesbe eliminated.

Explanation; The Commission has now adminis-tered the public funding program in five Presidentialelections. Based on our experience, we believe thatthe limitations could be removed with no materialimpact on the process.

Our experience has shown that, in past years, thelimitations have had little impact on campaignspending in a given state, with the exception oflowa and New Hampshire. ln most other states,campaigns have been unable or have not wished toexpend an amount equalto the limitation. ln effect,then, the administration of the entire program hasresulted in limiting disbursements in these two pri-maries alone.

With an increasing number of primaries vying for acampaign's limited resources, however, it would notbe possible to spend very large amounts in theseearly primaries and still have adequate funds avail-able for the later primaries. Thus, the overall na-tional limit would serve as a constraint on statespending, even in the early primaries. At the sametime, candidates would have broader discretion inthe running of their campaigns.

Our experience has also shown that the limitationshave been only partially successful ín limiting ex-penditures in the early primary states. The use of

the fundraising limitation, the compliance cost ex-emption, the volunteer service provisions, the unre-imbursed personal travel expense provisions, theuse of a personal residence in volunteer activityexemption, and a complex series of allocationschemes have developed into an art which, whenskillfully practiced, can partially circumvent the statelimitations.

Finally, the allocation of expenditures to the stateshas proven a significant accounting burden for cam-paigns and an equally difficult audit and enforce-ment task for the Commission. For all these rea-sons, the Commission decided to revise its stateallocation regulations for the 1992 Presidential elec-tion. Many of the requirements, such as those re-quiring distinctions between fundraising and othertypes of expenditures, were eliminated. However,the rules could not undo the basic requirement todemonstrate the amount of expenditures relating toa pafticular state. Given our experience to date, webelieve that this change to the Act would still be ofsubstantial benefit to all parties concerned.

Fundraising Limitation for Publicly FinancedPresidential Primary CampaignsSection:2 U.S.C. SS431(9XBXv¡) and 441a

Recommendation: The Commission recommendsthat the separate fundraising limitation provided topublicly financed Presidential primary campaigns becombined with the overall limit. Thus, instead of acandidate's having a $10 million (plus COLA3) limitfor campaign expenditures and a $2 million (plusCOLA) limit for fundraising (20 percent of overalllimit), each candidate would have one $12 million(plus COLA) limit for all campaign expenditures.

Explanation: Campaigns that have sufficient fundsto spend up to the overall limit usually allocatesome of their expenditures to the fundraising cat-

3Spending limits are increased by the cost-of-livingadjustment (COLA), which the Department of Labor cal-culates annually.

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egory.These campaigns come close to spendingthe maximum permitted under both their overall limitand their special fundraising limit. Hence, by com-bining the two limits, Congress would not substan-tially alter spending amounts or patterns. For thosecampaigns which do not spend up to the overallexpenditure limit, the separate fundraising limit ismeaningless. Many smaller campaigns do not evenbother to use it, except in one or two states wherethe expenditure limit is low, e.9., lowa and NewHampshire. Assuming that the state limitations areeliminated or appropriately adjusted, this recom-mendation would have little impact on the electionprocess. The advantages of the recommendation,however, are substantial. They include a reductionin accounting burdens and a simplification in repod-ing requirements for campaigns, and a reduction inthe Commission's auditing task. For example, theCommission would no longer have to ensure com-pliance with the 28-day rule, i.e., the rule prohibitingcommittees from allocating expenditures as exemptfundraising expenditures within 28 days of the pri-mary held within the state where the expenditurewas made.

Eligibility Threshold for Public FinancingSection: 26 U.S.C. 59033

Becommendation: The Commission recommendsthat Congress raise the eligibility threshold for pub-licly funded Presidential primary candidates.

Explanation; The Federal Election Commission hasadministered the public funding provisions in fivePresidential elections. The statute provides for acost-of-living adjustment (COLA) of the overall pri-mary spending limitation. There is, however, nocorresponding adjustment to the threshold require-ment. lt remains exactly the same as it was in 1974.An adjustment to the threshold requirement wouldensure that funds continue to be given only to pri-mary candidates who demonstrate broad nationalsupport. To reach this higher threshold, the Com-mission recommends increasing the number ofstates in which the candidate had to raise the quali-fying amount of matchable contributions; and/or

increase the total amount of qualifying matchablecontributions that had to be raised in each of thestates.

Eligibility Requirements for Public FinancingSection:26 U.S.C. $$9002, 9003, 9032 and 9033

Reco m me ndatio n : The Commission recommendsthat Congress amend the eligibility requirements forpublicly funded Presidential candidates to makeclear that candidates who have been convicted of awillful violation of the laws related to the public fund-ing process or who are not eligible to serve asPresident will not be eligible for public funding.

Explanation; Neither of the Presidential public fi-nancing statutes expressly restricts eligibility forfunding because of a candidate's prior violations oflaw, no matter how severe. And yet public confi-dence in the integrity of the public financing systemwould risk serious erosion if the U.S. Governmentwere to provide public funds to candidates who hadbeen convicted of felonies related to the publicfunding process. Congress should therefore amendthe eligibility requirements to ensure that such can-didates do not receive public financing for theirPresidential campaigns. The amendments shouldmake clear that a candidate would be ineligible forpublic funds if he or she had been convicted offraud with respect to raising funds for a campaignthat was publicly financed, or if he or she had failedto make repayments in connection with a past pub-licly funded campaign or had willfully disregardedthe statute or regulations. See LaRouche v. FEC,992F.2d 1263 (D.C. Cir. 1993) cert. denied,114 S.

Ct. 550 (1993). ln addition, Congress should makeit clear that eligibility to serve in the office sought is

a prerequisite for eligibility for public funding.

Deposit of RepaymentsSection: 26 U.S.C. S9007(d)

Recom me ndatio n: The Commission recommendsthat Congress revise the law to state that: All pay-ments received by the Secretary of the Treasury

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under subsection (b) shall be deposited by him orher in the Presidential Election Campaign Fundestablished by 59006(a).

Explanation; This change would allow the Fund lorecapture monies repaid by convention-relatedcommittees of national major and minor parties, aswell as by general election grant recipients. Cur-rently the Fund recaptures only repayments madeby primary matching fund recipients.

Part ll:General LegislativeRecommendations

Disclosure

Candidates and Principal Campaign CommitteesSection:2 U.S.C. $Sa32(eX1) and 433(a)

Recommendation: The Commission recommendsthat Congress revise the law to require a candidateand his or her principal campaign committee toregister simultaneously.

Explanation; An individual becomes a candidateunder the FECA once he or she crosses the $5,000threshold in raising contributions or making expen-ditures. The candidate has 15 days to file a state-ment designating the principal campaign committee,which will subsequently disclose all of thecampaign's financial activity. This committee, in

turn, has 10 days f rom the candidate's designationto register. This schedule allows 25 days to passbefore the committee's reporting requirements arelriggered. Consequently, the financial activity thatoccurred prior to the registration is not discloseduntilthe committee's next upcoming report. Thisperiod is too long during an election year. For ex-ample, should a report be due 20 days after anindividual becomes a candidate, the unregisteredcommittee would not have to file a report on thatdate and disclosure would be delayed. The nextreport might not be filed for 3 more months. By re-quiring simultaneous registration, the public wouldbe assured of more timely disclosure of thecampaign's activity.

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PACs Created by CandidatesSection: 2 U.S.C. $aa1 a(a)

Recomme ndation : The Commission recommendsthat Congress consider whether PACs created bycandidates should be deemed affiliated with thecandidate's principal campaign committee.

Explanation: A number of candidates for federaloffice, including incumbent officeholders, have cre-ated PACs in addition to their principal campaigncommittees. Under current law, such PACs gener-ally are not considered authorized committees.Therefore, they may accept funds f rom individualsup to the $5,000 limit permitted for unauthorizedcommittees in a calendar year and may make con-tributions of up to $5,000 per election to other fed-eral candidates once they achieve multicandidatestatus. ln contrast, authorized committees may notaccept more than $1,000 per election from individu-als and may not make contributions in excess of$1,000 to other candidates.

The existence of PACs created by candidates canpresent difficult issues for the Commission, such aswhen contributions are jointly solicited with thecandidate's principal campaign committee or theresources of the PAC are used to permit the candi-date to gain exposure by traveling to appearanceson behalf of other candidates. At times the opera-tions of the two committees can be difficult to distin-guish.

lf Congress concludes that there is an appearancethat the limits of the Act are being evaded throughthe use of PACs created by candidates, it may wishto consider whether such committees are affiliatedwith the candidate's principal campaign committee.As such, contributions received by the committeeswould be aggregated under a single contributionlimit and subjected to the limitations on contribu-tions to authorized committees. The same treatmentwould be accorded to contributions made by themto other candidates.

Require Monthly Filing for Certain Multicandi-date CommitteesSection: 2 U.S.C. Sa3a(aX )

Recom me ndatio n : The Commission recommendsthat multicandidate committees which have raisedor spent, or which anticipate raising or spending,over $100,000 be required to f ile on a monthly basisduring an election year.

Explanation; Under current law, multicandidatecommittees have the option of filing quarterly ormonthly during an election year. Quarterly filers thatmake contributions or expenditures on behalf ofprimary or general election candidates must also filepre-election reports.

Presidential candidates who anticipate receivingcontributions or making expenditures aggregating$100,000 or more must file on a monthly basis.Congress should consider applying this same re-porting requirement to multicandidate committeeswhich have raised or spent, or which anticipateraising or spending, in excess of $100,000 duringan election year. The requirement would simplifythe filing schedule, eliminating the need to calculatethe primary filing periods and dates. Filing would bestandardized-once a month. This change wouldalso benefit disclosure; the public would know whena committee's report was due and would be able tomonitor the larger, more influential committees'repofts. Although the total number of reports filedwould increase, most reports would be smaller,making it easier for the Commission to enter thedata into the computer and to make the disclosuremore timely.

Reporting of Last-Minute lndependent Expendi-turesSection: 2 U.S.C. $ 3a(c)

Reco m me ndation : The Commission recommendsthat Congress clarify when last-minute independentexpenditures must be reported.

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Explanation: The statute requires that independentexpenditures aggregating $1,000 or more and madeafter the 20th day, but more than 24 hours, beforean election be reported within 24 hours after theyare made. This provision is in contrast to otherreporting provisions of the statute, which use thewords "shall be filed." Must the report be receivedby the filing office within 24 hours after the indepen-dent expenditure is made, or may it be sent certi-fied/registered mail and postmarked within 24 hoursof when the expenditure is made? Should Congressdecide that committees must report the expenditurewithin 24 hours after it is made, committees shouldbe able to file via facsimile (fax) macine. (See Leg-islative Recommendation titled "Facsimile Ma-chines.") Clarification by Congress would be veryhelpful.

Reporting and Recordkeeping of Payments toPersons Providing Goods and ServicesSection:2 U.S.C. $$a32(c), 434(bX5XA), (6XA)and (6)(B)

Recommendation: The current statute requires re-porting "the name and address of each...person towhom an expenditure in an aggregate amount orvalue in excess of $200 within the calendar year ismade by the reporting committee to meet a candi-date or committee operating expense, together withthe date, amount, and purpose of such operatingexpenditure." The Commission recommends thatCongress clarify whether thís is meant, in all in-stances, to require reporting committees to discloseonly the payments made by the committee orwhether additional repofting is required, in someinstances, when a payment is made to an interme-diary contractor or consultant who, in turn, acts asthe committee's agent by making expenditures toother payees. lf Congress determines that disclo-sure of secondary payees is required, the Actshould require that committees maintain the name,address, amount and purpose of the disbursementmade to the secondary payees in their records anddisclose it to the public on their reports. Congress

should limit such disclosure to secondary paymentsabove a certain dollar threshold or to paymentsmade to independent subcontractors.

Explanation: The Commission has encountered onseveral occasions the question of just how detaileda committee's reporting of disbursements must be.See, e.9., Advisory Opinion 1983-25, 1 Fed. Elec-tion Camp. Fin. Guide (CCH), 115742 (Dec.22,1983) (Presidential candidate's committee not re-quired to disclose the names, addresses, dates oramounts of payments made by a general mediaconsultant retained by the committee); AdvisoryOpinion 1984-8, 1 Fed. Election Camp. Fin. Guide(CCH), I 5756 (Apr. 20, 1984) (House candidate'scommittee only required to itemize payments madeto the candidate for travel and subsistence, not thepayments made by the candidate to the actual pro-viders of services); Financial Control and Compli-ance Manualfor Presidential Primary Eleclion Can-didates Receiving Public Financing, Federal Elec-tion Commission, pp. 123-130 (1992) (distinguish-ing committee advances or reimbursements to cam-paign staff for travel and subsistence from otheradvances or reimbursements to such staff and re-quiring itemization of payments made by campaignstaff only as to the latter). Congressional intent in

the area is not expressly stated, and the Commis-sion believes that statutory clarification would bebeneficial. ln the area of Presidential public financ-ing, where the Commission is responsible for moni-toring whether candidate disbursements are forqualified campaign expenses (see 26 U.S.C.

$$9004(c) and 9038(b)(2)), guidance would be par-ticularly useful.

Excluding Political Committees from Protectionof the Bankruptcy CodeSection: 2 U.S.C. $433(d)

Recom me ndation : The Commission recommendsthat Congress clarify the distribution of authorityover insolvent political committees between the

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Commission's authority to regulate insolvency andtermination of political committees under 2 U.S.C.

S433(d), on one hand, and the authority of thebankruptcy courts, on the other hand.

Explanation; ln 2 U.S.C. S433(d), the Commissionis given authority to establish procedures for "thedetermination of insolvency" of any political commit-tee, the "orderly liquidation of an insolvent politicalcommittee," the "application of its assets for thereduction of outstanding debts," and the "termina-tion of an insolvent political committee after suchliquidation..." However, the Bankruptcy Code, 11

U.S.C. S101 ef seg., generally grants jurisdictionover such matters to the bankruptcy courts, and atleast one bankruptcy court has exercised its juris-diction under Chapter 11 of the Bankruptcy Code topermit an ongoing political committee to compro-mise its debts with the intent thereafter to resumeits fundraising and contribution and expenditureactivities. ln re Fund for a Conservative Majority100 B.R. 307 (Bankr. E.D.Va. 1989). Not only doesthe exercise of such jurisdiction by the bankruptcycourt conflict with the evident intent in 2 U.S.C.

S433(d) to empower the Commission to regulatesuch matters with respect to political committees,but permitting a political committee to compromisedebts and then resume its political activities canresult in corporate creditors effectively subsidizingthe committee's contributions and expenditures,contrary to the intent of 2 U.S.C. $aa1b(a). TheCommission promulgated a regulation generallyprohibiting ongoing political committees from com-promising outstanding debts, 1 1 CFR 1 16.2(b), butthe continuing potential jurisdiction of lhe bank-ruptcy courts over such matters could underminethe Commission's ability to enforce it. Accordingly,Congress may want to clarify the distribution ofauthority between the Commission and the bank-ruptcy courts in this area. ln addition, Congressshould specify whether political committees areentitled to seek Chapter 11 reorganization under theBankruptcy Code.

Fundraising Projects Operated by UnauthorizedCommitteesSection: 2 U.S.C 5432(e)

Recommendation: The Commission recommendsthat Congress specifically require that contributionssolicited by an unauthorized committee (i.e., a com-mittee that has not been authorized by a candidateas his/her campaign committee) be made payableto the registered name of the committee and thatunauthorized committees be prohibited from accept-ing checks payable to any other name.

Explanation; Unauthorized committees are not per-mitted to use the name of federalcandidate in theirname of in the name of a fundraising project theysponsor unless, in the case of a fundraising project,the name selected clearly indicates opposition tothe named candidate(s). The Commission adoptedthis latter prohibition after a rulemaking where therecord clearly established that contributors weresometimes confused or misled into believing thatthey were contributing to a candidate's authorizedcommittee (when, for example, the project's namewas "Citizens for X"), when in fact they were givingto the nonauthorized committee that sponsored theevent. This confusion sometimes led to requests forrefunds, allegations of coordination, inadequatedisclaimers, and inability to monitor contributionlimits. While recent revisions to the Commission'srules at 1 1 CFR 1 02.1 4(bX3) have now reduced thispossibility, the Commission believes that contributorawareness might be further enhanced if Congresswere to modify the statute by requiring that allchecks intended for an unauthorized committee bemade payable to the registered name of the unau-thorized committee, and by prohibiting unauthorizedcommittees from accepting checks payable to anyother name.

Disclaimer Notices (revised 1997)Section:2 U.S.C. 5441d

Recomme ndatio n : The Commission recommendsthat Congress revise the FECA to require registeredpolitical committees to display the appropriate dis-

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claimer notice (when practicable) in any communi-cation issued to the general public, regardless of itscontent or how it is distributed. Congress shouldalso revise the Federal Communications Act tomake it consistent with the FECA's requirementthat disclaimer notices state who paid for the com-munication.

Explanation; Under 2 U.S.C. $441d, a disclaimernotice is only required when "expenditures" aremade for two types of communications madethrough "public political advertising": (1) communi-cations that solicit contributions and (2) communi-cations that "expressly advocate" the election ordefeat of a clearly identified candidate. The Com-mission has encountered a number of problemswith respect to this requirement.

First, the statutory language requiring the dis-claimer notice refers specifically to "expenditures,"possibly leading to an interpretation that the re-quirement does not apply to disbursements that areexempt from the definition of "expenditure" such as"exempt activities" conducted by local and stateparty committees under, for example, 2 U.S.C.

$a31 (gXBXviii). Believing that Congress intendedsuch activities to be exempt only from the defini-tions of "contribution" and "expenditure," the Com-mission amended its rules at 1 1 CFR 110.1 1 torequire that covered "exempt activity" communica-tions include a statement of who paid for the com-munication. However, it would be helpful if Con-gress were to clarify that all types of communica-tions to the public should carry a disclaimer.

Second, the Commission has encountered difficul-ties in interpreting "public political advertising,"particularly when volunteers have been involvedwith the preparation or distribution of the communi-cation.

Third, the Commission has devoted considerabletime to determining whether a given communica-tion in fact contains "express advocacy" or "solicita-tion" language. The recommendation here woulderase this need.

The Commission considered expanding the generaldisclaimer requirements in the course of the rule-making; however, this was not included in the finalrules, which rather clarify the scope of some of thesubordinate requirements. Most of these problemswould be eliminated if the language of 2 U.S.C.

5441d were simplified to require a registered com-mittee to display a disclaimer notice whenever itcommunicated to the public, regardless of the pur-pose of the communication and the means of pre-paring and distributing it. The general public wouldbenefit by being aware of who has paid for a par-ticular communication. Moreover, political commit-tees and the Commission would benefit becausethey would no longer have to examine the contentof communications or the manner in which theywere disseminated to determine whether a dis-claimer was required.

This proposal is not intended to eliminate exemp-tions for communications appearing in places whereit is inconvenient or impracticable to display a dis-claimer.

Fourth, Congress might want to consider addingdisclaimer requirements for so-called "push poll"activity. This term generally refers to phone bankactivities or written surveys that seek to influencevoters, such as by providing false or misleadinginformation about a candidate. This practice ap-pears to be growing. The Commission has consid-ered requiring disclaimers on push pollcommunica-tions, but has declined to do so for a number ofreasons, including difficulty in defining push pollsand the fact that many such polls do not appear toexpressly advocate the election or defeat of aclearly identified candidate. lf Congress enacted thegeneral disclaimer requirement proposed above,this would encompass push poll communications bypolitical committees. Congress might also wish torequire disclosure by other groups engaging in thispractice.

Finally, Congress should change the sponsorshipidentification requirements found in the FederalCommunications Act to make them consistent with

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the disclaimer notice requirements found in theFECA. Under the Communications Act, federal po-litical broadcasts must contain an announcementthat they were furnished to the licensee, and bywhom. See FCC and FEC Joint Public Notice, FCC78-419 (June 19, 1978). ln contrast, FECA dis-claimer notices focus on who authorized and paidfor the communication. The Communications Actshould be revised to ensure that the additional infor-mation required by the FECA is provided withoutconfusion to licensees and political advertisers. lnaddition, the FECA should be amended to requirethat the disclaimer appear at the end of all broad-cast communications.

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

Recommendation: The current S441 h prohibitsfraudulent misrepresentation such as speaking,writing or acting on behalf of a candidate or commit-tee on a matter which is damaging to such candi-date or committee. lt does not, however, prohibitpersons from fraudulently soliciting contributions.The Commission recommends that a provision beadded to this section prohibiting persons fromfraudulently misrepresenting themselves as repre-sentatives of candidates or political parties for thepurpose of soliciting contributions which are notforuvarded to or used by or on behalf of the candi-date or party.

Explanation; The Commission has received a num-ber of complaints that substantial amounts ofmoney were raised fraudulently by persons or com-mittees purporting to act on behalf of candidates.Candidates have complained that contributionswhich people believed were going for the benefit ofthe candidate were diverted for other purposes.Both the candidates and the contributors wereharmed by such diversion. The candidates receivedless money because people desirous of contributing

believed they had already done so. The contribu-tors' funds were used in a manner they did not in-tend. The Commission has been unable to take anyaction on these matters because the statute gives itno authority in this area.

Draft Comm¡tteesSection:2 U.S.C. SS431(BXAX|) and (e)(A)(i),

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

Recomme ndatio n : The Commission recommendsthat Congress consider the following amendmentsto the Act in order to prevent a proliferation of "draft"committees and to reaffirm Congressional intentthat draft committees are "political committees"subject to the Act's provisions.

1. Bring Funds Baised and Spent for Undeclaredbut Clearly ldentified Candidates Within the Act'sPurview. Section 431(8XAX|) should be amended toinclude in the definition of "contribution" funds con-tributed by persons "for the purpose of influencing aclearly identified individuallo seek nomination forelection or election to Federal office...." Section431(9XAX|) should be similarly amended to includewithin the definition of "expenditure" funds ex-pended by persons on behalf of such "a clearlyidentif ied i ndivid ual."

2. Restrict Corporate and Labor Organization Sup-port for Undeclared but Clearly ldentified Candi-dates. Section 441b(b) should be revised to ex-pressly state that corporations, labor organizationsand national banks are prohibited from making con-tributions or expenditures "for the purpose of influ-encing a clearly identified individuallo seek nomina-tion for election or election..." to federal office.

3. Limit Contributions to Draft Committees. The lawshould include explicit language stating that no per-son shall make contributions to any committee (in-cluding a draft committee) established to influencethe nomination or election of a clearly identifiedindividuallor any federal office which, in the aggre-gate, exceed that person's contribution limit, percandidate, per election.

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Explanation; These proposed amendments wereprompted by the decisions of the U.S. Court ofAppeals for the District of Columbia Circuit in FECv. Machinists Non-Partisan Political League andFEC v. Citizens for Democratic Alternatives in1980 and of the U.S. Court of Appeals for theEleventh Circuit in FEC v. Florida for KennedyCommittee. The District of Columbia Circuit heldthat the Act, as amended in 1979, regulated onlylhe reporting requirements of draft committees.The Commission sought review of this decision bythe Supreme Court, but the Court declined to hearthe case. Similarly, the Eleventh Circuit found that"committees organized to 'draft' a person for fed-eral office" are not "political committees" within theCommission's investigative authority. The Com-mission believes that the appeals court rulingscreate a serious imbalance in the election law andthe political process because a nonauthorizedgroup organized to support someone who has notyet become a candidate may operate completelyoutside the strictures of the Federal Election Cam-paign Act. However, any group organized to sup-poft someone who has in fact become a candidateis subject to the Act's registration and reportingrequirements and contribution limitations. There-fore, the potential exists for funneling large aggre-gations of money, both corporate and private, intothe federal electoral process through unlimitedcontributions made to nonauthorized draft commit-tees thal support a person who has not yet be-come a candidate. These recommendations seekto avert that possibility.

Contributions and Expenditures

lssue Advocacy Advertising (1997)Sections:2 U.S.C. SS431(BXAX|) and (9XAX|);441d

Recommendation: The Commission recommendsthat Congress consider when "issue advocacy"advertising by corporations, labor organizations,

polit¡cal panies, and other organizations is an in-kind contribution because it is coordinated with acandidate or a candidate's campaign.

Explanation; The 1996 election cycle saw an explo-sion in "issue advocacy" advertising. Such adveftis-ing explores an officeholder's, a party's or acandidate's stand on a particular issue, but does notexpressly advocate the election or defeat of aclearly identified candidate or party. Courts haveruled that lhe Act's prohibition on expenditures bycorporations and labor organizations does not ex-tend to issue advocacy that does not contain ex-press advocacy. See FEC v. Massachusetts Citi-zens for Life, 479 U.S. 238 (1986); FEC v. ChristianAction Network,894 F.Supp.946 (W.D. Va. 1995),aff'd, 92 F.sd 1 178 (4th Cir. 1996); Clifton v. FEC,927 F.Supp. 493 (D.Me. 1996) and Maine Right toLife v. FEC,914 F. Supp. 8 (D.Me. 1996), aff'd,98F.3d 1 (1st Cir. 1996).

The Act defines the term "contribution" to includefunds that are spent 'ïor the purpose of influencingan election." Although advertisements devotedsolely to issue advocacy do not contain expressadvocacy, such advertising may benefit or harm acandidacy and consequently influence the electionprocess, particularly if the communication is coordi-nated with a candidate or his/her campaign. ln aseries of cases, the Supreme Court has viewedpublic communications coordinated with campaignsas in-kind contributions. As contributions, such com-municalions were subject to the Act's limitations andprohibitions, but were not subject to the same levelof First Amendment protection as expenditures. SeeBuckley v. Valeo,424 U.5.1 (1976); FEC v. Massa-chusetts Citizens for Life,479 U.S. 238 (1986); andColorado Republican Federal Campaign Committeev. FEC, 1 16 S.Ct. 2309 (1996).

ln accordance with these rulings, Congress shouldstipulate when coordination of an issue advocacyadvertisement with a candidate or campaign wouldbe considered an in-kind contribution. Additionally,Congress should state that coordination of such a

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public communication with a corporation or a labororganization would be prohibited activity. Such aprohibition would help the Commission address thepublic's concern about the use of soft money--funds that are raised or spent outside the prohibi-tions of the Act (such as corporate or union treasuryfunds)-{o influence federal elections.

Candidate's Use of Campaign Funds (revised1ee7)Section:2 U.S.C. S439a

Recommendaflon; Congress may wish to examinewhether the use of campaign funds to pay a salaryto the candidate is considered to be a "personaluse" of those funds.

Explanation; Under $439a of the Act, excess cam-paign funds cannot be converted by any person topersonal use. The Commission has promulgatedfinal rules on what would constitute "personal use"of excess funds. See 1 1 CFR 1 13.1 (g). lt was un-able, however, to decide whether excess campaignfunds may be used to pay a salary to the candidate.ln the past, some have argued before the Commis-sion that candidate salary payments are legitimatecampaign expenditures, while others have felt thatsuch payments constitute a personal use of excessfunds prohibited by $439a. Congressional guidanceon this issue would be helpful.

Disposition of Excess Campaign FundsSection:2 U.S.C. $439a

Recommendation: ln those cases where a candi-date has largely financed his campaign with per-sonalfunds, the Commission recommends thatCongress consider limiting the amount of excesscampaign funds that the campaign may transfer to anational, state or local committee of any politicalparty to $100,000 per year.

Explanation; Under current law, a candidate maytransfer unlimited amounts of excess campaignfunds to a political party. This makes it possible for

a candidate to contribute unlimited personalfundsto his campaign, declare these funds excess andtransfer them to a political party, thus avoiding thelimit on individual contributions to political parties.

Distinguishing Official Travel fromCampaign TravelSection: 2 U.S.C. $431 (9)

Recommendation: The Commission recommendsthat Congress amend the FECA to clarify the dis-tinctions between campaign travel and officialtravel.

Explanation; Many candidates for federal officehold elected or appointed positions in federal, stateor local government. Frequently, it is difficult todetermine whether their public appearances arerelated to their official duties or whether they arecampaign related. A similar question may arisewhen federal officials who are not running for officemake appearances that could be considered to berelated to their official duties or could be viewed ascampaign appearances on behalf of specific candi-dates.

Another difficult area concerns trips in which bothofficial business and campaign activity take place.There have also been questions as to how exten-sive the campaign aspects of the trip must be be-fore part or all of the trip is considered campaignrelated. Congress might consider amending thestatute by adding criteria for determining whensuch activity is campaign related. This would assistthe committee in determining when campaignfunds must be used for all or part of a trip. This willalso help Congress determine when officialfundsmust be used under House or Senate Rules.

Coordinated Party ExpendituresSection: 2 U.S.C. $441 a(d)

Recommendation: The Commission recommendsthat Congress clarify the number of coordinatedparty expenditure limits that are available to partycommittees during the election cycle.

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ln addition, Congress may want to clarify the distinc-tion between coordinated party expenditures madein connection with general elections and genericparty building activity.

Explanation; Section 441a(d) provides that nationaland state party committees may make expendituresin connection with the general election campaigns ofthe party's nominees for House and Senate. Thenational party committees may also make such ex-penditures on behalf of the party's general electionPresidential and Vice Presidential nominees. TheCommission has interpreted these provisions topermit party committees to make nearly any type ofexpenditure they deem helpful to their nomineesshort of donating the funds directly to the candi-dates. Expenditures made under $441a(d) are sub-ject to a special limit, separate from contributionlimits.

The Commission has been faced severaltimes withthe question of whether party committees have oneor two coordinated party expenditure limits in a par-ticular election campaign. ln particular, the issue hasbeen raised in special election campaigns. Somestate laws allow the first special election either tonarrow lhe field of candidates, as a primary would,or to fill the vacancy if one candidate receives amajority of the popular vote. lf a second special elec-tion becomes necessary to fill the vacancy, thequestion has arisen as to whether the party commit-tees may spend against a second coordinated partyexpenditure limit since both special elections couldhave filled the vacancy. ln a parallel manner, theCommission has been faced with the question ofwhether party committees have one or two coordi-nated party expenditure limits in a situation that in-cludes an election on a general election date and asubsequent election, required by state law, after thegeneral election. Although in the latter situation, adistrict court has concluded that only one coordi-nated party expenditure limit would apply (seeDemocratic Senatorial Campaign Committee v. FEC(No. 93-1321) (D.D.C., November 14, 1994)),broader Congressional guidance on this issue wouldbe helpful.

Party committees may also make expenditures forgeneric party-building activities, including get-out-the-vote and voter registration drives. These activi-ties are not directly attributable to a clearly identifiedcandidate. ln contrast to coordinated party expendi-tures, these activities are not subject to limitation.

When deciding, in advisory opinions and enforce-ment matters, whether an activity is a $441a(d)expenditure or a generic activity, the Commissionhas considered the timing of the expenditure, thelanguage of the communication, and whether itmakes reference only to candidates seeking a par-ticular office or to all the party's candidates, in gen-eral. However, the Commission still has difficultydetermining, in certain situations, when a communi-cation or other activity is generic party building ac-tivity or a coordinated party expenditure. Congres-sional guidance on this issue would be helpful.

Volunteer Participation in Exempt ActivitySection:2 U.S.C. SS431(8XB)(x) and (xii);

a31 (e)(B)(viii) and (ix)

Becom me ndatio n : The Commission recommendsthat Congress clarify the extent to which volunteersmust conduct or be involved in an activity in orderfor the activity to qualify as an exempt party activity

Explanation; Under the Act, certain activities con-ducted by state and local pany committees on be-half of the party's candidates are exempt from thecontribution limitations if they meet specific condi-tions. Among these conditions is the requirementthat the activity be conducted by volunteers. How-ever, the actual level of volunteer involvement inthese activities has varied substantially.

Congress may want to clarify the extent to whichvolunteers musl be involved in an activity in orderfor that activity to qualify as an exempt activity. Forexample, if volunteers are assisting with a mailing,must they be the ones to stuff the envelopes andsort the mail by zip code or can a commercial ven-

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dor perform that service? ls it sufficient involvementif the volunteers just stamp the envelopes or dropthe bags at the post office?

Contributions from MinorsSection: 2 U.S.C. $aa1 a(a)(1 )

Reco mme ndation : The Commission recommendsthat Congress establish a presumption that con-tributors below age 16 are not making contributionson their own behalf.

Explanation; The Commission has found that contri-butions are sometimes given by parents in theirchildren's names. Congress should address thispotential abuse by establishing a minimum age forcontributors, or otherwise provide guidelines ensur-ing that parents are not making contributions in thename of another.

Application of Contribution Limitationsto Family MembersSection:2 U.S.C. $441a

Recommendatio n : The Commission recommendsthat Congress examine the application of the contri-bution limitations to immediate family members.

Explanation; Under the current posture of the law, afamily member is limited to contributing $1,000 perelection to a candidate. This limitation applies tospouses and parents, as well as other immediatefamily members. (See S. Conf. Rep. No. 93-1237,93d Cong., 2d Sess.,58 (1974) and Buckleyv.Valeo, 424 U.S. 1 , 51 (footnote 57)(1976).) Thislimitation has caused the Commission substantialproblems in attempting to implement and enforcethe contribution limitations. 4

a While the Commission has attempted through regula-tions to present an equitable solution to some of theseproblems (see Explanation and Justification, Final Rule,48 Fed. Reg. 19019, 4pri127,1983, as prescribed by theCommission on July 1, 1983), statutory resolution is re-quired in this area.

Problems have arisen in enforcing the limitationswhere a candidate uses assets belonging to a par-ent. ln some cases, a parent has made a substan-tial gift to his or her candidate-child while cautioningthe candidate that this may well decrease theamount which the candidate would othen¡¡ise inheritupon the death of the parent.

Problems have also occurred in situations wherethe candidate uses assets held jointly with aspouse. When the candidate uses more than one-half of the value of the asset held commonly withthe spouse (for example, offering property as collat-eralfor a loan), the amount over one-half repre-sents a contribution from the spouse. lf that amountexceeds $1,000, it becomes an excessive contribu-tion from the spouse.

The Commission recommends that Congress con-sider the difficulties arising from application of thecontribution limitations to immediate family mem-bers.

Lines of Credit and Other Loans Obtained byCandidatesSection : 2 U.S.C. Sa31 (sXBXvii)

Recom me ndation : The Commission recommendsthat Congress provide guidance on whether candi-date committees may accept contributions whichare derived from advances on a candidate's broker-age account, credit card, or home equity line ofcredit, and, if so, Congress should also clarify howsuch extensions of credit should be reported.

Explanation; The Act currently exempts from thedefinition of "contribution" loans that are obtained bypolitical committees in the ordinary course of busi-ness from federally-insured lending institutions. 2U.S.C. 5431(SXBXvii). Loans that do not meet therequirements of this provision are either subject tothe Act's contribution limitations, if received frompermissible sources, or the prohibition on corporatecontributions, as appropriate.

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Since this aspect of the law was last amended in1979, however, a variety of financial options havebecome more widely available to candidates andcommittees. These include a candidate's ability toobtain advances against the value of a brokerageaccount, to draw cash advances from a candidate'scredit card, or to make draws against a home equityline of credit obtained by the candidate. ln manycases, the credit approval, and therefore the checkperformed by the lending institution regarding thecandidate's creditworthiness, may predate thecandidate's decision to seek federal office. Conse-quently, the extension of credit may not have beenmade in accordance with the statutory criteria suchas the requirement that a loan be "made on a basiswhich assures repayment." ln other cases, theextension of credit may be from an entity that is nota federally-insured lending institution. The Commis-sion recommends that Congress clarify whetherthese alternative sources of financing are permis-sible and, if so, specify standards to ensure thatthese advances are commercially reasonable ex-tensions of credit.

Enforcement

Audits for CauseSection: 2 U.S.C. S438(b)

Recom me ndatio n : The Commission recommendsthat Congress expand the time frame, from 6months to 12 months after the election, duringwhich the Commission can initiate an audit forcause.

Explanation; Under current law, the Commissionmust initiate audits for cause within 6 months afterthe election. Because year-end disclosure does nottake place until almost 2 months after the election,and because additional time is needed to computer-ize campaign finance information and review re-ports, there is little time to identify potential auditsand complete lhe referral process within that 6-month window.

Modifying Standard of "Reason to Believe"FindingSection:2 U.S.C. $4379

Recom mendation : The Commission recommendsthat Congress modify the language pertaining to"reason to believe," contained at 2 U.S.C. $4379, soas to allow the Commission to open an investigationwith a sworn complaint, or after obtaining evidencein the normal course of its supervisory responsibili-ties. Essentially, this would change the "reason tobelieve" standard to "reason to open an investiga-tion."

Explanation; Under the present statute, the Com-mission is required to make a finding that there is"reason to believe a violation has occurred" before itmay investigate. Only then may the Commissionrequest specific information f rom a respondent todetermine whether, in fact, a violation has occurred.The statutory phrase "reason to believe" is mislead-ing and does a disservice to both the Commissionand the respondent. lt implies that the Commissionhas evaluated the evidence and concluded that therespondent has violated the Act. ln fact, however, a"reason to believe" finding simply means that theCommission believes a violation may have occurredif the facts as described in the complaint are true.An investigation permits the Commission to evalu-ate the validity of the facts as alleged.

It would therefore be helpfulto substitute words thatsound less accusatory and that more accuratelyreflect what, in fact, the Commission is doing at thisearly phase of enforcement.

ln order to avoid perpetuating the erroneous conclu-sion that the Commission believes a respondenthas violated the law every time it finds "reason tobelieve," the statute should be amended.

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Protection for Those Who File Complaintsor Give Testimony (revised 1997)Section:2 U.S.C. $4379

Recom mendatio n : The Commission recommendsthat the Act be amended to make it unlawfulto im-properly discriminate against employees or unionmembers solely for filing charges or giving testi-mony under the statute.

Explanation; The Act requires that the identity ofanyone filing a complaint with the Commission beprovided to the respondent. ln many cases, thismay put complainants at risk of reprisals from therespondent, particularly if an employee or unionmember files a complaint against his or her em-ployer or union. This risk may well deter manypeople from filing complaints, particulafy under$441b. See, e.9., NLRB v. Robbins Tire & RubberCompany,437 U.S. 214,240 (1978); Brennan v.

Engineered Products, lnc.,506 F.2d 299,302 (8thCtr.197Ð; Texas Industries, lnc. v. NLRB,336 F.2d128, 134 (Sth Cir. 1964). ln other statutes relating toretaliation for filing complaints, Congress has madeit unlawfulto discriminate against employees orother individuals for filing charges or giving testi-mony under the statute. See, e.9.,29 U.S.C.

$158(aX4) (National Labor Relations Act); 29U.S.C. S215(3) (Fair Labor Standards Actl; 42U.S.C. $2000e-3(a) (Equal Employment Opportu-nity Act); 42 U.S.C. $3617 (Fair Housing Act). TheCommission recommends that Congress considerincluding a similar provision in the FECA.

Public Financing

Supplemental Funding for Publicly FundedCandidatesSection:26 U.S.C. SS9003 and 9004

Recom me ndation: The Commission recommendsthat Congress consider whether to modify the gen-eral election Presidential public funding system in

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instances where a nonpublicly funded candidateexceeds the spending limit for publicly funded can-didates.

Exp I an ati on; Major party P residential cand idateswho participate in the general election public fund-ing process receive a grant for campaigning. ln

order to receive the grant, the candidate must agreeto limit expenditures to that amount. Candidateswho do not request public funds may spend an un-limited amount on their campaign. Congress maywant to consider whether the statute should ensurethat those candidates who are bound by limits arenot disadvantaged.

Miscellaneous

Funds and Services from Private SourcesSection:2 U.S.C. $437c

Recommendation: The Commission recommendsthat Congress give the Commission authority toaccept funds and services from private sources toenable the Commission to provide guidance andconduct research on election administration andcampaign finance issues.

Explanation; The Commission has been very re-stricted in the sources of private funds it may acceptto finance topical research, studies, and jointprojects with other entities because it does not havestatutory gift acceptance authority. ln view of theCommission's expanding role in this area, Congressshould consider amending the Act to provide theCommission with authority to accept gifts from pri-vate sources. Permitting the Commission to obtainfunding from a broader range of private organiza-tions would allow the Commission to have morecontrol in structuring and conducting these activitiesand avoid the expenditure of government funds forthese activities. lf this proposalwere adopted, how-ever, the Commission would not accept funds fromorganizations that are regulated by or have financialrelations with the Commission.

Part lllConformi ng LegislativeRecommendations

Disclosure

Definition of Political Committee (1997)Section: 2 U.S.C. $431 (4XA)

Recommendation: The Commission recommendsthat Congress revise the definition of politicalcom-mittee to incorporate "major purpose" as the testrecognized by the coufis.

Explanation; Section 431(4XA) of the Act defines apoliticalcommittee as a group which raises orspends in excess of $1,000 during a calendar year.ln Buckley v. Valeo, the Supreme Court, citing FirstAmendment concerns, ruled that the definition ofpolitical committee "need only encompass organiza-tions that are under the control of a candidate or themajor purpose of which ís the nomination or electionof a candidate." Subsequent court rulings havecited the Buckley case in interpreting the statute toinclude "major purpose" as the test. See FEC v.

Massachusetts Citizens for Life,479 U.S. 238(1986) and FEC v. GOPAC, \nc.,917 F.Supp. 851(D.D.C. 1ee6).

Recently, however, an appeals court has ¡nter-preted the wording of the statute narrowly, rulingthat the $1,000 threshold is the only applicable fac-tor in determining if an organization is a politicalcommittee. See Akrns v. FEC, No. 92-1864(JLG)(D.D.C. 1994); aff'd, 66 F.3d 348 (D.C. Cir. 1995,appealvacated and reh'g en banc granted,74F.3d287 (D.C. Cir. 1996), rev'd, (D.C. Cir. 1996).

Congress should amend the statute to rectify theconflicting court rulings and to clarify Congressionalintent regarding the meaning of "major purpose."

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

Recomme ndatio n : The Commission recommendsthat Congress make a technical amendment to sec-tion 438(a)(4) by deleting the reference to the Clerkof the House.

Explanation; Section a38(a)( ) outlines the process-ing of disclosure documents filed under the Act. Thesection permits political committees to "salt" theirdisclosure reports with 10 pseudonyms in ordertodetect misuse of the committee's FEC reports andprotect individual contributors who are listed on thereport from unwanted solicitations. The Act requirescommittees who "salt" their reports to file the list ofpseudonyms with the appropriate filing office.

Public Law No. 104-79 (December 28, 1995)changed the point of entry for House candidatereports from the Clerk of the House to the FEC,effective December 31, 1995. As a result, Housecandidates must now file pseudonym lists with theFEC, rather than the Clerk of the House. To estab-lish consistency within the Act, the Commissionrecommends that Congress amend section438(aX4) to delete the reference to the Clerk of theHouse as a point of entry for the filing of pseud-onym lists.

Contributions and Expenditures

Broader Prohibition Against Force andReprisalsSection : 2 U.S.C. S441 b(bX3XA)

Recommendation: The Commission recommendsthat Congress revise the FECA to make it unlawfulfor a corporation, labor organization or separatesegregated fund to use physical force, job discrimi-nation, financial reprisals or the threat thereof toobtain a contribution or expenditure on behalf of anycandidate or political committee.

Explanation; Current 5441b(bx3)(A) could be inter-preted to narrowly apply to the making of contribu-tions or expenditures by a separate segregatedfund which were obtained through the use of force,job discrimination, financial reprisals and threats.Thus, Congress should clarify that corporations andlabor organizations are prohibited from using suchtactics in the solicitation of contributions for theseparate segregated fund. ln addition, the FEC hasrecently revised its rules to clarify that it is not per-missible for a corporation or a labor organization touse coercion, threats, force or reprisalto urge anyindividual to contribute to a candidate or engage infundraising activities. See 60 FR 64260 (December14, 1995). However, Congress should include lan-guage to cover such situations.

Nonprofit Corporations and Express AdvocacySection:2 U.S.C. 5441b

Recommendation: ln light of the decision of the U.SSupreme Court in FEC v. Massachusetts Citizensfor Life, lnc. (MCFL), the Commission recommendsthat Congress consider amending the provisionprohibiting corporate and labor spending in connec-tion with federal elections in order to incorporateinto the statute the text of the court's decision. Con-gress may also wish to include in the Act a defini-tion for the term "express advocacy."

Explanation; ln the Court's decision of December15, 1986, the Court held that the Act's prohibition oncorporate political expenditures was unconstitu-tional as applied to independent expenditures madeby a narrowly defined type of nonprofit corporation.The Court determined, however, that these non-profit corporations had to disclose some aspect oftheir financial activity-in particular, independentexpenditures exceeding $250 and identification ofpersons who contribute over $200 to help fundthese expenditures. The Court further ruled thatspending for political activity could, at some point,become the major purpose of the corporation, andthe organization would then become a politicalcom-mittee. The Court also indicated that the prohibition

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on corporate expenditures for communications isli mited to commu nications expenditures containingexpress advocacy.

Since the Court decision and subsequent relateddecisions (e.9., Ausfrn v. Michigan Chamber ofCommerce,494 U.S.652 (1990)), the Commissionhas concluded a rulemaking proceeding to imple-ment changes necessitated by the current case lawSee 60 FR 35293 (July 6, 1995). However, theCommission believes that statutory clarificationwould also be beneficial.

Congress should consider whether statutorychanges are needed: (1) to exempt independentexpenditures made by certain nonprofit corporationsfrom the statutory prohibition against corporate ex-penditures; (2) to specify the reporting requirementsfor these nonprofit corporations; and (3) to provide adefinition of express advocacy.

HonorariumSection: 2 U.S.C. $a31 (BXBXxiv)

Recom me ndation : The Commission recommendsthat Congress should make a technical amendment,deleting 2 U.S.C. $431(8)(B)(xiv), now contained in

a list of definitions of what is not a contribution.

Explanation; The 1976 amendments lo the FederalElection Campaign Act gave the Commission juris-diction over the acceptance of honoraria by all fed-eral officeholders and employees. 2 U.S.C. 5441i.ln 1991, the Legislative Branch Appropriations Actrepealed 5441i. As a result, the Commission has nojurisdiction over honorarium transactions takingplace after August 14, 1991, the effective date ofthe law.

To establish consistency within the Act, the Com-mission recommends that Congress make a techni-cal change to S431(BXBXxiv) deleting the referenceto honorarium as defined in former $441i. Thiswould delete honorarium from the list of definitionsof what is not a contribution.

Acceptance of Cash ContributionsSection:2 U.S.C. $4419

Recom me ndatio n : The Commission recommendsthat Congress modify the statute to make the treat-ment of 2 U.S.C. $4419, concerning cash contribu-tions, consistent with other provisions of the Act. Ascurrently drafted, 2 U.S.C. $4419 prohibits only themaking of cash contributions which, in the aggre-gate, exceed $100 per candidate, per election. ltdoes not address the issue of accepting cash contri-butions. Moreover, the current statutory languagedoes not plainly prohibit cash contributions in ex-cess of $100 to political committees other than au-thorized committees of a candidate.

Explanation; Currently this provision focuses onlyon persons making the cash contributions. How-ever, these cases generally come to light when acommittee has accepted these funds. Yet the Com-mission has no recourse with respect to the commit-tee in such cases. This can be a problem, particu-larly where primary matching funds are received onthe basis of such contributions.

While the Commission, in its regulations at 11 CFR110.4(c)(2), has included a provision requiring acommittee receiving such a cash contribution topromptly return the excess over $100, the statutedoes not explicitly make acceptance of these cashcontributions a violation. The other sections of theAct dealing with prohibited contributions (i.e.,

SS 441b on corporate and labor union contributions,441c on contributions by government contractors,441e on contributions by foreign nationals, and 441fon contributions in the name of another) all prohibitboth the making and accepting of such contribu-tions.

Secondly, the statutory text seems to suggest thatthe prohibition contained in $4419 applies only tothose contributions given to candidate committees.This language is at apparent odds with the Commis-sion's understanding of the Congressional purposeto prohibit any cash contributions which exceed$1OO in federal elections.

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Public Financing

Applicability of Title Vlto Recipients of Pay-ments from the Presidential Election GampaignFundSection:26 U.S.C. S$9006(b), 9008(bX3) and 9037

Recom mendation : -lhe Commission recommends

that Congress clarify that committees receivingpublic financing payments from the PresidentialElection Campaign Fund are exempt from thequirements of Title Vl of the Civil Rights Act of1964, as amended.

Explanation; This proposed amendment wasprompted by the decision of the U.S. District Couftfor the District of Columbia in Freedom Republi-cans, lnc., and Lugenia Gordon v. FEC,788 F.

Supp.600 (1992), vacated, No.92-5214 (D.C. Cir.January 18, 1994). The Freedom Republicans'complaint asked the district court to declare that theCommission has jurisdiction to regulate the nationalpafties' delegate selection process under Title Vl. ltalso requested the court to order the Commission toadopt such regulations, direct the Republican Partyto spend no more of the funds already received forits 1992 national nominating convention, and seekrefunds of moneys already disbursed if the Republi-can Party did not amend its delegate selection andapportionment process to comply with Title Vl. Thedistrict court found that the Commission "does havean obligation to promulgate rules and regulations toinsure the enforcement of Title Vl. The language ofTitle Vl is necessarily broad, and applies on its faceto the FEC as wellas to both major political partiesand other recipients of federalfunds." TSS F. Supp.at 601.

The Commission appealed this ruling on a numberof procedural and substantive grounds, includingthat Title Vl does not apply to the political parties'apportionment and selection of delegates to theirconventions. However, the court of appeals over-ruled the district court decision on one of the non-

substantive grounds, leaving the door open forother lawsuits involving the national nominatingconventions or other recipients of federalfundscertified by the Commission. No. 92-5214, slip op.at 15.

ln the Commission's opinion, First Amendment con-cerns and the legislative history of the public fund-ing campaign statutes strongly indicate that Con-gress did not intend Title Vl to permit the Commis-sion to dictate to the political parties how to selectcandidates or to regulate the campaigns of candi-dates for federal office. Nevertheless, the potentialexists for persons immediately prior to an election toinvoke Title Vl in the federal courts in a manner thatmight interfere with the parties' nominating processand the candidates' campaigns. The recommendedclarification would help forestall such a possibility.

For these reasons, Congress should consider add-ing the following language to the end of each publicfinancing provision cited above: "The acceptance ofsuch payments will not cause the recipient to beconducting a 'program or activity receiving federalfinancial assistance'as that term is used in Title Vlof the Civil Rights Act of 1964, as amended."

Enforcement of Nonwillful ViolationsSection:26 U.S.C. S$9012 and 9042

Reco mmendatio n : The Commission recommendsthat Congress consider amending the PresidentialElection Campaign Fund Act and the PresidentialPrimary Matching Payment Account Act to clarifythat the Commission has authority for civil enforce-ment of nonwillfulviolations (as well as willful viola-tions) of the public funding provisions.

Explanation; Section 9012 of the Presidential Elec-tion Campaign Fund Act and 59042 of the Presiden-tial Primary Matching Payment Account Act provideonly for "criminal penalties" for knowing and willfulviolations of the spending and contribution provi-sions and the failure of publicly funded candidatesto furnish all records requested by the Commission.The lack of a specific reference to nonwillfulviola-

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tions of these provisions has raised questions re-garding the Commission's ability to enforce theseprovisions through the civil enforcement process.

ln some limited areas, the Commission has invokedother statutes and other provisions in Title 26 tocarry out its civil enforcement of the public fundingprovisions. lt has relied, for example, on 2 U.S.C.$441a(b) to enforce the Presidential spending limits.Similarly, the Commission has used the candidateagreement and certification processes provided in26 U.S.C. 5$9003 and 9033 to enforce the spend-ing limits, the ban on private contributions, and therequirement to furnish records. Congress may wishto consider revising the public financing statutes toprovide explicit authority for civil enforcement ofthese provisions.

Contributions to Presidential Nominees WhoReceive Pubtic Funds in the General EtectionSection: 26 U.S.C. 59003

Recom me ndatio n : The Commission recommendsthat Congress clarify that the public financing stat-utes prohibit the making and acceptance of contri-butions (either direct or in-kind) to Presidential can-didates who receive full public funding in the gen-eral election.

Explanation; The Presidential Election CampaignFund Act prohibits a publicly financed general elec-tion candidate from accepting private contributionsto defray qualified campaign expenses. 26 U.S.C.S9003(bX2). The Act does not, however, contain aparallel prohibition against lhe making of these con-tributions. Congress should consider adding a sec-tion to 2 U.S.C. $441a to clarify that individuals andcommittees are prohibited from making these contri-butions.

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Miscellaneous

Ex Officio Members of Federal ElectionCommissionSection: 2 U.S.C. S437c(aX1 )

Recom mendation : The Commission recommendsthat Congress amend section 437cby removing theSecretary of the Senate, the Clerk of the House,and their designees f rom the list of the members ofthe Federal Election Commission.

Explanation: ln 1993, the U.S. Court of Appeals forthe District of Columbia ruled that the ex officiomembership of the Secretary of the Senate and theClerk of the House on the Federal Election Com-mission was unconstitutional. (FEC v. NRA PoliticalVictory Fund,6 F.3d 821 (D.C. Cir. 1993), ced.dismissed for want of jurisdiction, 115 S. Ct. 537(1216/94).) This decision was left in place when theSupreme Court dismissed the FEC's appeal on thegrounds that the FEC lacks standing to indepen-dently bring a case under Title 2.

As a result of the appeals court decision, the FECreconstituted itself as a six-member body whosemembers are appointed by lhe President and con-firmed by the Senate. Congress should accordinglyamend the Act to reflect the appeals court's deci-sion by removing the references to the ex officiomembers from section 437c.