[Federal Register: November 17, 2005 (Volume 70, Number 221)]
[Rules and Regulations]
[Page 69631-69633]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr17no05-1]
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Rules and Regulations
Federal Register
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[[Page 69631]]
FEDERAL ELECTION COMMISSION
11 CFR Part 300
[Notice 2005-26]
$5,000 Exemption for Disbursements of Levin Funds by State,
District, and Local Party Committees and Organizations
AGENCY: Federal Election Commission.
ACTION: Final rule.
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SUMMARY: The Federal Election Commission is eliminating from its
regulations an exemption allowing State, district, and local committees
and organizations of a political party to use only Levin funds to pay
for certain types of Federal election activity aggregating $5,000 or
less in a calendar year. In Shays v. FEC, the District Court
invalidated the exemption and remanded the regulation to the Commission
for further action consistent with the court's opinion. The Commission
appealed this ruling, and the Court of Appeals for the D.C. Circuit
affirmed the District Court's decision. The repeal of this rule means
that State, district, and local political party committees and
organizations must pay for these specific types of Federal election
activity either entirely with Federal funds, or with a mix of Federal
funds and Levin funds. Further information is provided in the
supplementary information that follows.
DATES: The rules at 11 CFR 300.32(c)(4) are effective on December 19,
2005.
FOR FURTHER INFORMATION CONTACT: Mr. Brad C. Deutsch, Assistant General
Counsel, or Ms. Cheryl A.F. Hemsley, Attorney, 999 E Street, NW.,
Washington, DC 20463, (202) 694-1650 or (800) 424-9530.
SUPPLEMENTARY INFORMATION: The Commission issued a Notice of Proposed
Rulemaking (``NPRM'') proposing to eliminate from its regulations at 11
CFR 300.32(c)(4) an exemption that had allowed State, district, and
local committees of a political party \1\ to pay for certain types of
Federal election activity (``FEA'') \2\ aggregating $5,000 or less in a
calendar year entirely with Levin funds \3\ (``$5,000 Exemption''). The
NPRM also requested comments on the possibility of creating a new,
restructured exemption. The NPRM was published in the Federal Register
on February 2, 2005. 70 FR 5385 (February 2, 2005). The comment period
closed on March 4, 2005. The Commission received five comments from ten
commenters on the proposed rules.\4\ Eight commenters favored
elimination of the $5,000 Exemption and one commenter favored
maintaining the $5,000 Exemption. Additionally, the Commission received
a comment from the Internal Revenue Service, indicating ``the proposed
rules do not pose a conflict with the Internal Revenue Code or the
regulations thereunder.'' The Commission is issuing final rules
eliminating the $5,000 Exemption and is declining to adopt a
restructured exemption.
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\1\ In addition to political party committees, these regulations
are equally applicable to State, district, and local party
organizations that do not qualify as political committees. See 11
CFR 300.33(a)(1) and (2).
\2\ There are four types of FEA: Type 1--Voter registration
activity during the period that begins on the date that is 120 days
before a regularly scheduled Federal election is held and ends on
the date of the election; Type 2--Voter identification, get-out-the-
vote activity, or generic campaign activity conducted in connection
with an election in which a candidate for Federal office appears on
the ballot; Type 3--A public communication that promotes or
supports, or attacks or opposes a clearly identified candidate for
Federal office; and Type 4--Services provided during any month by an
employee of a State, district, or local committee of a political
party who spends more than 25 percent of his or her compensated time
during that month on activities in connection with a Federal
election. See 2 U.S.C. 431(20) and 11 CFR 100.24.
\3\ Levin funds are funds that are raised by State, district, or
local party committees and organizations pursuant to the
restrictions in 11 CFR 300.31 and disbursed subject to the
restrictions in 11 CFR 300.32. See 11 CFR 300.2(i).
\4\ All comments on the NPRM are available at http://www.fec.gov/law/law_rulemakings.shtml#levin
.
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Under the Administrative Procedure Act, 5 U.S.C. 553(d), and the
Congressional Review of Agency Rulemaking Act, 5 U.S.C. 801(a)(1),
agencies must submit final rules to the Speaker of the House of
Representatives and the President of the Senate and publish them in the
Federal Register at least 30 calendar days before they take effect. The
final rule that follows was transmitted to Congress on November 10,
2005.
Explanation and Justification
11 CFR 300.32(c)--Conditions and Restrictions on Spending Levin Funds
The Bipartisan Campaign Reform Act of 2002 (``BCRA''), Pub. L. 107-
155, 116 Stat. 81 (2002), amended the Federal Election Campaign Act of
1971 (the ``Act''), 2 U.S.C. 431 et seq., in many respects. Section
441i(b)(1) of the Act, as added by BCRA, provides that State, district,
and local political party committees generally must use Federal funds
\5\ to pay for FEA. However, the Levin Amendment (2 U.S.C. 441i(b)(2))
provides an exception for two types of FEA, for which State, district,
and local political party committees may allocate disbursements between
Federal funds and Levin funds in accordance with allocation ratios
determined by the Commission. 2 U.S.C. 441i(b)(2); see also 11 CFR
300.2(i), 300.32, and 300.33. Types 1 and 2 FEA, which involve certain
voter registration, get-out-the-vote, voter identification, and generic
campaign activity, are allocable between Federal and Levin funds, so
long as the activities do not refer to a clearly identified Federal
candidate (``allocable Type 1&2 FEA''). See 2 U.S.C. 441i(b)(2)(B)(i)
and 11 CFR 300.32(c).
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\5\ ``Federal funds'' are funds that comply with the limits,
prohibitions, and reporting requirements of the Act. See 11 CFR
300.2(g).
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In 2002, the Commission promulgated regulations at 11 CFR Part 300
implementing BCRA. See Final Rules and Explanation and Justification
for Prohibited and Excessive Contributions; Non-Federal Funds or Soft
Money, 67 FR 49064 (July 29, 2002). Specifically, 11 CFR 300.32(c)(4)
required any State, district, or local committee or organization of a
political party that disburses more than $5,000 for allocable Type 1&2
FEA in a calendar year either to pay for such allocable FEA entirely
with Federal funds or to allocate the disbursements between Federal
funds and Levin funds. The same provision also created a ``de minimis
exemption'' for any State, district, or local party committee or
organization whose disbursements for allocable Type 1&2 FEA aggregate
$5,000 or less in a
[[Page 69632]]
calendar year, thereby permitting such party committees and
organizations to pay for these expenses entirely with Levin funds.
The $5,000 Exemption was one of several regulations at issue in
Shays v. FEC, 337 F.Supp.2d 28 (D.D.C. 2004) (``Shays District''),
aff'd, 414 F.3d 76 (D.C. Cir. July 15, 2005) (``Shays Appeal''), reh'g
en banc denied (October 21, 2005) (No. 04-5352). The District Court in
Shays District held that the $5,000 Exemption in 11 CFR 300.32(c)(4)
was inconsistent with Congress's intent, as expressed in BCRA, to
require State, district, and local party committees to pay for
allocable Type 1&2 FEA either solely with Federal funds or with an
allocated mix of Federal funds and Levin funds. Shays District at 114-
17.
The Commission appealed the District Court's ruling regarding
several of its regulations, including 11 CFR 300.32(c)(4). On July 15,
2005, the Court of Appeals for the D.C. Circuit affirmed the District
Court's invalidation of the $5,000 Exemption. Shays Appeal at 115. In
affirming the District Court's invalidation of the $5,000 Exemption,
the Court of Appeals concluded that the Commission had failed to
establish that the $5,000 Exemption was ``in fact de minimis.'' Shays
Appeal at 114. The Court of Appeals also concluded that because
Congress had exercised its judgment in enacting the Levin Amendment,
``Congress's rationale for including activities in the Levin Amendment
obviously affords no justification for excluding them from Levin
allocation, the very form of regulation Congress chose.'' Id. (emphasis
in original).
The NPRM proposed to eliminate entirely the $5,000 Exemption in 11
CFR 300.32(c)(4). In response to the NPRM, eight commenters urged the
Commission to eliminate the $5,000 Exemption altogether. These
commenters stated that BCRA was clear on its face and argued that the
Levin Amendment itself reflected Congress's narrowly-drawn exception
allowing State, district, and local party committees to use only
Federal funds or to allocate between Federal and Levin funds for
allocable Type 1&2 FEA. Four of the commenters noted that the Levin
Amendment was, itself, a compromise reached during Congressional
deliberation. These commenters asserted that Congress had contemplated
that Levin funds always would be used in combination with Federal funds
for allocable Type 1&2 FEA, recognizing that FEA activities influence
Federal elections.
On the other hand, one commenter favored retaining the $5,000
Exemption, stating that the exemption did not undermine Congressional
intent. Specifically, this commenter asserted that absent the $5,000
Exemption, a strict application of the Levin Amendment would lead to
suppression of ``local grassroots activity in favor of non-party or
large institutional party activity'' and that this was ``an unlikely
objective'' for Congress.
1. Elimination of the Current $5,000 Exemption. In light of the
conclusions reached by the Court of Appeals in Shays Appeal, which
precluded retaining the current rule, the Commission has decided to
eliminate the $5,000 Exemption from paragraph (c)(4) of section 300.32.
Thus, revised paragraph (c)(4) requires State, district, and local
committees and organizations of political parties to pay for all
allocable Type 1&2 FEA either entirely with Federal funds or with an
allocated mix of Federal funds and Levin funds, without regard to the
total amount of their annual disbursements. The wording of revised 11
CFR 300.32(c)(4) also includes a conforming revision that replaces the
word ``may'' with ``must'' to reflect unambiguously that State,
district, and local party committees and organizations must choose
between paying for such expenditures either entirely with Federal funds
or with an allocated mix of Federal funds and Levin funds.
2. Rejection of a Restructured Exemption. As noted above, the NPRM
also requested comments on a possible restructuring of the exemption in
section 300.32(c)(4) to mirror the reporting exception contained in
section 434(e)(2)(A) of the Act, which exempts State, district, and
local party committees from reporting FEA if they have combined
receipts and disbursements for FEA (whether allocable or not) that
together aggregate to less than $5,000 in a calendar year. Seven
commenters addressed the restructuring proposal, all of them asserting
that any restructured exemption would be contrary to Congressional
intent.
As discussed above, the Court of Appeals held that the careful
balance already reflected in the Levin Amendment represents Congress's
exercise of its judgment, and effectively precludes the Commission from
promulgating a further exemption unless such an exemption were ``truly
de minimis.'' Shays Appeal at 114. In light of the comments received in
this rulemaking and the decision of the Court of Appeals, the
Commission has decided not to adopt the restructuring proposal
contained in the NPRM.
Certification of No Effect Pursuant to 5 U.S.C. 605(b) Regulatory
Flexibility Act
The Commission certifies that the attached final rule does not have
a significant economic impact on a substantial number of small
entities. The basis for this certification is that the organizations
affected by this final rule are State, district, and local party
committees and organizations, which are not ``small entities'' under 5
U.S.C. 601. These not-for-profit committees do not meet the definition
of ``small organization,'' which requires that the enterprise be
independently owned and operated and not dominant in its field. 5
U.S.C. 601(4). State political party committees are not independently
owned and operated because they are not financed and controlled by a
small identifiable group of individuals, and they are affiliated with
the larger national political party organizations. In addition, the
State political party committees representing the Democratic and
Republican parties have a major controlling influence within the
political arena of their State and are thus dominant in their field.
District and local party committees are generally considered affiliated
with the State committees and need not be considered separately. To the
extent that any State party committees representing minor political
parties might be considered ``small organizations,'' the number
affected by this final rule is not substantial.
List of Subjects in 11 CFR Part 300
Campaign funds, Nonprofit organizations, Political candidates,
Political committees and parties, Reporting and recordkeeping
requirements.
0
For the reasons set out in the preamble, the Federal Election
Commission is amending Subchapter C of Chapter I of Title 11 of the
Code of Federal Regulations as follows:
PART 300--NON-FEDERAL FUNDS
0
1. The authority citation for Part 300 continues to read as follows:
Authority: 2 U.S.C. 434(e), 438(a)(8), 441a(a), 441i, 453.
0
2. Section 300.32 is amended by revising paragraph (c)(4) to read as
follows:
Sec. 300.32 Expenditures and disbursements.
* * * * *
(c) Conditions and restrictions on spending Levin funds. * * *
[[Page 69633]]
(4) The disbursements for allocable Federal election activity must
be paid for either entirely with Federal funds or by allocating between
Federal funds and Levin funds according to 11 CFR 300.33.
* * * * *
Dated: November 10, 2005.
Scott E. Thomas,
Chairman, Federal Election Commission.
[FR Doc. 05-22778 Filed 11-16-05; 8:45 am]
BILLING CODE 6715-01-P