[Federal Register Volume 78, Number 85 (Thursday, May 2, 2013)]
[Proposed Rules]
[Pages 25635-25638]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-10326]
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FEDERAL ELECTION COMMISSION
11 CFR Chapter I
[Notice 2013-07]
Technological Modernization
AGENCY: Federal Election Commission.
ACTION: Advance Notice of Proposed Rulemaking.
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SUMMARY: The Federal Election Commission requests comments on whether
to begin a rulemaking to revise its regulations in 11 CFR chapter I to
address contributions and expenditures made by electronic means, such
as by credit card, debit card, Internet-based payment processing, and
text messaging; to eliminate or update references to outdated
technologies; and similar issues. The Commission intends to review the
comments received as it decides what revisions, if any, it will propose
making to its rules.
DATES: Comments must be received on or before June 3, 2013. The
Commission will determine at a later date whether to hold a public
hearing on this Notice. If a hearing is to be held, the Commission will
publish a notice in the Federal Register announcing the date and time
of the hearing.
ADDRESSES: All comments must be in writing. Comments may be submitted
electronically via the Commission's Web site at http://www.fec.gov/fosers, reference REG 2013-01. Commenters are encouraged to submit
comments electronically to ensure timely receipt and consideration.
Alternatively, comments may be submitted in paper form. Paper comments
must be sent to the Federal Election Commission, Attn.: Amy L.
Rothstein, Assistant General Counsel, 999 E Street, NW., Washington, DC
20463. All comments must include the full name and postal service
address of a commenter, and of each commenter if filed jointly, or they
will not be considered. The Commission will post comments on its Web
site at the conclusion of the comment period.
FOR FURTHER INFORMATION CONTACT: Ms. Amy L. Rothstein, Assistant
General Counsel, or Ms. Jessica Selinkoff, Attorney, 999 E Street NW.,
Washington, DC 20463, (202) 694-1650 or (800) 424-9530.
SUPPLEMENTARY INFORMATION: The Federal Election Commission is
publishing this Advance Notice of Proposed Rulemaking to obtain
comments on whether to revise its regulations at 11 CFR chapter I to
address electronic transactions. Specifically, the Commission is
considering whether to update its regulations to reflect electronic
transactions, such as those made by debit cards, credit cards, gift
cards, Internet-based payment processing, and online banking.\1\ Such a
rulemaking could address the receipt, deposit, accounting,
recordkeeping, reporting, redesignation, and reattribution of
electronic transactions, as well as matching funds, conduit activity,
and contributions by text message. The Commission is also considering
whether to revise its regulations by eliminating or updating references
to outmoded technologies such as telegrams and fax machines.
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\1\ See Rulemaking Priorities for 2012, Agenda Doc. 12-40 (May
24, 2012), http://www.fec.gov/agenda/2012/mtgdoc_1240.pdf.
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As a general matter, the Commission seeks to ensure that the
regulated community is able to take advantage of evolving technological
innovations, while ensuring that the use of the technology is
consistent with the Federal Election Campaign Act, 2 U.S.C. 431 et
seq., as amended, (``the Act'') as well as the Presidential Election
Campaign Fund Act, 26 U.S.C. 9001 et seq., and the Presidential Primary
Matching Payment Account Act, 26 U.S.C. 9031 et seq. (collectively,
``Chapters 95 and 96 of Title 26''). More specifically, here the
Commission invites comments on whether and how it should update its
regulations to take into account electronic transactions in a manner
that provides sufficient guidance to the regulated community while
reducing the need for serial revisions to reflect new and emerging
technologies. Should regulations identify specific, approved means of
engaging in electronic transactions? Or should regulations provide only
general standards or criteria? Would the latter approach increase the
risk of corruption, abuse, or circumvention of the Act, or Chapters 95
and 96 of Title 26, that may not be present with a bright-line rule
that is less technologically flexible?
1. Updating Outmoded Regulations
The Commission is considering whether it should update its
regulations to reflect recent technological advances. For example,
certain regulations refer to technologies that are obsolete or seldom
used today, such as a ``telegram'' (11
[[Page 25636]]
CFR 104.6(c)(1)); ``typewriters'' (11 CFR 114.9(d)); and a ``carbon
copy'' of a check (11 CFR 102.9(b)(2)(iii)). Other regulations refer to
technologies now used only in limited circumstances, such as microfilm,
facsimiles and computer tape. See, e.g., 11 CFR 105.5 (microfilm copies
provided by the Secretary of the Senate), 108.6 (microfilm or facsimile
copies maintained by State officers). How should the Commission
consider addressing these references to seldom used or obsolete
technologies? What other, similar technological references in 11 CFR
chapter I should the Commission consider updating or addressing in a
rulemaking?
Several regulations refer to ``writing,'' ``signature,'' and
``printing'' requirements. The Commission is considering whether it
should revisit these requirements to address electronic documents and
records. For example, Commission regulations provide a means for a
contributor to redesignate a contribution in ``a writing, signed by the
contributor.'' 11 CFR 110.1(b), 110.2(b); see also 11 CFR 110.1(f)
(designations), 110.1(k) (joint contributions and reattributions).
Other regulations require documents to be ``signed'' before being filed
with the Commission, without explicitly providing for the possibility
of electronic signatures. See, e.g., 11 CFR 111.4 (submission of
complaints), 111.23 (designation of counsel), 300.37(d) (certifications
by certain tax-exempt organizations). And some regulations apply to
``printed'' documents and communications without expressly addressing
whether an electronic communication or an attachment to an electronic
message, such as a portable document file or ``PDF,'' is ``printed.''
See, e.g., 11 CFR 104.7 (``best efforts''), 110.11(c)(2) (disclaimers
for printed communications). The Commission invites comments on whether
and, if so, how it should consider updating these provisions.
Previously, the Commission concluded that a particular method of
obtaining redesignations of contributions through a combination of
electronic and traditional means met the written signature requirements
in the redesignation provisions at 11 CFR 110.1(b)(5) and 110.2(b)(5),
because that method ``provides a level of assurance as to the
contributor's identity and intent comparable to that of a written
signature.'' \2\ At the same time, the Commission encouraged the use of
innovations in technology to effectuate electronic redesignations and
stated that it would consider, on a case-by-case basis, other methods
of electronic redesignation.\3\ If the Commission decides to revise the
redesignation regulations to include electronic redesigations, what
other methods should it consider? How should the Commission revise the
redesignation rules and other regulations that require ``writings'' or
signatures in order to minimize the need for serial revisions to adapt
to new and emerging technologies?
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\2\ See Interpretive Rule Regarding Electronic Contributor
Redesignations, 76 FR 16233 (Mar. 23, 2011), available at http://www.fec.gov/law/cfr/ej_compilation/2011/notice_2011-02.pdf.
\3\ Id.
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The Commission is also considering whether to revise regulations
that require certain communications to be mailed or hand-delivered to
the Commission without providing for the possibility of electronic
transmission. See, e.g., 11 CFR 1.3 (Privacy Act requests), 112.1(e)
(advisory opinion requests). Should the Commission update these
regulations in light of current technology? If so, how?
2. Providing for Electronic Contributions and Transactions
The Act, Chapters 95 and 96 of Title 26, and Commission regulations
generally refer to contributions by cash or check and to disbursements
by check or draft without taking into account electronic transactions.
Yet, according to the most recent triennial study conducted by the
Federal Reserve System, payments by check have been decreasing and the
``number of noncash payments in the United States . . . increased at a
compound annual rate of 4.6 percent'' from 2006 to 2009.\4\ Electronic
payments--that is, payments made by debit cards; credit cards;
automated clearinghouses; and prepaid debit, credit, banking, and gift
cards--``collectively exceed three-quarters of all noncash payments''
in the United States.\5\
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\4\ Federal Reserve System, 2010 Federal Reserve Payments Study:
Noncash Payment Trends in the United States: 2006-2009 4 (Apr. 5,
2011), available at www.frbservices.org/files/communications/pdf/press/2010_payments_study.pdf.
\5\ Id.
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Consistent with this trend, people increasingly use electronic
means to contribute to political committees. A series of studies by the
Pew Research Center of the 2006, 2008, and 2010 elections shows that
the number of Internet users who make online contributions to
candidates is increasing.\6\ And among adults who donated to
presidential candidates in the 2012 election, 50 percent donated online
or via email.\7\ As of September 2012--only a few months after the
Commission had approved the use of text messaging to make
contributions--ten percent of those who made contributions in the
presidential race did so by ``text message from a cell phone or cell
phone app.'' \8\
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\6\ See, e.g., Aaron Smith, Pew Internet and American Life
Project, The Internet and Campaign 2010 21 (Mar. 17, 2011),
available at http://www.pewinternet.org/~/media//Files/Reports/2011/
Internet%20and%20Campaign%202010.pdf (finding that online
contributions increased from three percent in the 2006 mid-term
elections to four percent in 2010); Aaron Smith, Pew Internet and
American Life Project, The Internet's Role in Campaign 2008 38-39
(Apr. 15, 2009), available at http://www.pewinternet.org/~/media//
Files/Reports/2009/The--Internets--Role--in--Campaign--2008.pdf
(showing that nine percent made online contributions).
\7\ Aaron Smith & Maeve Duggan, Pew Internet and American Life
Project, Presidential Campaign Donations in the Digital Age (Oct.
25, 2012), available at http://www.pewinternet.org/~/media/Files/
Reports/2012/PIP--State--of--the--2012--race--donations.pdf (finding
further that 67 percent donated in person, over the telephone, or
through the mail).
\8\ Id.
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a. General Industry Practice
In light of these trends, the Commission is considering whether and
how to revise its regulations to address electronic contributions and
other transactions. As a preliminary matter, the Commission seeks
information on general industry practice. How are commercial and
consumer electronic transactions conducted generally? What are the
industry standards, practices, and safeguards? How do vendors and
third-party payment processors, such as PayPal, verify the payer's
identity and attribute payments made by credit card? What types and
forms of information are typically collected and maintained? What are
the standard practices of third-party payment processors, such as
PayPal or Square? What are the intermediate steps in processing
electronic transactions? Do vendors or third-party payment processors
typically process multiple recipients' funds through merchant accounts?
What are the general timeframes for each step of these electronic
processes? What are typical accounting practices with regard to
merchant accounts? How do these practices differ, if at all, for
prepaid debit, credit, banking and gift card transactions? How might
practices change in light of emerging technologies? Are there other
forms of electronic payment--such as by electronic wallet or swipe,\9\
P2P (or
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person to person) platform,\10\ mobile app, or Twitter hashtag \11\--
that the Commission should consider if it decides to revise its rules?
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\9\ See, e.g., Tara Siegel Bernard & Claire Cain Miller, Swiping
Is the Easy Part, N.Y. Times, Mar. 24, 2011, at B1, available at
http://www.nytimes.com/2011/03/24/technology/24wallet.html?_r=0.
\10\ See, e.g., Fed. Fin. Inst. Examination Council, Online
Person-to-person (P2P), Account-to-Account Payments and Electronic
Cash, IT Examination HandBook InfoBase, http://ithandbook.ffiec.gov/it-booklets/retail-payment-systems/payment-instruments,-clearing,-and-settlement/card-based-electronic-payments/online-person-to-person-(p2p),-account-to-account-(a2a)-payments-and-electronic-
cash.aspx (last visited Feb. 26, 2013).
\11\ See, e.g., Heather Kelly, Twitter and Amex to Let You Pay
with a Hashtag, CNN (Feb. 12, 2013), http://www.cnn.com/2013/02/11/tech/social-media/twitter-hashtag-purchases; see also https://chirpify.com/ (social media purchase platform).
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b. Political Committee Practice
The Commission also seeks information on how political committees
receive electronic contributions. Do political committees' practices
differ from general commercial industry standards and practices? If so,
how do they differ? Are political committees' practices comparable to
those of nonprofit organizations that receive electronic donations at
the Federal, State, or local level? What legal or practical
considerations or constraints drive any such differences? What role, if
any, should commercial industry standards and practices play in the
Commission's consideration of requirements for electronic contributions
received by political committees?
The Commission also seeks information on recordkeeping practices
for electronic transactions. Commission regulations require political
committees to maintain records of contributions and disbursements in
ways that do not explicitly account for electronic transactions. See,
e.g., 11 CFR 102.9(a)(4) (requiring a ``photocopy of each check or
written instrument or a digital image of each check or written
instrument''), 102.9(b)(2) (requiring records such as cancelled checks,
receipts, and carbon copies for disbursements over $200). Although the
Commission has interpreted its recordkeeping regulations in the context
of electronic transactions,\12\ should the Commission revise these
regulations to address expressly recordkeeping requirements for
electronic transactions, such as, for example, requiring political
committees that receive credit card contributions to maintain records
with cardholders' names and credit card numbers? See, e.g., 11 CFR
9034.2(b) (requirements for credit card contributions eligible for
matching funds). Would this requirement be consistent with current
industry practices? Would it need to be updated periodically to reflect
changing technology? What should the recordkeeping requirements be for
contributions made by prepaid debit, credit, banking and gift cards?
Should the regulations take a less specific approach, like that in 11
CFR 104.14(b), which requires records to ``provide in sufficient detail
the necessary information and data from which the filed reports and
statements may be verified, explained, clarified, and checked for
accuracy and completeness''? Alternatively, are the current rules
flexible enough to account for electronic recordkeeping practices
without being revised?
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\12\ See Advisory Opinion 1995-09 (NewtWatch) (approving a
proposal to maintain records supporting electronic fund transfers);
Advisory Opinion 1993-04 (Cox); Advisory Opinion 1994-40 (Alliance
for American Leadership); see also Federal Election Commission,
Campaign Guide: Congressional Candidates and Committees 75-76 (Aug.
2011), available at http://www.fec.gov/pdf/candgui.pdf (describing
recordkeeping for credit card disbursements).
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Other recordkeeping considerations that arise in the context of
electronic transactions relate to the use of merchant accounts. The Act
and Commission regulations require all receipts to be deposited into a
political committee's campaign depository account within ten days of
receipt. 2 USC 432(h)(1); 11 CFR 103.3(a); see also 11 CFR
102.2(a)(1)(vi) (disclosure of campaign depositories). Although the
Commission has previously opined on the treatment of merchant accounts
in specific factual situations,\13\ the Commission seeks information on
the current uses of merchant accounts by political committees. Do
contributions to political committees made via credit card or other
electronic means customarily pass through a merchant account before
being deposited by the committees in their campaign depositories?
Should merchant accounts themselves be considered campaign
depositories? Why or why not? How can an electronic contribution that
is processed through a merchant account containing funds designated for
multiple recipients be traced for recordkeeping, disclosure and audit
purposes in a manner that provides assurances comparable to a ``paper
trail''? \14\
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\13\ See, e.g., Advisory Opinion 1999-22 (Aristotle Publishing)
(concluding that political committees receiving credit card
contributions through merchant account should disclose that account
as a campaign depository).
\14\ See, e.g., Advisory Opinion 1993-04 (Cox), n. 2 (discussing
recordkeeping and ``paper trails''); Advisory Opinion 1999-22
(Aristotle Publishing) (approving a vendor's use of a single
merchant ID to process contributions subsequently forwarded to
multiple political committees).
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In several recent advisory opinions, the Commission has addressed
electronic contributions to political committees that are processed by
incorporated commercial vendors or payment processors. In some of these
opinions, the Commission concluded that the transaction was permissible
under 11 CFR 110.6, which prohibits corporations from acting as
conduits or intermediaries, because the corporation was acting as a
vendor to the political committee recipient.\15\ In other advisory
opinions, the Commission concluded that the transaction was permissible
because the corporations were providing services to the
contributors.\16\ Most recently, the Commission explained that some
contributions made through electronic payment processors were not
subject to 11 CFR 110.6 because they were not contributions to an
intermediary earmarked for a candidate.\17\ Should the Commission
consider revising its regulations at 11 CFR 110.6 to address electronic
contributions processed by incorporated commercial vendors and payment
processors? If so, what approach should the regulations take? Should
the regulations also address how to treat fees paid to commercial
vendors and payment processors to process electronic contributions?
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\15\ Advisory Opinion 2007-04 (Atlatl); Advisory Opinion 2004-19
(DollarVote); see also Advisory Opinion 2012-09 (Points for
Politics).
\16\ Advisory Opinion 2011-06 (Democracy Engine); Advisory
Opinion 2006-08 (Brooks); see also Advisory Opinion 2011-19
(GivingSphere).
\17\ Advisory Opinion 2012-22 (skimmerhat); but see Advisory
Opinion Request 2012-08 (Repledge) (no advisory opinion issued).
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Other regulations that do not expressly address electronic
contributions also have been interpreted by the Commission to apply to
electronic transactions. In Advisory Opinion 1990-04 (American
Veterinary Medical Association), for example, the Commission approved
credit card transactions under 11 CFR 102.6, which addresses combined
payments of contributions and dues by check. The Commission also has
construed 11 CFR 102.8, which applies when a contribution is received,
and 11 CFR 110.1(b)(6) and 110.2(b)(6), which describe when a
contribution is made, in the context of electronic contributions.\18\
Should the Commission
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revise these regulations to address electronic contributions expressly?
If so, should the regulations take the same approach as those taken
previously? If not, why not, and what approach should they take
instead?
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\18\ Advisory Opinion 2012-35 (Global Transaction Services
Group, Inc.); Advisory Opinion 2008-08 (Zucker); see also Advisory
Opinion 2012-26 (Cooper for Congress, ArmourMedia, Inc., and m-Qube,
Inc.); Advisory Opinion 2012-09 (Points for Politics); Federal
Election Commission, Campaign Guide: Congressional Candidates and
Committees 23, 74 (Aug. 2011), available at http://www.fec.gov/pdf/candgui.pdf (describing when a credit card contribution is
``received'').
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Recently, the Commission approved the use of text messaging to
process contributions in a series of advisory opinions.\19\ Should the
Commission amend its regulations to address contributions made by text
message? If so, should the regulations take the same approach as the
advisory opinions? Should any revised regulations also address issues
that were not addressed in the advisory opinions, such as how political
committees should report the receipt of contributions made by text
message? What related issues should the Commission address?
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\19\ See Advisory Opinion 2012-17 (Red Blue T LLC, ArmourMedia,
Inc., and m-Qube, Inc.); Advisory Opinion 2012-26 (Cooper for
Congress, ArmourMedia, Inc., and m-Qube, Inc.); Advisory Opinion
2012-28 (CTIA--The Wireless Association); Advisory Opinion 2012-30
(Revolution Messaging, LLC); Advisory Opinion 2012-31 (AT&T Inc.).
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The Commission is also considering whether and, if so, how to
revise the paper-oriented definitions of ``money'' and determinations
of ``disbursement'' in its regulations. For example, the regulatory
definition of ``contribution'' defines ``money'' as ``currency * * *,
checks, money orders, or any other negotiable instruments payable on
demand.'' 11 CFR 100.52(c); see also 11 CFR 100.111(d) (similarly
defining ``money'' in the definition of ``expenditure''), 102.10
(requiring disbursements to be made by check or ``similar draft'' drawn
on accounts established at the committee's campaign depository). In
several advisory opinions, the Commission has interpreted the term
``similar draft'' to include electronic disbursements.\20\ Should the
Commission revise its regulations to provide expressly that
contributions, expenditures, and disbursements include funds
transferred electronically? Should any revised regulations take the
same approach as the advisory opinions? If not, why not, and what
approach should they take instead?
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\20\ See, e.g., Advisory Opinion 1993-04 (Cox) (approving a
``computer driven billpayer service'' that included the disbursement
of funds by electronic transfer); Advisory Opinion 1982-25 (Sigmund)
(concluding that a wire transfer qualifies as a ``similar draft'').
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Finally, the Commission is considering whether to revise its
regulations that expressly apply only to cash contributions so that
they also expressly apply to certain electronic contributions. For
example, cash contributions in excess of $100 are prohibited. 11 CFR
110.4. The Commission seeks comments on whether prepaid debit, credit,
banking, and gift cards are functionally the same as cash. If so,
should the regulation be revised to prohibit contributions in excess of
$100 made by prepaid debit, credit, banking, and gift cards? If not,
why not?
c. Rulemaking vs. Other Guidance
The Commission seeks comments on whether a rulemaking is the best
way for it to address questions raised by the receipt of electronic
contributions, and the making of electronic disbursements, by political
committees. As noted above, the Commission to date has provided
guidance on electronic transactions largely through advisory opinions,
interpretive rules, and campaign guides. Are these the best ways for
the Commission to provide guidance on the subject in light of rapidly
evolving technologies, or would rules on the subject also be helpful?
How should the Commission craft regulations in order to minimize the
need for serial revisions in the face of new and emerging technologies?
Given the speed at which technology has been advancing, the Commission
welcomes comments suggesting general regulatory criteria or standards
that are flexible and adaptable enough to apply to new or emerging
technology or business arrangements.
3. Other Electronic Modernization Issues
The Commission welcomes comments, including any pertinent data,
concerning any electronic modernization issues that are not addressed
in this notice and that relate to the Commission's administration of
the Act or Chapters 95 and 96 of Title 26.
Dated: April 25, 2013.
On behalf of the Commission.
Ellen L. Weintraub,
Chair, Federal Election Commission.
[FR Doc. 2013-10326 Filed 5-1-13; 8:45 am]
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