[Federal Register Volume 67, Number 223 (Tuesday, November 19, 2002)]
[Rules and Regulations]
[Pages 69927-69950]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-28886]



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Part IV





Federal Election Commission





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11 CFR Parts 102 and 110



Contribution Limitations and Prohibitions; Final Rule

Federal Register / Vol. 67, No. 223 / Tuesday, November 19, 2002 / 
Rules and Regulations

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FEDERAL ELECTION COMMISSION

11 CFR Parts 102 and 110

[Notice 2002-22]


Contribution Limitations and Prohibitions

AGENCY: Federal Election Commission.

ACTION: Final rules and transmittal of regulations to Congress.

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SUMMARY: The Federal Election Commission is issuing these final rules 
to implement amendments made by the Bipartisan Campaign Reform Act of 
2002 (``BCRA'') to the contribution limitations and prohibitions of the 
Federal Election Campaign Act of 1971, as amended (``FECA'' or ``the 
Act''). These rules increase the limits on contributions made by 
individuals and political committees; index certain contribution limits 
for inflation; prohibit contributions by minors to candidates, 
authorized committees and committees of political parties and donations 
by minors to committees of political parties; and prohibit 
contributions, donations, expenditures, independent expenditures and 
disbursements by foreign nationals. These rules also revise the 
Commission's rules for designating contributions to particular 
elections and attributing contributions to particular donors. Further 
information is provided in the Supplementary Information that follows.

EFFECTIVE DATE: January 1, 2003.

FOR FURTHER INFORMATION CONTACT: Ms. Mai T. Dinh, Acting Assistant 
General Counsel, Mr. J. Duane Pugh, Acting Special Assistant General 
Counsel (redesignations and reattributions), or Attorneys Mr. Michael 
G. Marinelli (contribution limitations), Ms. Dawn M. Odrowski 
(contributions by minors) or Ms. Anne A. Weissenborn (foreign 
nationals), 999 E Street, NW., Washington, DC 20463, (202) 694-1650 or 
(800) 424-9530.

SUPPLEMENTARY INFORMATION: The Bipartisan Campaign Reform Act of 2002, 
Public Law 107-155, 116 Stat. 81 (Mar. 27, 2002), contains extensive 
and detailed amendments to the Federal Election Campaign Act of 1971, 
as amended, 2 U.S.C. 431 et seq. This is one of a series of rulemakings 
the Commission is undertaking to implement the provisions of BCRA.
    Section 402(c)(1) of BCRA establishes a general deadline of 270 
days for the Commission to promulgate regulations to carry out BCRA. 
The President of the United States signed BCRA into law on March 27, 
2002, so the 270-day deadline is December 22, 2002.
    Because of the brief period before the deadline for promulgating 
these rules, the Commission received and considered public comments 
expeditiously. The Notice of Proposed Rulemaking (``NPRM'') on which 
these final rules are based was published in the Federal Register on 
August 22, 2002. 67 FR 54,366 (Aug. 22, 2002). The written comments 
were due by September 13, 2002. The names of commenters and their 
comments are available at http://www.fec.gov/register.htm under 
``Contribution Limitations and Prohibitions.'' The NPRM stated that the 
Commission would hold a hearing on the proposed rules if it received a 
sufficient number of requests to testify. After reviewing the comments 
received and in light of the relatively small number of requests to 
testify, the Commission decided not to hold a public hearing on this 
rulemaking. A notice canceling the proposed hearing was published on 
the Commission's website on October 2, 2002 (http://www.fec.gov/press/20021002cancel.html) and in the Federal Register on October 7, 2002, 67 
FR 62,410 (Oct. 7, 2002).
    Under the Administrative Procedures 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 rules on contribution limitations and prohibitions were 
transmitted to Congress on November 8, 2002.

Introduction

    The final rules address five major topics: (1) Increased limits on 
contributions made by certain persons to candidates, by political party 
committees to Senate candidates, and by individuals in a 2-year period; 
(2) indexing of certain contributions limits for inflation; (3) 
prohibition on contributions, donations, expenditures, independent 
expenditures and disbursements by foreign nationals; (4) prohibition on 
contributions by minors to candidates, authorized committees, and 
committees of political parties and on donations by minors to 
committees of political parties; and (5) designating contributions to 
particular elections and attributing contributions to particular 
contributors.
    Four of the five topics involve implementing specific provisions of 
BCRA. BCRA's amendments to 2 U.S.C. 441a(a) that increase contribution 
limits for individuals and political committees are implemented by 
amending 11 CFR 110.1, 110.2 and 110.5 and adding new Sec.  110.17 on 
indexing the contributions limits for inflation. BCRA's amendments to 2 
U.S.C. 441e to strengthen and expand the ban on campaign contributions 
and donations by foreign nationals is implemented by removing and 
reserving 11 CFR 110.4(a), the former regulation addressing foreign 
nationals, and adding new Sec.  110.20. BCRA's ban on contributions by 
minors to Federal candidates and contributions and donations by minors 
to committees of political parties at 2 U.S.C. 441k is implemented by 
removing 11 CFR 110.1(i)(2), the former regulation addressing 
contributions by minors, and adding new Sec.  110.19.
    In light of BCRA's focus on contribution limits, the Commission has 
also decided to streamline its rules for redesignating contributions 
for a particular election and reattributing contributions to particular 
contributors. These changes are reflected in amendments to 11 CFR 
110.1(b)(5) and 110.1(k)(3).

Explanation and Justification

11 CFR 102.9 Accounting for Contributions and Expenditures

    Recordkeeping requirements play a crucial role in ensuring 
compliance with FECA's and BCRA's contributions limitations, as noted 
in the NPRM. 64 FR at 54,372. Accordingly, the Commission sought 
comment on a variety of proposals to modify the recordkeeping 
requirements in 11 CFR 102.9. Two commenters were opposed to any 
change; one noted that electronic records should be sufficient, 
provided they are in readable form. Another commenter supported the 
Commission's proposal to require political committees to maintain 
photocopies or electronic copies of contributors' checks. The 
Commission has determined that requiring retention of photocopies or 
electronic copies of contributors' checks will facilitate audits that 
determine compliance with contribution limits. Therefore, 11 CFR 
102.9(a) is amended to require political committee treasurers to 
maintain either a full-size photocopy or a digital image of each check 
or written instrument by which a contribution is made. If a political 
committee elects to retain digital images, it must be prepared to 
provide the Commission with the computer equipment and software needed 
to retrieve and read the digital images at no cost to the Commission. 
New 11 CFR 102.9(a)(4).

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    Additionally, the Commission is also amending the supporting 
evidence requirements for redesignations and reattributions in 
connection with other changes made to redesignations and 
reattributions, as explained below in the discussion of 11 CFR 
110.1(l).
    Paragraph (e)(1) of 11 CFR 102.9 is amended to clarify that its 
requirements apply to contributions designated in writing by the 
contributor pursuant to 11 CFR 110.1(b)(2)(i), contributions treated as 
such pursuant to 11 CFR 110.1(b)(2)(ii), contributions redesignated in 
writing by the contributor pursuant to new 11 CFR 110.1(b)(5)(ii)(A), 
or contributions designated by presumption pursuant to new 11 CFR 
110.1(b)(5)(ii)(B). New paragraph (e)(2) makes the standard for 
acceptable accounting methods explicit by stating that the committee's 
records must demonstrate that, prior to the primary election, recorded 
cash on hand was at all times equal to or in excess of the sum of 
general election contributions received less the sum of general 
election disbursements made. Additionally, a technical change is made 
to recodify existing regulatory text as new paragraph (e)(3) in order 
to clarify that the requirement for candidates not in the general 
election to refund any contributions designated or treated as 
contributions for the general election applies to all candidates and 
authorized committees.

11 CFR 110.1 Contributions by Persons Other Than Multi-Candidate 
Political Committees

1. 11 CFR 110.1(a) Scope
    Section 110.1(a) sets out the scope of the regulations in 11 CFR 
110.1. The final rules in this paragraph contain amended citations to 
the provisions concerning minors and foreign nationals. This final rule 
is substantially identical to the proposed rule, and the Commission did 
not receive any comments concerning paragraph (a).
2. 11 CFR 110.1(b)(1) Increases in Limitations on Contributions to 
Candidates
    The Act limits the amount that individuals and certain other 
persons may contribute to candidates and political committees, 
including political party committees with respect to Federal elections. 
2 U.S.C. 441a(a)(1). The pre-BCRA provisions of the Act permitted 
persons to contribute up to $1,000 to Federal candidates per election 
and up to $20,000 per calendar year to political committees established 
and maintained by national political parties. For contributions made on 
or after January 1, 2003, BCRA amends 2 U.S.C. 441a(a)(1)(A) to 
increase the amount persons may contribute to Federal candidates to 
$2,000 per election. Section 110.1(b)(1), which contains the 
contribution limitation of 2 U.S.C. 441a(a)(1)(A), is therefore, being 
amended to incorporate the new increased $2,000 contribution limit. 
Paragraph (b)(1) in the final rules, with some minor revisions, is 
substantially identical to proposed paragraph (b)(1) in the NPRM. The 
Commission did not receive any comments on this provision.
    FECA also permits certain persons to contribute up to $5,000 per 
year to any other political committees. 2 U.S.C. 441a(a)(1)(C). This 
contribution limit was left unchanged by BCRA. However, BCRA did revise 
2 U.S.C. 441a(a)(1) by adding paragraph (D), which permits persons to 
make up to $10,000 in contributions to a political committee 
established and maintained by a State committee of a political party in 
a calendar year. This statutory provision was implemented by the 
addition of new paragraph (c)(5) to Sec.  110.1. See Prohibited and 
Excessive Contributions: Non-Federal Funds or Soft Money Final Rules, 
67 FR 49,063 (July 29, 2002).
    BCRA mandates that the limit for contributions by individuals and 
other persons under 2 U.S.C. 441a(a)(1)(A) be increased every odd-
numbered year by the percentage difference in the price index between 
the current year and the base year of 2001. 2 U.S.C. 441a(c)(1)(B). The 
mechanics of the indexing are set forth in 11 CFR 110.17, which is 
discussed below. However, in order to alert the reader that the 
contribution limits are adjusted every two years, Sec.  110.1(b)(1)(i) 
contains a cross reference to section 110.17. Additionally, paragraph 
(b)(1)(ii) sets forth the 2-year time period in which the increased 
contribution limits are to be in effect. That 2-year period starts the 
day after the previous general election and ends on the day of the next 
regularly scheduled general election.
    Because the contribution limits may change every two years, 
depending upon the consumer price index, paragraph (b)(1)(iii) states 
that the Commission will publish the new contribution limits in effect 
in the Federal Register every odd-numbered year and maintain that 
information on its website. One commenter supported this change.
3. 11 CFR 110.1(b)(3) Net Debts Outstanding
    The NPRM raised the issue of the effect of the increase on 
contribution limits due to the inflation adjustment on contributions 
made after an election that are used to satisfy the net debts 
outstanding of a candidate's authorized committees related to that 
previous election. The NPRM sought comment on the following 
hypothetical: If the contribution limit were to be increased from 
$2,000 to $2,100, effective November 3, 2004, and contributor X makes a 
$2,000 contribution to candidate Y in October of 2004, could 
contributor X make a $100 contribution after November 3, 2004 
designated for that general election, provided that candidate Y's 
principal campaign committee still has net debts outstanding?
    The Commission received several comments concerning this issue. All 
the commenters who addressed this, including the Congressional sponsors 
of BCRA, argued against permitting the increase in the contribution 
limits to apply to contributions made to pay off net debts outstanding 
from any election held prior to the increase in the contribution 
limits. Instead, these commenters proposed that any increased 
contribution limits should only apply to elections held after the date 
on which the indexing triggers a higher contribution limit. Several of 
these commenters noted the confusion that would ensue for both 
contributor and recipient committees if multiple contribution limits 
applied to the same election. The Commission agrees with this 
reasoning. In addition, it finds no evidence that Congress intended 
candidates in a deficit position after an election to have the benefit 
of accepting larger contributions than candidates who have no debts 
outstanding for that election. Consequently, the Commission is 
persuaded that the increase in the contribution limits should not be 
applied to previous elections. This interpretation will reduce the 
occurrence of multiple changes to the contribution limits for 
elections. The Commission also notes that the retroactive application 
of 2 U.S.C. 441a(c)(1)(C) specifically begins on the date after the 
previous general election, and can thus be construed to mean that the 
increase in the contribution limits does not apply to any previous 
election.
    To make clear that the increase in contribution limits cannot be 
used to retire net debts outstanding from previous elections, the 
Commission is amending Sec.  110.1(b)(3)(iii). This regulation sets 
forth the conditions under which candidates may accept contributions to 
retire net debts outstanding after the date of a previous primary or 
general election. The Commission is renumbering the two existing 
conditions as paragraphs (b)(3)(iii)(A) and (B) and is adding the

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additional requirement at paragraph (b)(3)(iii)(C) that contributions 
received for net debts outstanding arising from previous elections do 
not exceed the contribution limitations in effect on the date of such 
election.
4. 11 CFR 110.1(b)(5)(ii) Redesignations
A. Introduction
    In the NPRM, the Commission stated that BCRA's renewed focus on 
contribution limits coincided with the Commission's consideration of 
updating and streamlining its rules for designating contributions for a 
particular election or attributing contributions to particular 
contributors. See NPRM, 67 FR at 54,371. Under existing regulations, 
all contributions are either designated in writing by the contributor, 
11 CFR 110.1(b)(2)(i), or treated as contributions for the next 
election after the contribution is made. 11 CFR 110.1(b)(2)(ii). This 
is in order to ensure that no person contributes more than the 
individual contribution limit to any candidate with respect to a 
particular election. 2 U.S.C. 441a(a)(1)(A). Commission regulations 
permit political committees in certain circumstances to obtain a 
written redesignation signed by the contributor. 11 CFR 
110.1(b)(5)(ii). The Commission presented proposed rules in the NPRM 
that would permit the authorized committees of candidates to 
redesignate contributions pursuant to a presumption in certain 
circumstances. NPRM, 67 FR at 54,376. Additionally, the NPRM proposed 
amending the rules pertaining to reattribution of contributions similar 
to the rules on redesignation. This proposal is addressed in the 
Explanation and Justification for 11 CFR 110.1(k)(3)(ii), discussed 
below.
    One commenter applauded the Commission's consideration of the 
contribution redesignation regulations that it characterized as 
``confusing and burdensome both for committees and contributors.'' In 
contrast, several commenters noted that BCRA neither requires nor 
anticipates a reexamination of the redesignation rules. BCRA's silence 
on these issues led one commenter to the conclusion that these issues 
would be more appropriately addressed in a separate rulemaking that 
does not arise from BCRA, while another found the Commission's 
reexamination well-timed, as an effort to simplify FECA compliance 
generally, which will improve the ability of political committees to 
comply with the new requirements of BCRA. In light of the new 
contribution limits and other statutory changes in BCRA, the Commission 
has concluded that this rulemaking provides an appropriate vehicle for 
simplifying the rules governing redesignation.
B. 11 CFR 110.1(b)(5)(ii)(A) Existing Redesignation Rule
    Because the Commission has decided to provide for an alternative 
method for redesignation of contributions, 11 CFR 110.1(b)(5)(ii) 
requires a technical amendment in order to incorporate the new 
provision within this section. Thus, this rulemaking redesignates 
former 110.1(b)(5)(ii)(A) and (B) as 110.1(b)(5)(ii)(A)(1) and (2), 
respectively. This rulemaking does not amend the regulatory language of 
these provisions.
C. 11 CFR 110.1(b)(5)(ii)(B) Redesignation of Certain Excessive Primary 
Contributions
    Current 11 CFR 110.1(b)(5) sets forth the procedure for the 
redesignation of excessive contributions to candidates and authorized 
committees from any person, except multicandidate committees and those 
persons prohibited from making contributions. See 11 CFR 110.1(a). When 
seeking a redesignation of an excessive contribution, a committee 
treasurer must offer the contributor a refund and obtain a signed, 
written redesignation from the contributor within 60 days of the 
treasurer's receipt of the contribution. See 11 CFR 110.1(b)(5)(ii). 
These requirements apply to excessive contributions that were 
designated in writing by the contributor, 11 CFR 110.1(b)(5)(i)(A) and 
(B), or that were not designated in writing by the contributor, 11 CFR 
110.1(b)(5)(i)(C) and (D), in which case 11 CFR 110.1(b)(2)(ii) treats 
the contributions as made for the next election for that Federal office 
after the contributions are made.\1\ In addition to written 
redesignations, the Commission is amending 11 CFR 110.1(b)(5) to permit 
authorized committees to redesignate contributions that would otherwise 
be excessive without obtaining a signed, written document under certain 
circumstances, as discussed below.
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    \1\ These requirements apply whether the contributions are 
excessive on their face or in aggregation with other contributions, 
11 CFR 110.1(b)(5)(i)(A) and (C), or were designated for an election 
and were made after the election, but cannot be accepted because the 
contributions exceed net debts outstanding from the past election, 
11 CFR 110.1(b)(5)(i)(B), or were received after an election but 
undesignated, and the authorized committee has net debts outstanding 
from the previous election. 11 CFR 110.1(b)(5)(i)(D).
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    As proposed in the NPRM, the Commission is amending these 
regulations to include a mechanism to simplify redesignation procedures 
for certain excessive primary contributions by using a presumption. See 
NPRM, 67 FR at 54,371, new 11 CFR 110.1(b)(5)(ii)(B). This presumption 
applies only when a contributor makes an excessive contribution to a 
candidate's authorized committee before a primary election that is not 
designated in writing for a particular election. In such circumstances, 
a candidate's authorized committee may presume that the contributor 
intended to contribute any excessive amount to that candidate's general 
election, without obtaining written permission from the contributor to 
treat the excess as a general election contribution. This presumption 
should not be inferred, however, in instances where the contributor has 
expressly designated a contribution in writing for a different 
election.
    The Commission agrees with the commenter who noted the 
reasonableness of a presumption that a contributor of a large 
contribution to a primary election campaign would also support the 
general election campaign of the same candidate. That commenter 
reasoned that the primary and general elections occur in the same year 
and are two stages of one process to elect a candidate to a particular 
office. However, the Commission disagrees with another commenter who 
argued that written redesignations most often serve as barriers to 
contributor intent, which in the commenter's view is generally to 
support the candidate to the maximum extent possible. The Commission 
retains its rules on written redesignations in all other situations 
described in 11 CFR 110.1(b)(5)(i)(A) through (D). Only in the specific 
circumstance presented in new 11 CFR 110.1(b)(5)(ii)(B) will the 
presumption suffice to replace a written redesignation.
    Thus, the Commission is revising Sec.  110.1(b)(5)(ii)(B) to permit 
an authorized committee to redesignate excessive contributions to the 
general election if the following conditions are satisfied. First, the 
contribution must be made before the primary election. Second, the 
contribution must not have been designated in writing for another 
election. Third, the contribution would be excessive if treated as a 
contribution made for the primary election, and fourth, the 
redesignation does not cause the contributor to exceed any other 
contribution limit. These conditions are set forth in paragraphs 
(b)(5)(ii)(B)(1) through (4), respectively. The committee must be 
permitted to accept general election contributions in order to 
designate contributions by presumption. Therefore, if a presidential 
candidate's

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authorized committee accepts public funding in the general election, 
the presumption is available to any such committees only to the extent 
they are permitted to accept contributions to a general election legal 
and accounting compliance fund. The final rule also requires that the 
authorized committee notify the contributor of the redesignation. This 
requirement is discussed in further detail below.
D. 11 CFR 110.1(b)(5)(ii)(B)(5) and (6) Notice to Contributors
    With respect to the redesignation of certain primary contributions, 
the NPRM included two alternatives, Alternatives 1-A and 1-B. See 
proposed 11 CFR 110.1(b)(5)(ii)(B), NPRM, 67 FR at 54,371 and 54,376. 
The alternatives differed in whether an authorized committee employing 
the presumption to redesignate a contribution would be required to 
notify the contributor that such action is being taken. Alternative 1-A 
would not have required any notification to the contributor, while 
Alternative 1-B would have required notification through the addition 
of paragraphs (b)(5)(ii)(B)(5) and (6). See NPRM, 67 FR at 54,371 and 
54,376.
    Alternative 1-A was designed to minimize the administrative burden 
on authorized committees when a contributor's intent could be 
reasonably inferred. See id. at 54,371. Some commenters preferred this 
approach. One viewed it as a better balance between the Commission's 
need to ensure that committees follow procedures and the committees' 
need for flexibility. Greater flexibility for the committees was the 
basis for another commenter's support. Another found Alternative 1-A to 
be consistent with contributor intent and with BCRA's change in the 
individual aggregate contribution limit from an annual to an election 
cycle basis. See 2 U.S.C. 441a(a)(3). The Commission notes, however, 
that BCRA changes the individual aggregate contribution limit to a bi-
annual basis that only approximates the election cycle for the U.S. 
House of Representatives. More importantly, Congress did not change the 
per candidate contribution limits from a per-election to an election-
cycle basis.
    Alternative 1-B in the Commission's proposal would have required 
that the authorized committee inform the contributor that a portion of 
the contribution is being redesignated to the general election, and 
that the contributor may request a refund instead. As with Alternative 
1-A, no confirmation from the contributor would have been required.
    This alternative attracted the support of several commenters, as 
well. One commenter found that the presumption combined with notice to 
the contributor reasonably approximates contributor intent, with notice 
ensuring that any other contributor intent can be honored. Similarly, 
another argued Alternative 1-B strikes the appropriate balance between 
the administrative burden imposed on authorized committees and the need 
to honor contributor intent, noting that some primary election 
contributors might plan to support a different candidate in the general 
election. Another commenter supported the notice required under 
Alternative 1-B because it would provide an opportunity for the 
contributor to ``opt-out'' and receive a refund, instead of permitting 
the redesignation, and because it is more likely to prevent the 
contributor from inadvertently making an excessive contribution to the 
general election.
    The Commission has determined that notifying contributors is 
necessary when authorized committees redesignate excessive 
contributions that were initially considered primary contributions by 
operation of 11 CFR 110.1(b)(2)(ii) to be general election 
contributions. The Commission has therefore adopted Alternative 1-B as 
proposed in the NPRM, with clarification to the notice procedure as 
described below. See NPRM, 67 FR at 54,371 and 54,376. The Commission 
believes that, in the precise circumstances discussed, it is reasonable 
to infer that the contributor of an otherwise excessive primary 
contribution would likely not object to redesignating a portion of that 
contribution to the general election campaign. The contributor's check 
establishes the contributor's intent to contribute the funds to the 
candidate's authorized committee. The contribution limits in FECA 
prohibit the excessive contributions at issue, so the presumption 
permits the authorized committee to honor the contributor's intent in a 
manner that avoids a violation of law by both the recipient committee 
and the contributor.
    The notice and refund procedure serves to confirm the presumption 
that a contributor of an excessive, undesignated contribution to the 
primary election would consent to a redesignation of the excessive 
portion of the contribution to the general election. The authorized 
committee may assume acquiescence on the part of the contributor if the 
contributor does not respond to the notification. However, if the 
contributor does not want the contribution to be redesignated, the 
notice provides a mechanism by which the contributor may object to the 
redesignation and request a refund or a reattribution under 11 CFR 
110.1(k)(3)(ii). Additionally, the Commission notes that the trigger 
for a committee's use of the presumption--an undesignated excessive 
contribution--suggests the contributor may benefit from information 
about the contribution limits in FECA. Contributors need to know if a 
contribution was redesignated or reattributed so that they can avoid an 
inadvertent excessive contribution. Any authorized committee that seeks 
to retain a contribution that would otherwise constitute a violation of 
law can fairly be required to notify the contributor of the means by 
which it has remedied the violation of law. Thus, new paragraph 
(b)(5)(ii)(B)(5) requires the treasurer to notify the contributor of 
the redesignation and provide an opportunity to the contributor to 
request a refund. In such a notice, the committee may, if it wishes, 
also seek a written reattribution under 11 CFR 110.1(k)(3)(ii)(A); 
however, authorized committees are not required to include this 
information in the notice pursuant to 11 CFR 110.1(b)(5)(ii)(B)(5).
    Authorized committees may notify contributors by paper mail, email, 
fax, or any other written method. The authorized committee must do so 
within sixty days of the treasurer's receipt of the contribution. See 
new 11 CFR 110.1(b)(5)(ii)(B)(6). The notice must be written in order 
to avoid opportunities for fraud, so the option to communicate orally 
has been deleted from paragraph (b)(5)(ii)(B)(6). The sixty-day 
requirement protects contributor intent by providing notice on a 
reasonably contemporaneous basis.
E. 11 CFR 110.1(b)(5)(ii)(C) Redesignation of Certain Excessive General 
Election Contributions
    The Commission sought comment on whether to permit backward-looking 
presumptions, so that excessive general election contributions received 
after a primary election could be designated by an authorized committee 
to pay off primary debt. See NPRM, 67 FR at 54,371. Three commenters 
favored a backward-looking presumption in certain circumstances. One 
supported the presumption in the situation described, provided that the 
authorized committee has net debts outstanding for the primary 
election. Another supported the presumption, provided that it is 
limited to elections in the same election cycle. A third supported the 
presumption, provided that the contributor receives notice. Finally, 
one commenter argued against such a

[[Page 69932]]

backward-looking presumption because it would require more complex 
considerations by the contributors. However, the Commission notes that 
the burden of calculating net debts outstanding for the primary 
election falls on the authorized committees, not on the contributors.
    The Commission has determined that the backward-looking 
presumption, in limited circumstances, should apply subject to the same 
conditions as the redesignation presumption in 11 CFR 
110.1(b)(5)(ii)(B). The Commission notes that current 11 CFR 
110.1(b)(3)(iv) permits a candidate in the general election to pay 
primary election debts and obligations with general election 
contributions. Thus, if a contributor designates in writing that a non-
excessive contribution should be considered for the general election, 
the recipient committee may nonetheless use those funds to pay primary 
debts, pursuant to 11 CFR 110.1(b)(3)(iv). In this situation, it would 
be incongruous if a recipient committee had less flexibility with 
contributions that are not designated in writing than it would have 
with those that are designated in writing.
    Consequently, the Commission has incorporated such a presumption in 
new 11 CFR 110.1(b)(5)(ii)(C). The presumption can be applied to an 
excessive contribution that is made after the primary election date, 
but before the general election and that was not designated in writing 
by the contributor. 11 CFR 110.1(b)(5)(ii)(C)(1) and (2). The committee 
must have more net debts outstanding as calculated under 11 CFR 
110.1(b)(3)(ii) from the primary than the excessive portion of the 
contribution. 11 CFR 110.1(b)(5)(ii)(C)(5). The conditions in 11 CFR 
110.1(b)(5)(ii)(C)(3), (4), (6), and (7) are similar or identical to 
the conditions set forth in 11 CFR 110.1(b)(5)(ii)(B)(3), (4), (5), and 
(6), respectively. It is important to note, however, that if a 
contributor makes an excessive contribution and designates the 
contribution in a signed writing for the general election, then the 
authorized committee would be required to obtain a signed writing from 
the contributor to redesignate any portion of the contribution to the 
primary. See new 11 CFR 110.1(b)(5)(ii)(C)(2).
5. 11 CFR 110.1(c) Contributions to Political Party Committees
    The pre-BCRA provisions of the Act permitted persons to contribute 
up to $20,000 per calendar year to the political committees established 
and maintained by the national political parties. BCRA amends 2 U.S.C. 
441a(a)(1)(B) to increase the amount that may be contributed by 
individuals and certain other persons to political committees 
established and maintained by national political parties to $25,000 per 
calendar year. Consequently, the Commission is amending 11 CFR 
110.1(c)(1) to increase the amount that may be contributed by those 
covered by 2 U.S.C. 441a(a)(1)(B) to committees established and 
maintained by national political parties to $25,000 per year. No 
comments were received on this change. Paragraph (c)(2) of this section 
provides that these committees consist of the national committees, and 
the House and Senate campaign committees.
    The Commission is adding new paragraphs (c)(1)(i), (ii) and (iii) 
to Sec.  110.1. These paragraphs parallel new paragraphs (b)(1)(i), 
(ii) and (iii) discussed above. Paragraph (c)(1)(i) provides for 
application of the indexing provisions at 11 CFR 110.17 to the 
contribution limitation for contributions to national party committees. 
New paragraph (c)(1)(ii) establishes the two-year period in which the 
indexing is applied. New paragraph (c)(1)(iii) provides for the 
periodic publication by the Commission of the increased contribution 
limits. When proposed in the NPRM, the new paragraphs (c)(1)(i) and 
(c)(1)(iii) received no comments. These paragraphs are left 
substantially unchanged from the NPRM in the final rules. The comments 
relating to paragraph (c)(1)(ii) regarding the timing of the increase 
in the contribution limit due to the application of the indexing 
provisions are addressed below in the Explanation and Justification for 
new Sec.  110.17.
6. 11 CFR 110.1(i) Contributions by Spouses
    As explained below in the Explanation and Justification for new 11 
CFR 110.19, 2 U.S.C. 441k prohibits contributions made by minors to 
Federal candidates and contributions and donations to committees of 
political parties, but it does not prohibit contributions or donations 
to other types of political committees such as corporate and labor 
organization separate segregated funds and non-connected political 
committees (often referred to as ``PACs'').
    The proposed rules would have amended the pre-BCRA provision 
governing contributions by minors at former 11 CFR 110.1(i)(2) to 
reflect this point. The Commission has decided instead to move the pre-
BCRA minors provision to new 11 CFR 110.19 so that all of the 
provisions regarding minors are addressed in one section of the 
regulations. Therefore, the final rules move the minors provision at 
former 11 CFR 110.1(i)(2) to new 11 CFR 110.19(d). As a result of this 
move, Sec.  110.1(i) addresses only contributions by spouses, a 
provision that is unchanged. Therefore the final rules amend the title 
of paragraph (i) to ``Contributions by Spouses'' to reflect the 
remaining focus of this paragraph.
7. 11 CFR 110.1(k)(3)(ii) Reattribution
A. Introduction
    In connection with the proposed amendments to the redesignation 
rules, the NPRM also included a similar proposal to amend the 
reattribution rules. Current 11 CFR 110.1(k)(3) sets forth the 
procedures for the reattribution of excessive contributions to other 
joint contributors. Contributions from more than one person must 
include each contributor's signature, and each such contributor is 
attributed an equal share of the contribution unless other instructions 
are provided. 11 CFR 110.1(k)(1) and (2). A committee may ask a 
contributor who made an excessive contribution if a joint contribution 
was intended. 11 CFR 110.1(k)(3)(i). In order to reattribute a 
contribution in such a situation, a committee treasurer must offer the 
contributor a refund and must obtain within sixty days of the 
contribution a written reattribution signed by each of the 
contributors. 11 CFR 110.1(k)(3)(ii). (Unlike redesignation, which is 
limited to authorized committees because of the relationship of the 
contribution to particular elections pursuant to 2 U.S.C. 
441a(a)(1)(A), the reattribution procedure is available to all 
political committees, any of which could receive joint contributions.) 
The commenters who supported the Commission's proposal to amend the 
redesignation rules also supported the proposal to amend the 
reattribution rules for the same reasons. Likewise, commenters who did 
not favor the Commission's proposal regarding redesignation also did 
not support amending the reattribution rules at this time.
B. The Proposal and Comments
    The Commission proposed a presumption related to reattribution in 
the NPRM. When funds are contributed by a check or other written 
instrument with two or more names imprinted on the check, but with only 
one signature, the entire contribution is attributed to the individual 
whose signature appears on the check. See 11 CFR 104.8(c) and 
110.1(k)(1). Alternatives 2-A and 2-B in proposed 11 CFR 
110.1(k)(3)(ii)(B) in the NPRM both included a presumption that with 
respect to such contributions that are excessive, a committee would

[[Page 69933]]

be permitted to presume that the contribution should be attributed 
equally among those whose names appeared on the check or other 
instrument. See NPRM, 67 FR at 54,371 and 54,377. Like the 
redesignation alternatives, Alternative 2-B would have required the 
recipient committee to notify the contributors, while Alternative 2-A 
would not have required any notice. See id.
    Three commenters opposed both Alternatives 2-A and 2-B. The three 
agreed that inferring a non-signer's intent to contribute in the 
absence of any indication from that individual is extremely unreliable 
and carries a greater risk of error than the redesignation presumption. 
One commenter observed that the non-signer might not support the same 
candidates and political committees that the signer supports. Even if 
he or she does support the same candidates, if the non-signer is 
unaware of the contribution, he or she may inadvertently make an 
excessive contribution to the same committee. Another of the three 
found Alternative 2-B unacceptable because the burden of ``opting-
out,'' that is, choosing to request a refund instead of permitting the 
reattribution, would be on the contributor, whereas the commenter 
believed the burden should be on the recipient committee. A fourth 
commenter agreed with the presumption, arguing that contributors do not 
generally believe more than one signature would be required because 
usually only one person signs a particular check. This commenter also 
argued that any indication of intent to make a joint contribution 
should suffice, citing examples of accompanying correspondence, a donor 
card, or a notation on a check. Under such circumstances, this 
commenter would not require notification. In the absence of any 
indication of such an intent, this commenter supports the approach of 
Alternative 2-B, which would require the recipient committee to notify 
the contributors of the reattribution.
C. 11 CFR 110.1(k)(3)(ii)(A) Existing Reattribution Rule
    Because the Commission has decided to provide for an alternative 
method for reattribution of contributions, 11 CFR 110.1(k)(3)(ii) 
requires a technical amendment in order to incorporate the new 
provision within this section. Thus, this rulemaking redesignates 
former Sec.  110.1(k)(3)(ii)(A) and (B) as Sec.  110.1(k)(3)(ii)(A)(1) 
and (2), respectively. This rulemaking does not amend the regulatory 
language of these provisions.
D. 11 CFR 110.1(k)(3)(ii)(B) Presumption of a Reattribution
    The Commission has concluded that the changes required by BCRA 
provide an appropriate occasion to promulgate regulations that will 
provide authorized committees with additional means of reattributing 
certain contributions. Thus, it has adopted Alternative 2-B with two 
modifications. Under paragraph (k)(3)(ii)(B)(1), if an excessive 
contribution is made with a written instrument with more than one 
individual's name imprinted upon it, but only one signature, the 
permissible portion of the contribution will be attributed to the 
signer, and the committee may reattribute any excessive portion of the 
contribution to any other individual whose name is imprinted on the 
written instrument. Thus, the final rule differs from the proposed rule 
in that the proposed rule would have divided excessive contributions 
equally among the names listed on the check. The final rule takes a 
different approach in order to attribute the maximum permissible amount 
to the signer because that contributor's intent is clear. Only 
excessive funds would be reattributed pursuant to the presumption to 
another contributor whose name appears preprinted on the check, and 
only to the extent that this reattribution would not cause that other 
individual to exceed his or her contribution limit.
    The Commission has determined that notice to the contributors is 
essential to make any presumption in this situation reasonable. The 
political committee employing this presumption is required to notify 
all contributors and offer the signer contributor a refund under 
paragraph (k)(3)(ii)(B)(2).
    As noted in the NPRM, the Commission and political committees have 
devoted significant resources to ensure compliance with the 
reattribution requirements. The Commission agrees with the commenter 
who noted that joint contributors often indicate their intention to 
jointly contribute in some fashion other than by both signing one 
personal check. However, the Commission also agrees that a presumption 
based only on an individual's name appearing on a check is not reliable 
standing alone. Consequently, the Commission is adopting the 
requirement that political committees notify all of the joint 
contributors to whom any portion of the contribution is reattributed. 
The committee may make the notice in any written form and must do so 
within sixty days of the treasurer's receipt of the contribution. See 
new 11 CFR 110.1(k)(3)(ii)(B)(3). The sixty-day requirement protects 
contributor intent by providing notice on a reasonably contemporaneous 
basis. Like the redesignation notice provision, section 
110.1(k)(3)(ii)(B)(3) has been clarified to permit notice by any 
written method, including email. Authorized committees may, if they 
choose, provide contributors with a single notice as to any permissible 
redesignation and any permissible reattribution.
E. Other Proposals Relating to Redesignation and Reattribution for 
Which No Changes to the Rule Are Being Made
(1) 11 CFR 110.2 Multicandidate Contributions
    Current 11 CFR 110.2(b)(5) sets forth the procedure for 
redesignation of excessive contributions made by multicandidate 
committees. In the NPRM, the Commission asked commenters to address 
whether excessive contributions from multicandidate committees should 
be subject to any form of redesignation by presumption. Only one 
commenter supported any such application, while two opposed it. These 
two argued that a signed writing should be required from multicandidate 
committees because these committees are likely to be sufficiently 
familiar with the existing Commission requirements so that the higher 
standard of specificity required from them is not burdensome. The 
Commission agrees that the redesignation presumption is inappropriate 
for multicandidate committees, so no change has been made to 11 CFR 
110.2.
(2) Expanding the Redesignation Presumption Beyond the Election Cycle
    The Commission also asked in the NPRM if presumptions that would 
permit authorized committees to redesignate contributions beyond the 
current election cycle to either earlier or subsequent cycles were 
appropriate. See NPRM, 67 FR at 54,371. Only one commenter supported 
any presumption that reaches beyond a current cycle; that commenter 
argued that redesignations to elections in future cycles were 
acceptable if the contributors were notified. The other commenters 
argued that any presumptions should be limited to the current cycle. 
One said inferring donative intent would be difficult as the extent to 
which a contributor supports a candidate can vary significantly from 
one election cycle to another. Another noted that this might be so 
because candidates' positions on issues can change, and

[[Page 69934]]

candidates are likely to face different opponents in previous or 
subsequent cycles. Another noted that recordkeeping would be 
complicated for the committees (which may change from one election to 
the next), the contributors, and the Commission if such a presumption 
were adopted. The Commission agrees with many of these comments and has 
decided to limit the redesignation and reattribution presumptions to 
within one election cycle.
(3) Separate Accounts for Redesignated Contributions
    The Commission asked in the NPRM if it should revise 11 CFR 102.9 
to require that an authorized committee maintain a separate account for 
general election contributions accepted before the primary election 
occurs. See NPRM, 67 FR at 54,371-72. Three commenters addressed this 
proposal. Two commenters who opposed the requirement stated that 
separate accounts are unnecessary. One argued that the public record 
consists of all of a candidate committee's accounts combined, even if 
the funds are in fact in separate accounts. Consequently, they argued 
that the public record, which specifies to which election contributions 
are designated, would not be augmented by a committee's maintenance of 
separate accounts. Should an authorized committee be subject to a 
Commission audit, this commenter argued that the Audit Division is 
capable of calculating whether a committee spent general election funds 
on the primary election campaign. Another commenter noted that separate 
accounts do not ``specifically aid in compliance'' and that separate 
accounts are not required by BCRA. One commenter supported the 
requirement, arguing that the Commission has a valid concern regarding 
the use of general election funds in a primary election campaign, which 
could permit the contributor and the committee to effectively double 
the contribution limit with respect to the primary election. This 
commenter also argued that separate accounts are a modest burden for 
committees and may be preferable to maintaining separate books and 
records.
    Although the Commission believes maintaining a separate account is 
the best way for an authorized committee to show its compliance with 
the prohibition on spending general election contributions in 
connection with a primary election, the Commission is reluctant to 
require that authorized committees maintain separate accounts when 
other means of accounting, which may be better suited to an 
organization, will suffice to prevent the use of general election 
contributions in connection with a primary election. Consequently, the 
Commission declines to amend 11 CFR 102.9 in this regard.
(4) Eliminating the Signature Requirements
    The Commission sought comment on whether it should eliminate the 
signature requirement for all redesignations and reattributions under 
11 CFR 110.1 and 110.2, and instead permit authorization from the 
contributor by email or through oral communications with the 
contributor when the recipient committee creates and maintains a 
contemporaneous signed record of the conversation. See NPRM, 67 FR at 
54,371.
    All of the commenters who addressed this issue thought an email 
should suffice, instead of a writing signed by the contributor. Some 
commenters were opposed to permitting committees to memorialize 
conversations to serve as documentation of redesignations or 
reattributions, as discussed above in connection with 11 CFR 110.1(l).
    In adopting the new means of redesignation and reattribution in 11 
CFR 110.1(b)(5)(ii)(B), 110.1(b)(5)(ii)(C), and 110.1(k)(3)(ii)(B), the 
Commission has concluded that no contributor response is required for 
the reattributions and redesignations pursuant to the new presumptions, 
so no contributor signature is required. However, the designation and 
attribution regulations require contributor signatures in other 
instances. See, e.g., 11 CFR 110.1(b)(4)(ii), new 
110.1(b)(5)(ii)(A)(2), 110.1(k)(1), and new 110.1(k)(3)(ii)(A)(2). In 
these situations, the regulations require a response from the 
contributor, and thus require the response to be in writing and signed 
by the contributor in order to prevent fraud and to clearly indicate 
who is contributing. Cf. 11 CFR 104.8(c) (requiring contributions to be 
reported as made by the last person signing the instrument). While 
email may be an appropriate vehicle for contacting contributors such as 
new 11 CFR 110.1(b)(5)(ii)(B)(6) and (C)(7) or for contributor 
responses in some instances, it may raise complicating issues that have 
not been addressed in this rulemaking. For example, with respect to 
reattributions, how could a committee determine whether both 
contributors have consented to the reattribution? The Commission has 
concluded that permitting email to replace a contributor's signature 
should be undertaken in connection with a rulemaking that considers all 
of the instances in Commission regulations in which this issue is 
present, rather than making that change in some instances, but not 
others, and in the absence of a full consideration of issues similar to 
the one raised above. Therefore, the Commission has concluded that 
existing rules should not be amended in this rulemaking to eliminate 
the signature requirements across the board or to permit email messages 
to take the place of signed written redesignations or reattributions 
under revised 11 CFR 110.1(b)(5)(ii)(A)(2) or 11 CFR 
110.1(k)(3)(ii)(A)(2). Consequently, no further changes to the 
regulations are being made in this rulemaking.
8. 11 CFR 110.1(l)(4) and (5) Supporting Evidence
    As noted in the NPRM, the adoption of the notification approach 
requires 11 CFR 110.1(l)(4) to be amended to specify the supporting 
evidence required to be retained under such an approach. See NPRM, 67 
FR at 54,371. A full-size copy of the check or written instrument, any 
signed writings from the contributors that accompanied the 
contribution, and the political committee's notices required for 
redesignations under 11 CFR 110.1(b)(5)(ii)(B) or (C) or reattributions 
under 11 CFR 110.1(k)(3)(ii)(B) are included among the supporting 
evidence that must be retained for the redesignation or reattribution 
to be effective. See new 11 CFR 110.1(l)(4)(ii). Paragraph (l)(5) has 
also been revised to state that if a political committee fails to 
retain the notices, then the presumptions for the redesignations or the 
reattributions will not be effective.
    Some commenters supported the proposal that would have permitted 
committees to orally notify contributors and write a memorandum 
regarding the conversation to document it. Others opposed this aspect 
of the proposal as an inherently unreliable process that would provide 
too great an opportunity for fraud and abuse. The Commission agrees 
with the latter comments, so the final rules with regard to the 
redesignation and reattribution presumptions require the notice to be 
in writing, including by email. See new 11 CFR 110.1(b)(5)(ii)(B)(6); 
110.1(b)(5)(ii)(C)(7); and 110.1(k)(3)(ii)(B)(3).
    One technical correction is included in 11 CFR 110.1(l)(5) as well. 
The citation to paragraph (l)(2) in the first sentence should be to 
paragraph (l)(1) instead.

[[Page 69935]]

11 CFR 110.2 Contributions by Multicandidate Political Committees

    Section 110.2 sets forth the dollar limits on contributions made by 
multicandidate committees, as generally established by 2 U.S.C. 
441a(a)(2). BCRA substantially amended the contribution limit for 
certain types of multicandidate committees specified in 2 U.S.C. 
441a(h), which is addressed in Sec.  110.2. As a result, the Commission 
is amending the regulations to reflect the new limits set forth in more 
detail below.
    Under pre-BCRA 2 U.S.C. 441a(h), the Republican and Democratic 
Senatorial campaign committees or the national committee of a political 
party or any combination of such committees were permitted to 
contribute up to $17,500 to a candidate for election or nomination for 
election to the U.S. Senate during the year of the election. BCRA 
amends this section of the Act to increase the amount that may be 
contributed by these committees to Senatorial candidates to $35,000 on 
or after January 1, 2003. Consequently, 11 CFR 110.2(e), which contains 
this contribution limit, is being amended to increase the limit to 
$35,000.
    New paragraph (e)(1) sets forth the amended contribution limit. The 
Commission did not receive any comment on its proposal to amend 
paragraph (e)(1). New paragraph (e)(2) parallels the provisions in 
Sec.  110.1(c)(1)(i), (ii) and (iii) and 110.1(b)(1)(i), (ii) and 
(iii). New paragraph (e)(2) provides for the application of the 
indexing provisions at 11 CFR 110.17 to this contribution limitation 
and establishes the two-year period in which the increased contribution 
limits are in effect. New paragraph (e)(2) also provides for the 
periodic publication by the Commission of the increased contribution 
limit. When first proposed in the NPRM, this paragraph received one 
comment supporting the intention to publish information regarding the 
adjusted contribution limit. The comments relating to paragraph (e)(2) 
that concern the timing of the increase in the contribution limit due 
to the application of the indexing provisions are addressed in the 
Explanation and Justification for new Sec.  110.17, below.

11 CFR 110.4 Contributions in the Name of Another; Cash Contributions

    Previously, 11 CFR 110.4(a) set forth regulations implementing the 
prohibitions on contributions and expenditures by foreign nationals 
codified at 2 U.S.C. 441e. In light of the amendments to 2 U.S.C. 441e 
contained in BCRA, Sec.  110.4(a) is being removed and reserved, and 
new 11 CFR 110.20 is being created to implement BCRA's prohibition on 
contributions, donations, expenditures, independent expenditures, and 
disbursements by foreign nationals.
    In addition, the section heading has been changed to cover the two 
topics addressed in this section: (1) Contributions made in the name of 
another and (2) cash contributions.

11 CFR 110.5 Aggregate Bi-Annual Contribution Limitations for 
Individuals

    Aside from the limits on the dollar amounts that individuals may 
contribute to candidates and political committees, 2 U.S.C. 441a(a)(3) 
also contains aggregate limits on the amount that individuals may give 
within a specified period of time. These contribution limits are set 
forth in the Commission's regulations at 11 CFR 110.5. However, as with 
Sec. Sec.  110.1 and 110.2 discussed above, BCRA substantially amended 
the FECA by restructuring the aggregate contribution limits. As a 
result, the Commission is amending the regulations in Sec.  110.5 to 
reflect the new contribution limits in BCRA.
1. 11 CFR 110.5(a) Scope
    Section 110.5(a) sets forth the scope of the regulations in 11 CFR 
110.5. The final rules in this paragraph contain amended citations to 
the provisions concerning minors and foreign nationals. This final rule 
is identical to the proposed rule, on which the Commission received no 
comments.
2. 11 CFR 110.5(b) Bi-Annual Limitations
    BCRA amends the provisions in FECA that establish the total amount 
of contributions that may be made by individuals within the prescribed 
time periods. Under former 2 U.S.C. 441a(a)(3), individuals were 
permitted to make no more than $25,000 in aggregate contributions per 
calendar year. This section was revised by BCRA to establish new bi-
annual aggregate limits that permit individuals to make up to $95,000 
in contributions, including up to $37,500 in contributions to 
candidates and their authorized committees, and up to $57,500 in 
contributions to any other political committees. 2 U.S.C. 441a(a)(3)(A) 
and (B). The $57,500 aggregate contribution limit contains a further 
restriction in that no more than $37,500 of this amount may be given to 
political committees that are not the political committees of national 
political parties. 2 U.S.C. 441a(a)(3)(B).
    Current 11 CFR 110.5(b) is being amended to incorporate the 
increased bi-annual aggregate contribution limits, which are effective 
on January 1, 2003. New paragraph (b)(1)(i) contains the new bi-annual 
aggregate limit for contributions to candidates and their authorized 
committees. New paragraph (b)(1)(ii) contains the new bi-annual 
aggregate limit for contributions to other political committees. The 
Commission received no comments on the changes to paragraphs (b)(1)(i) 
and (ii) of this section.
    Sections 441a(i)(1)(C) and 441a-1(a)(1)(B) of FECA contain an 
exception to the bi-annual contribution limits for individuals. Under 
these new provisions of BCRA, the individual contribution limits to 
candidates for the U.S. House of Representatives and U.S. Senate are 
increased during certain limited time periods if the candidate is 
opposing another candidate who makes expenditures from his or her 
personal funds above a certain threshold. Contributions made under 
these increased dollar limits do not apply to the individual 
contributor's bi-annual aggregate limits. 2 U.S.C. 441a(i)(1)(C) and 
441a-1(a)(1)(B). Accordingly, new Sec.  110.5(b)(2) reflects this 
exception, which will be addressed in greater detail in a separate 
rulemaking concerning the so-called ``millionaires'' amendment.'' One 
commenter, while agreeing generally with proposed paragraph 
(b)(1)(iii), suggested that the language in the draft rule was not 
direct enough in making this point. The Commission agrees and thus, new 
paragraph (b)(2) states more precisely the circumstances under which 
the individual bi-annual limits on contributions do not apply to 
contributions coming under 2 U.S.C. 441a(i)(1)(C) or 441a-1(a)(1)(B).
    Section 110.5(b)(3) provides for the increase, if necessary, in the 
bi-annual aggregate contribution limits by the percent difference in 
the price index, as described in 11 CFR 110.17. The issues relating to 
the relationship of the statutory time frame for aggregating 
contributions and the inflation adjustment time frame are discussed 
below regarding 11 CFR 110.17(b). New paragraph (b)(4) states the 
Commission's intention to publish information regarding the adjusted 
contribution limits in the Federal Register and on the Commission's Web 
site. One commenter supported publishing the adjusted contribution 
limits. New paragraphs (b)(3) and (b)(4) contain provisions parallel to 
that found 11 CFR 110.1(b) and (c) and 110.2(e). These paragraphs of 
the final rules contain minor wording revisions but are nearly 
identical to the

[[Page 69936]]

proposed versions, on which the Commission received no comments.

11 CFR 110.9 Violations of Limitations

    The final rules at 11 CFR 110.9, formerly entitled, ``Miscellaneous 
provisions,'' are being amended to address only violations of the 
contribution and expenditure limitations. Other provisions in 11 CFR 
110.9 addressing fraudulent misrepresentations, the price index 
increase, and the voting age population are being or will be amended 
and moved in this rulemaking and other BCRA rulemaking projects.\2\ The 
title of section 110.9 is also being changed to ``Violations of 
limitations'' to reflect these changes. Finally, the final rules add 
the word ``knowingly'' in two places pertaining to the acceptance of 
contributions in violation of the limitations and prohibitions set 
forth in 11 CFR part 110. This revision mirrors the knowledge 
requirement in 2 U.S.C. 441a(f) and 441f. No comments were received on 
this revision or the reorganization of these provisions.
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    \2\ The BCRA rulemaking project entitled ``Other Provisions'' 
will address the fraudulent misrepresentation provisions. See Notice 
of Proposed Rulemaking (``NPRM'') at 67 FR 55,348, 55,356 (Aug. 29, 
2002). The BCRA rulemaking project entitled ``Coordination and 
Independent Expenditures'' will address the voting age population 
provisions. See NPRM at 67 FR 60,042, 60,060 ( Sept. 24, 2002).
---------------------------------------------------------------------------

    The prohibition on contributions by minors is contained in 2 U.S.C. 
441k and not in 2 U.S.C. 441a of the Act. Therefore, the Commission 
notes that in instances where a candidate, an authorized committee, or 
a committee of a political party knowingly accepts a contribution from 
a minor, it would be in violation of Sec.  110.9 only if the 
contribution is made in the name of another, but not if the 
contribution was made with the minor's own funds. See 2 U.S.C. 
441a(f)(''no candidate or political committee shall knowingly accept 
any contribution * * * in violation of the provisions of this 
section'').

11 CFR 110.17 Price Index Increase

    Pre-BCRA 2 U.S.C. 441a(c) mandated yearly indexing to inflation of 
the expenditure limitations established by 2 U.S.C. 441a(b) (the limits 
on expenditures by candidates for nomination and election to the office 
of President of the United States who accept public funding) and 2 
U.S.C. 441a(d) (the limits on expenditures by national party 
committees, State party committees, or their subordinate committees in 
connection with the general election campaign of candidates for Federal 
office). BCRA amends 2 U.S.C. 441a(c) to extend the inflation indexing 
to: (1) The limitations on contributions made by persons under 2 U.S.C. 
441a(a)(1)(A) (contributions to candidates) and 441a(a)(1)(B) 
(contributions to national party committees); (2) the bi-annual 
aggregate contribution limits applicable to individuals now found at 2 
U.S.C. 441a(a)(3); and (3) the limitation on contributions made to U.S. 
Senate candidates by certain political party committees at 2 U.S.C. 
441a(h). 2 U.S.C. 441a(c)(1)(B). Under the statute, the adjustments for 
inflation for 2 U.S.C. 441a(a)(1)(A), 441a(a)(1)(B), 441a(a)(3) and 
441a(h) are to be made only in odd-numbered years and such increases 
are to be in effect for the 2-year period beginning on the first day 
following the date of the general election in the preceding year and 
ending on the date of the next regularly scheduled general election. 2 
U.S.C. 441a(c)(1)(C).
    Former 11 CFR 110.9(c), which described the expenditure limits 
subject to inflation indexing, did not include any of the new inflation 
indexing discussed above. In order to address the price indexing for 
the new contributions and expenditures limitations in a comprehensive 
manner, the Commission is adding new Sec.  110.17 to track the changes 
to 2 U.S.C. 441a(c).
1. 11 CFR 110.17(a) Price Index Increases for Party Committee 
Expenditure and Presidential Candidate Expenditure Limitations
    New Sec.  110.17(a) replaces and restates, with some minor 
rewording, former section 110.9(c) regarding the price index increases 
that apply to the political party committee and Presidential candidate 
spending limits established by 11 CFR 110.7 and 110.8. However, 
paragraph (a) contains one important change from former section 11 CFR 
110.9(c). Section 110.9(c) had incorrectly stated that the expenditure 
limitations established by Sec. Sec.  110.7 and 110.8 would be 
increased by the annual percent difference of the price index, as 
certified to the Commission by the Secretary of Labor. Section 441a(c) 
of the Act does not use an annual percent difference of the price index 
to calculate the increases. Instead, it requires the use of the percent 
difference between the price index for the 12 months preceding the 
beginning of the calendar year in which the change is made and the base 
period. For the party committee expenditures limitations and the 
Presidential candidate expenditures limitations, the base period is 
calendar year 1974, with each change remaining in effect for a calendar 
year. Consequently, paragraph (a) of new 11 CFR 110.17 correctly states 
the standard to be applied and deletes the term ``annual'' from the 
regulation. The Commission received no comment on this change.
2. 11 CFR 110.17(b) Price Index Increases for Contributions by Persons, 
by Political Party Committees to Senatorial Candidates, and the Bi-
Annual Aggregate Contribution Limitation for Individuals
    As noted above, BCRA increased the number of contribution 
limitations now subject to price index increases. 2 U.S.C. 
441a(c)(1)(B). New 11 CFR 110.17(b) tracks BCRA by providing that the 
following contribution limits will be indexed to inflation: 11 CFR 
110.1(b)(1) (limits for persons contributing to candidates and 
authorized political committees); 11 CFR 110.1(c)(1) (limits for 
contributions made to national party committees); 11 CFR 110.2(e) 
(limits for contributions made by party committees to Senatorial 
candidates); and 11 CFR 110.5 (bi-annual aggregate contribution limits 
for individuals). New Sec.  110.17(b)(1) specifies that these 
contribution limitations will be increased during odd-numbered years 
and that the increased limit would be in effect for a two-year period.
    The NPRM raised the issue of the interaction between the statutory 
provision that indexes certain contribution limits, 2 U.S.C. 
441a(c)(1)(C), and the various contribution limits themselves. 
Particular focus was centered on the retroactive effective date in the 
indexing provision as it relates to the two calendar year-based 
aggregate contribution limit of 2 U.S.C. 441a(a)(3).
    In the NPRM, the Commission proposed at 11 CFR 110.5(b)(3) to 
interpret the statute in a way that required donors to aggregate 
contributions using the two-year period referenced in the effective 
date language of the indexing provision, rather than the 'January 1 of 
odd year through December 31 of even year' time frame of Section 
441a(a)(3).
    Several commenters, including the Congressional sponsors of BCRA, 
urged that the Commission not adopt the proposed approach and instead 
apply the calendar year approach set forth in the statutory provision 
setting out the contribution limit itself. The commenters noted that 
the inflation adjustment language was confusing and its effective date 
language stems largely from an intention to assure that the revised 
`per election' limit on giving to candidates was revised after each 
general election. They urged, in essence, that the Commission simplify

[[Page 69937]]

application of the inflation adjustment provision so that for affected 
limits based on calendar year aggregations, the effective date would 
only affect the next upcoming calendar year-based period. This would 
mean that the inflation adjustments on the limit on contributing to 
national parties (2 U.S.C. 441a(a)(1)(B)), the limit on national party 
contributions to Senate candidates (2 U.S.C. 441a(h)), and the two-year 
limit on aggregate contributions (2 U.S.C. 441a(a)(3)) would only 
affect the next calendar-year based period, not the calendar year-based 
period when the effective date period technically begins under section 
441a(c)(1)(B).
    The Commission has decided to adopt the approach suggested by the 
commenters. It would be somewhat confusing if the calendar year-based 
contribution limits were to be increased in the midst of the calendar 
year period involved. Accordingly, the Commission is adopting final 
rules that delete the language at proposed 11 CFR 110.5(b)(3), and is 
modifying the language at proposed 11 CFR 110.1(c)(1)(ii), 110.2(e)(2), 
and 110.5(b)(2) and 110.17(b)(1) to clarify that for the calendar year-
based limits, the indexing changes will only affect the calendar year-
based periods that follow. Please note that the indexing changes for 
the `per election' limit at 11 CFR 110.1(b)(1) will still take effect, 
pursuant to 11 CFR 110.1(b)(1)(ii), on the day after the general 
election and will only affect elections held after that general 
election. See discussion above regarding 11 CFR 110.1(b)(3) and Net 
Debts Outstanding.
    New paragraph (b)(2) of 11 CFR 110.17 establishes that 2001 is the 
base year for the calculation of the price index difference. No 
comments were received regarding this paragraph. One commenter noted 
that while the contribution limits may be increased due to indexing to 
inflation, the exact amount of the increase may not be precisely known 
or formally published until after January of the odd-numbered year. The 
commenter urged that the Commission establish a ``safe harbor'' to deal 
with these circumstances. This commenter suggested allowing political 
committees to receive contributions in excess of previous contributions 
limits while granting a period of time after the publication of the new 
limits to refund ``de minimis excessive contributions'' without 
triggering enforcement consequences.
    The Commission believes that the creation and implementation of 
this approach would be problematic. Determining or defining what 
amounts should be treated as de minimis poses difficulties. In the 
discussion regarding net debts outstanding and increased contribution 
limits, the Commission noted the confusion that would exist if multiple 
contribution limits attached to the same election. Similarly, allowing 
political committees to determine what amounts to accept in 
anticipating the indexing adjustments would also create confusion and, 
in effect, multiple contribution limits. The operation of a safe harbor 
would, therefore, be administratively challenging and could also 
undermine the contribution limits. Also, during times when inflation is 
low, it is possible that there would be no increase in certain limits 
due to the operation of the rounding provisions. See the Explanation 
and Justification for new 11 CFR 110.17(c) below. For these reasons, 
the Commission has determined that the acceptance of ``de minimis'' 
excessive contributions is not appropriate and is not included in the 
final rules.
3. 11 CFR 110.17(c) Rounding of Price Index Increases
    A further change in 2 U.S.C. 441a(c) is the introduction of a 
rounding provision for all the amounts that are increased by the 
indexing to inflation in 2 U.S.C. 441a (including the Presidential 
expenditure limits at 2 U.S.C. 441a(b) and coordinated party spending 
limits at 2 U.S.C. 441a(d)). If the inflation--adjusted amount is not a 
multiple of $100, it is rounded to the nearest multiple of $100. 2 
U.S.C. 441a(c)(1)(B)(iii). New section 110.17(c) implements the new 
rounding provision found at 2 U.S.C. 441a(c)(B)(iii). This final rule, 
which is identical to the proposed rule, did not draw any comments.
4. 11 CFR 110.17(d) Definition of Price Index
    New Sec.  110.17(d) tracks 2 U.S.C. 441a(c)(2)(A) by specifically 
defining the ``price index'' as the average over a calendar year of the 
Consumer Price Index (all items--United States city average) published 
by the Bureau of Labor Statistics. The Department of Labor computes the 
CPI using two population groups: All Urban Consumers (CPI-U) and 
Clerical Workers (CPI-W). The CPI-U represents approximately 87% of the 
total United States population while the CPI-W, a subset of the CPI-U, 
represents 32% of the total United States population.\3\ While neither 
the FECA nor BCRA specifies which population group is to be used, the 
Commission has historically used the more inclusive CPI-U since that 
appears to be the best method to calculate changes in the affected 
limitations. The Commission received one comment supporting the use of 
the CPI-U and no comments supporting the use of the CPI-W. Therefore, 
for the reasons identified above, the Commission will continue to use 
the CPI-U when calculating the percent change in the Consumer Price 
Index.
---------------------------------------------------------------------------

    \3\ The CPI published by the Department of Labor may be found at 
http://www.bls.gov/cpi/home.htm.
---------------------------------------------------------------------------

5. 11 CFR 110.17(e) Publication of Price Index Increases
    New Sec.  110.17(e) in the final rules states that the Commission 
will announce the amount of the adjusted expenditure and contribution 
limitations in the Federal Register and on the Commission's Web site. 
The Commission received one comment supporting this provision and none 
opposing it.
6. Application of the First Increase Due to Percent Changes in the 
Price Index
    The increased contribution limits of 2 U.S.C. 441a(a)(1)(A) and 
(B), 441a(a)(3), and 441a(h) apply to contributions made on or after 
January 1, 2003. However, under the interpretation outlined above, 2 
U.S.C. 441a(c)(1)(C) requires that these same contribution limits be 
increased through indexing for inflation in odd-numbered years with the 
increase in effect starting with the day following the last general 
election in the previous year. This could imply that the initial 
contribution limits authorized by BCRA to take legal effect on January 
1, 2003 should also be increased by the difference in the price index. 
Several comments, including one from the Congressional sponsors of 
BCRA, disagreed with this interpretation and instead urged that the 
first increase in the limits should occur in 2005 and take effect in 
November 3, 2004, which is the day after the general election.
    One comment noted that it was legally impossible for the indexing 
provision to be given their full effect in 2003. According to the 
commenter, the new contribution limits are effective on or after 
January 1, 2003. For the indexing provisions to be given a full effect 
in 2003, any increase in the contribution limit would be retroactively 
applied, making the effective date November 6, 2002, rather than the 
statutorily mandated effective date of January 2, 2003. Even though the 
legislative history is otherwise silent on this point, this legal 
impossibility strongly implies that these provisions were intended to 
be applied first in 2005. After considering these

[[Page 69938]]

comments, the Commission agrees that the indexing provisions should be 
first applied in 2005.

11 CFR 110.19 Contributions and Donations by Minors

1. Introduction
    BCRA prohibits individuals who are 17 years old and younger 
(minors) from making contributions to Federal candidates and 
contributions and donations to committees of political parties. See 2 
U.S.C. 441k. Senator McCain, a primary sponsor of BCRA, stated during 
the Senate debate on the legislation that the prohibition on 
contributions by minors ``restores the integrity of the individual 
contribution limits by preventing parents from funneling contributions 
through their children, many of whom are simply too young to make such 
contributions knowingly.'' 148 Cong. Rec. S2145-2146 (daily ed. March 
20, 2002).
    The final rules at new 11 CFR 110.19 implement BCRA's prohibitions 
on contributions and donations by minors at 2 U.S.C. 441k. Because 2 
U.S.C. 441k expressly prohibits only contributions by minors to 
candidates and contributions and donations by minors to committees of 
political parties, contributions by minors to other types of political 
committees, such as separate segregated funds and non-connected 
political committees, will continue to be governed by the provisions of 
the pre-BCRA regulations. These regulations are being moved from former 
11 CFR 110.1(i)(2) to 11 CFR 110.19(d).
2. 11 CFR 110.19(a) Contributions to Candidates
    Paragraph (a) of 11 CFR 110.19 prohibits contributions by minors to 
Federal candidates. The paragraph specifies that the prohibition on 
contributions by minors to Federal candidates includes contributions to 
a candidate's principal campaign committee, to any other authorized 
committee of that candidate, and to any entity directly or indirectly 
established, financed, maintained or controlled by one or more Federal 
candidates.
    The Commission sought comment on whether prohibiting contributions 
by minors to entities directly or indirectly established, financed, 
maintained or controlled by one or more Federal candidates is within 
the scope of 2 U.S.C. 441k. The only commenter to address this issue 
supported prohibiting minors' contributions to such entities, opining 
that the prohibition would further BCRA's purpose of ensuring that 
contribution limits are not evaded by a parent funneling money through 
a child. The Commission agrees.
    The Commission also sought comment in the NPRM as to whether the 
regulations should make clear that the relevant time for determining 
whether a minor has made a prohibited contribution or donation is the 
age of the minor at the time he or she makes a contribution. No 
comments were received on this issue. The final rules do not include a 
separate provision addressing this point because reference in the rules 
to 11 CFR 110.1(b)(6), which addresses when a contribution is made, 
provides sufficient clarification.
3. 11 CFR 110.19(b) Contributions and Donations to Committees of 
Political Parties
    New 11 CFR 110.19(b) implements BCRA's prohibition on contributions 
and donations by minors to ``a committee of a political party.'' The 
proposed rules at 11 CFR 110.19(b) interpreted this provision as a 
prohibition on contributions and donations to national, State, 
district, and local party committees. In light of BCRA's language 
prohibiting donations as well as contributions to political party 
committees, the Commission proposed to interpret 2 U.S.C. 441k to 
prohibit minors from making any donations whatsoever to State, 
district, and local party committees, including to their non-Federal 
accounts. In the alternative, the Commission sought comment on whether 
a narrower construction of BCRA's prohibition on donations to State, 
district, and local party committees was warranted. Specifically, the 
Commission sought comment on prohibiting donations by minors to the 
extent such amounts are used to conduct activities affecting Federal 
elections but to permit these donations if used for exclusively non-
Federal purposes to the extent permitted by State law.
    Two commenters addressed this issue. One commenter stated that 
BCRA's prohibition should not extend to minors' contributions to State, 
district, and local party committees because the purpose of the 
provision is to prevent parents from evading federal contribution 
limits by funneling contributions to their children. The commenter 
argued that aside from limits on Levin funds, which can be used to 
finance certain ``Federal election activities'' by State, district, and 
local parties, BCRA does not limit funds given to State, district, and 
local parties. The same commenter also rejected the narrower 
construction described in the NPRM that would prohibit minors' 
donations to State, district, and local party committees only to the 
extent that they were to finance activities affecting Federal 
elections. The commenter argued that concerns that minors' 
contributions might be used as Levin funds should be addressed in a 
rulemaking addressing those funds.
    A second commenter stated that though contributions by minors to 
State, district, and local party committees do not risk circumvention 
of federal contribution limits ``since there are no such limits,'' the 
statutory language at 2 U.S.C. 441k does not limit the prohibition on 
contributions or donations by minors to federal accounts of State, 
district, and local party committees. Other commenters, including the 
Congressional sponsors of BCRA, did not directly address the issue of 
minors' donations to political party committees but noted that minors 
may continue to make donations directly to State and local candidates 
to the extent permitted under State law.
    The final rule at 11 CFR 110.19(b)(1) follows the proposed rule by 
prohibiting contributions and donations by minors to national, State, 
district, and local committees of a political party. Further, the 
Commission believes that interpreting the prohibition on donations to 
encompass both non-Federal accounts and Federal accounts of political 
party committees is appropriate. Interpreting the phrase ``committee of 
a political party'' to encompass only national party committees would 
render the prohibition on ``donations'' meaningless because national 
party committees must no longer accept non-Federal funds under 2 U.S.C. 
441i. Similarly, the prohibition on ``donations'' would have no meaning 
if the minor's prohibition encompassed only Federal accounts of party 
committees since funds accepted by Federal accounts, used for the 
purpose of influencing Federal elections, are considered to be 
``contributions'' not ``donations.'' Thus, BCRA preempts State law to 
the extent that State law permits minors to make donations to State, 
district, and local party committees.
    Prohibiting donations by minors to all committees of State, 
district, and local parties also has a Federal purpose because 
donations of non-Federal funds to State parties could otherwise be 
used, in part, to finance Federal election activities, as defined at 2 
U.S.C. 431(20). See also, 11 CFR 100.24(a) and (b) in Final Rules for 
Prohibited and Excessive Contributions: Non-Federal Funds or Soft 
Money, 67 FR 49,064, 49,110-49,111 (July 29, 2002). These activities, 
including voter registration and get-out-the vote activities conducted 
within a

[[Page 69939]]

specific time frame, are required under BCRA to be funded either wholly 
with Federal funds or with a combination of Federal funds and another 
category of funds regulated by BCRA known as ``Levin funds.'' See 67 FR 
at 49,098 and 49,125-49,126 (11 CFR 300.32(c) and 300.33(a) and 
accompanying Explanation and Justification). Although Levin funds may 
be raised from sources permitted under State law, BCRA limits the 
amount of such funds to $10,000 per donor. Thus, to the extent that 
donations to State, district, and local party committees may be used 
for such activities, BCRA limits those donations. Prohibiting minors 
from making donations serves to prevent parents from circumventing 
those donation limits through minor children, just as the prohibition 
on contributions by minors serves to prevent evasion of the 
contribution limits.
    The Commission has decided not to include in the final rules the 
alternative suggested in the NPRM that would permit minors to make 
donations to non-Federal accounts of State, district, and local party 
committees if the recipient committee can show by establishing separate 
accounts or through a reasonable accounting method that the donation is 
used for exclusively non-Federal purposes. As discussed above, the 
statutory language is broad and does not distinguish between Federal 
and non-Federal accounts of party committees. Additionally, this 
approach would require State, district, and local party committees to 
track yet another type of donation or establish another account in 
addition to those it already tracks or maintains, thereby resulting in 
an additional administrative burden to those groups. See, e.g., 67 FR 
at 49,093 (Explanation and Justification for 11 CFR 300.30).
    Accordingly, as interpreted by the final rules, BCRA preempts State 
law to the extent that State law permits individuals under 18 years of 
age to donate funds to State, district, and local party committees. 
This preemption may have little practical effect in some states. As 
pointed out in the NPRM, many states treat contributions by minors as 
contributions by their parent(s) or guardian(s). See for example, Kan. 
Stat. Ann. 25-4153(c) and Okla. Stat. t. 74, 257:10-1-2(a)(1) and 
(h)(2).
    Paragraph (b)(2) of the final rules is unchanged from the proposed 
rules. It prohibits contributions and donations by minors to entities 
directly or indirectly established, financed, maintained or controlled 
by a committee of a national, State, district or local political party. 
No comments were received on this provision.
    As discussed above in the Explanation and Justification for 
paragraph (b)(1), the Commission interprets the prohibition on 
contributions and donations by minors to committees of political 
parties to include accounts of party committees and entities 
established, financed, maintained or controlled by these party 
committees, including their Federal and non-Federal accounts. 
Consequently, new paragraph (b)(3) of the final rules makes clear that 
the prohibition on contributions and donations by minors encompasses 
donations to any account of a committee or entity described in 
paragraphs (b)(1) and (b)(2) of this section.
4. Contributions and Donations by Minors for Certain Runoffs, Recounts 
and Election Contests
    BCRA provides that its prohibition on contributions and donations 
by minors to candidates and political parties does not apply with 
respect to runoff elections, recounts or election contests resulting 
from elections held prior to November 6, 2002. See 2 U.S.C. 431 note. 
Proposed 11 CFR 110.1(i)(3) addressed this provision. No commentes were 
received on it. The final rules do not address 2 U.S.C. 431 note 
because the Commission has concluded that regulatory provisions for it 
are unnecessary.
5. 11 CFR 110.19(c) Contributions to Political Committees That Are Not 
Authorized Committees or Committees of Political Parties
    Because 2 U.S.C. 441k specifically prohibits contributions by 
minors to candidates and political party committees and not to other 
types of unauthorized committees, proposed 11 CFR 110.19(c) 
contemplated that minors could continue to make unearmarked 
contributions to unauthorized political committees except political 
party committees, in accordance with the requirements of 11 CFR 
110.1(i)(2), the prior rules governing contributions by minors. The 
Commission sought comment in the NPRM as to whether 2 U.S.C. 441k could 
be interpreted to also prohibit contributions by minors to other 
political committees such as separate segregated funds and non-
connected political committees. None of the commenters addressed this 
issue.
    The final rules adhere to the plain language of 2 U.S.C. 441k in 
permitting minors to continue to make contributions to these other 
political committees under the existing rules. Thus, the final rules at 
11 CFR 110.19(c)(1) through (c)(3) restate the regulations governing 
contributions by minors, which are being moved from 11 CFR 110.1(i)(2) 
and amended to reflect that they now govern unearmarked contributions 
by minors to unauthorized political committees other than political 
party committees. Paragraph (c) provides that an individual under 18 
years of age may make contributions in accordance with the contribution 
limits set out at 11 CFR 110.1 and 110.5, if all of the following 
conditions are satisfied: (1) The minor voluntarily and knowingly makes 
the decision to contribute; (2) the funds, goods or services 
contributed are owned or controlled exclusively by the minor; (3) the 
contribution is not made from the proceeds of a gift given to the minor 
to make a contribution or is not in any way controlled by an individual 
other than the minor; and (4) the contribution is not earmarked or 
otherwise directed to one or more Federal candidates or political 
committees or organizations described in Sec. Sec.  110.19(a) and (b).
    The reorganization of the final rule clarifies that the types of 
committees to which a minor may continue to contribute are political 
committees not described in Sec. Sec.  110.19(a) and (b), provided that 
the contribution is not earmarked to a candidate, committee or 
organization described in Sec. Sec.  110.19(a) and (b). The final rules 
also clarify that non-earmarked contributions to these other political 
committees will continue to be governed by the existing regulations 
governing contributions by minors. No comments were received on this 
provision.
6. 11 CFR 110.19(d) Volunteer Services
    Paragraph (d) of the final rules makes clear that minors are not 
prohibited from volunteering their services to Federal candidates, 
political party committees or other political committees, in accordance 
with legislative intent. See 148 Cong. Rec. S2146 (daily ed. March 20, 
2002) (statement of Senator McCain). The final rule is identical to 
proposed 11 CFR 110.19(d). The Commission received one comment 
addressing volunteer services. The commenter agreed that under 2 U.S.C. 
441k minors could continue to participate in any type of political 
campaign by volunteering.
7. 11 CFR 110.19(e) Definition of Directly or Indirectly Establish, 
Maintain, Finance, or Control
    The final rule at 11 CFR 110.19(e) is similar to the language of 
the proposed rule in 11 CFR 110.19(e). It refers the reader to 11 CFR 
300.2(c) for the definition of ``directly or indirectly establish, 
maintain, finance, or control.'' For the definition, see Final Rules 
for

[[Page 69940]]

Excessive and Prohibited Contributions: Non-Federal Funds or Soft 
Money, 67 FR at 49,121. The Commission believes that it is preferable 
to use the same definition of a term throughout the BCRA regulations to 
promote consistency and avoid confusion where, as here, doing so would 
not undermine the purpose of the statute. One commenter expressed 
support for using the same definition of the term throughout the BCRA 
regulations, although the same commenter noted that it had disagreed 
with the definition of ``directly or indirectly establish, maintain, 
finance, or control'' contained in 11 CFR 300.2(c) in its comments on 
the NPRM on Prohibited and Excessive Contributions: Non-Federal Funds 
or Soft Money.
8. Proposed Exemption for Emancipated Minors
    The Commission also sought comment in the NPRM as to whether minors 
who are emancipated under State law should be exempt from the 
prohibition. Under many State laws, a petition for a judicial 
declaration or order of emancipation requires consideration as to 
whether a minor manages his or her own financial affairs or is 
financially self-supporting. Emancipation also has the effect, in most 
cases, of conferring upon a minor the rights and responsibilities of an 
adult, and relieving a child of parental control, thereby diminishing 
the possibility that a parent would funnel contributions or donations 
through an emancipated minor child.
    Five commenters addressed this issue. Four commenters, including 
the congressional sponsors of BCRA, expressed support for such an 
exemption. These commenters agreed that the risk of parental evasion of 
the contribution limits through an emancipated minor was either not 
present or diminished. The fifth commenter agreed that the risk of 
parental circumvention of contribution limits was less of a concern in 
the case of an emancipated minor. However, this commenter argued that 
the statutory language clearly prohibited contributions by minors based 
solely on age.
    The Commission has decided not to include an exemption for 
emancipated minors in the final rules given the plain language of 2 
U.S.C. 441k, which prohibits certain contributions and donations by 
minors on the basis of age alone and not on a minor's legal or 
financial independence from a parent.

11 CFR 110.20 Prohibition on Contributions, Donations, Expenditures, 
Independent Expenditures and Disbursements by Foreign Nationals

    As indicated by the title of section 303 of BCRA, ``Strengthening 
Foreign Money Ban,'' Congress amended 2 U.S.C. 441e to further 
delineate and expand the ban on contributions, donations, and other 
things of value by foreign nationals. BCRA expressly applies the ban to 
contributions and donations solicited, accepted, received, or made 
directly or indirectly in connection with State and local, as well as 
Federal office. 2 U.S.C. 441e(a)(1)(A) and (a)(2). Furthermore, the 
prohibition applies to: (1) Contributions and donations to committees 
of political parties; (2) donations to Presidential inaugural 
committees; (3) donations to party committee building funds; (4) 
disbursements for electioneering communications; (5) expenditures; and 
(6) independent expenditures. 2 U.S.C. 441e(a)(1)(B) and (C); 36 U.S.C. 
510. Consequently, the Commission is amending 11 CFR part 110 to 
implement the revised statutory provision. The final rules remove and 
reserve 11 CFR 110.4(a), the former regulation that addressed foreign 
nationals. New Sec.  110.20 implements BCRA's prohibition on 
contributions, donations, expenditures, independent expenditures, and 
disbursements by foreign nationals. This new section also implements 
the provision in 2 U.S.C. 441e(a)(2) that prohibits persons from 
knowingly soliciting, accepting, or receiving contributions and 
donations from foreign nationals, and adds prohibitions against the 
knowing provision of substantial assistance with foreign national 
contributions or donations, including, but not limited to, serving as a 
conduit or intermediary. ``Foreign national'' and ``knowingly'' are 
defined for purposes of this section.
1. 11 CFR 110.20(a)(1) and (2) Definitions of ``Disbursement'' and 
``Donation''
    New Sec.  110.20(a) defines for purposes of this section several 
words or phrases that are either not defined in other sections of the 
Act or that are defined elsewhere so as to cover only Federal 
elections. Two of these, namely ``disbursement'' and ``donation'' were 
not defined in the proposed rules; however, comments were sought as to 
whether the final rules should include definitions of these terms.
    Although the Commission did not receive any comments regarding a 
definition of ``disbursement,'' it believes additional guidance to be 
necessary in light of the use of ``disbursement'' in BCRA in the 
context of the foreign national prohibition, and its corresponding and 
repeated use in new Sec.  110.20. Thus, the final rule at 11 CFR 
110.20(a)(1) incorporate the definition of this term in new 11 CFR 
300.2(d). One commenter urged the Commission to import the definition 
of ``donation'' in 11 CFR 300.2(e) into Sec.  110.20(a). For the same 
reason that the Commission considers it necessary to provide guidance 
as to ``disbursement'' in Sec.  110.20, it agrees that Sec.  110.20(a) 
should also include a definition of ``donation.'' Consequently, 
paragraph (a)(2) incorporates the definition of ``donation'' at 11 CFR 
300.2(e) into Sec.  110.20.
2. 11 CFR 110.20(a)(3) Definition of ``Foreign National''
    Section 110.20(a)(3), which defines ``foreign national,'' generally 
follows the definition at former 11 CFR 110.4(a)(4). Section 
110.20(a)(3)(i) incorporates ``foreign principal'' as defined in 22 
U.S.C. 611(b) within the definition of ``foreign national.'' Paragraph 
(a)(3)(ii) includes non-citizens but excludes permanent residents of 
the United States as defined in 8 U.S.C. 1101(a)(20). Paragraph 
(a)(3)(iii) narrows the definition of ``foreign national'' by excluding 
both citizens of the United States and, in keeping with BCRA, United 
States nationals pursuant to 8 U.S.C. 1101(a)(22).\4\ The final rule is 
the same as the language in proposed 11 CFR 110.20(i). No comments 
addressing this definition were received.
---------------------------------------------------------------------------

    \4\ ``National of the United States'' is defined as ``(A) a 
citizen of the United States, or (B) a person who, though not a 
citizen of the United States, owes permanent allegiance to the 
United States.'' 8 U.S.C. 1101(a)(22). The addition of (B) covers 
residents of American Samoa.
---------------------------------------------------------------------------

3. 11 CFR 110.20(a)(4) and (a)(5) Definition of ``Knowingly''
    Both the former and the current foreign national prohibitions in 2 
U.S.C. 441e are silent as to what degree of knowledge, if any, a person 
soliciting, accepting, or receiving a contribution or donation must 
have regarding the foreign national status of the contributor or donor 
to establish a violation of the statute. In contrast, some other 
prohibitions in FECA and BCRA expressly provide that knowledge is an 
element of the violation.\5\
---------------------------------------------------------------------------

    \5\ 5 E.g., 2 U.S.C. 441a(f) ``No candidate or political 
committee shall knowingly accept any contribution * * * in violation 
of the provisions of this section * * *.'' (Emphasis added).
---------------------------------------------------------------------------

    The Commission in recent years has addressed the issue of required 
knowledge in a number of enforcement matters arising under former 2 
U.S.C.

[[Page 69941]]

441e(a). See, for example, Matter Under Review (``MUR'') 4530, et al. 
In this and related matters, the Commission confronted questions of 
whether the statute or the First Amendment requires a person to have 
knowledge of a contributor or donor's foreign national status in order 
to be in violation of the foreign-national prohibition, and, if so, 
what degree of knowledge is required.
    The Commission considered, for example, whether actual knowledge at 
the time of a solicitation or receipt is a prerequisite for a 
violation, or whether the person has a duty of inquiry when 
circumstances would raise the suspicions of an objective observer. 
Another alternative with regard to the level of knowledge required 
would be to assume, given the silence in both FECA and BCRA on this 
question, that Congress intended this to be a strict liability statute. 
The fact that Congress has used ``knowingly'' in other provisions of 
FECA and BCRA, but did not include this standard with regard to the 
solicitation, acceptance, or receipt of foreign national contributions 
and donations, could be construed as intent not to require knowledge in 
this regard.
    The U.S. Supreme Court has found that `` `the meaning of the 
statute must, in the first instance, be sought in the language in which 
the act is framed, and if that is plain, * * * the sole function of the 
courts is to enforce it according to its terms'.'' Sutherland Statutory 
Construction 40:01, quoting Caminetti v. U.S., 242 U.S. 470, 485 
(1917). However, one exception to this ``plain meaning rule'' is that 
the rule should not be applied when an injustice would result. 
Sutherland Statutory Construction 47:25. Based upon its prior 
enforcement experience with political committees, and, in particular, 
with the frequent involvement of volunteers in the solicitation and 
receipt of contributions and donations, the Commission has determined 
that a knowledge requirement may produce a less harsh result than a 
strict liability standard.
    The final rules at 11 CFR 110.20(a)(4), like the proposed rules, 
contain three standards of knowledge, any one of which would satisfy 
the knowledge requirements: (1) Actual knowledge; (2) reason to know; 
and (3) the equivalent of willful blindness. Additionally, both the 
proposed rules and the final rules in paragraph (a) contain a list of 
facts that would lead a reasonable person to conclude that, or inquire 
as to whether, a contribution or donation was made by a foreign 
national.
    The NPRM sought comments as to whether the additions of a knowledge 
requirement and of specific standards of knowledge were appropriate and 
whether there were other potential facts that should be added to those 
proposed as circumstances that should trigger an inquiry. Further, 
comments were requested as to whether the regulation should expressly 
require that recipient candidates, political committees and other 
organizations actively seek information as to the citizenship of 
contributors and donors whenever one of the factors listed is at issue.
    Several of the commenters opposed a strict liability standard, but 
supported the inclusion of explicit knowledge requirements in the 
rules. However, some commenters opposed as too high the standard in 
proposed paragraph (g)(4)(ii) that would find knowledge when a person 
was aware of facts that would lead a reasonable person to conclude that 
there is ``a substantial probability'' the source of certain funds is a 
foreign national; one of these commenters suggested that a 
``preponderance of the evidence'' or ``more likely than not''standard 
would be more appropriate. Divergent views were expressed as to the 
inclusion of a duty to inquire about the nationality of a donor, with 
one commenter urging reliance upon current 11 CFR 103.3 rather than 
upon the addition of an affirmative duty to inquire,\6\ and another 
arguing that a ``reasonable inquiry'' should include asking 
``directly'' whether or not a donor is a foreign national.
---------------------------------------------------------------------------

    \6\ The Commission's regulations at 11 CFR 103.3(b) require that 
political committee treasurers examine all contributions received 
for evidence of illegality. If a contribution presenting genuine 
questions as to legality is deposited, the treasurer has an 
affirmative duty to investigate the contribution and use best 
efforts to determine the legality of the contribution. 11 CFR 
103.3(b)(1). If, despite such due diligence, the treasurer is unable 
to determine the legality of the contribution within 30 days of 
receipt, the treasurer is required to refund the contribution to the 
contributor. Id.
---------------------------------------------------------------------------

    As is also discussed below with regard to new section 110.20(g) and 
(h), the final rules make knowledge an element of any violation of 2 
U.S.C. 441e arising from the solicitation, acceptance, or receipt of 
foreign national contributions and donations, or that results from the 
substantial provision of assistance in the solicitation, making, 
acceptance, or receipt of such contributions and donations. The final 
rules at 11 CFR 110.20(a)(4) provide a definition of ``knowingly,'' 
whereby satisfaction of any one of three standards will establish 
knowledge for purposes of 11 CFR 110.20(g) and (h). Section 
110.20(a)(5) contains a list of facts that would lead a reasonable 
person to conclude, or inquire as to whether, a contribution or 
donation was made by a foreign national, as discussed below.
    In the final rules, the first standard of knowledge at paragraph 
(a)(4)(i) is that of actual knowledge of the source of funds solicited, 
accepted, or received. The second standard at paragraph (a)(4)(ii) 
requires awareness on the part of the person soliciting, accepting, or 
receiving a contribution or donation of certain facts that would lead a 
reasonable person to conclude that there is a substantial probability 
that the contribution or donation comes from a foreign source. 
Substantial probability means that there is a considerable likelihood 
that the donor is a foreign national. See Black's Law Dictionary, Fifth 
Edition, 1979, and the Random House Dictionary of the English Language, 
1987. This is, in effect, a ``reason to know'' standard under which a 
person should have acted as though a fact existed until it could be 
proven otherwise. See Restatement (Second) of Agency, sec. 9, cmt. d 
(1958).
    The third standard of knowledge at paragraph (a)(4)(iii) is 
satisfied when the person soliciting, accepting, or receiving a 
contribution or donation is, or becomes aware of, facts that would lead 
a reasonable person to inquire as to whether the source of the funds 
solicited, accepted, or received is a foreign national. This third 
standard is in effect willful blindness, which is applicable to 
situations in which a known fact should have prompted a reasonable 
inquiry, but did not.
    Each of the three paragraphs focus on the source of the funds at 
issue. The source of funds may or may not be the putative contributor 
or donor who provides a check or other negotiable instrument to a 
candidate or committee; rather, the source would be the person or 
persons who originated the contribution or donation, even if it passed 
through the hands or accounts of a U.S. citizen or permanent resident.
    Paragraph (a)(5) sets forth categories of facts that are intended 
to be illustrative of the types of information that should lead a 
recipient to question the origin of a contribution or donation under 
paragraphs (a)(4)(ii) or (iii). These consist of: (i) The use of a 
foreign passport or passport number; (ii) the provision of a foreign 
address; (iii) the use of a check or other written instrument drawn on 
a foreign bank or a wire transfer from a foreign bank; or (iv) 
contributors or donors who reside abroad. Failure to conduct a 
reasonable inquiry in the face of any of these facts constitutes 
evidence of a knowing violation of the Act.

[[Page 69942]]

4. 11 CFR 110.20(a)(6) Definition of ``Solicit''
    The NPRM sought comments as to whether the Commission should 
incorporate into the regulations at 11 CFR 110.20 the definition of 
``solicit'' at 11 CFR 300.2(m), whether it should leave the term 
undefined, or whether it should give the term a more expansive or a 
narrower reading in this context. The term ``to solicit'' is defined in 
11 CFR 300.2(m) as ``to ask another person to make a contribution or 
donation, or transfer of funds, or to provide anything of value, 
including through a conduit or intermediary.'' Prohibited and Excessive 
Contributions: Non-Federal Funds or Soft Money; Final Rule, 67 FR 
49,064-49,122 (July 29, 2002).
    Two of the comments received strongly urged the Commission not to 
incorporate the definition of ``solicit'' at 11 CFR 300.2(m), deeming 
it too narrow. One such commenter characterized the definition as 
``radically underinclusive'' and inferred that it would allow ``a broad 
range of solicitations to escape [regulation,]'' and, if adopted in 
part 110, would allow candidates and officials to ``suggest or request 
that foreign nationals make contributions to their campaigns.'' In 
promulgating 11 CFR 300.2(m), however, the Commission was advised of 
the need for clear definitions to avoid ambiguity, vagueness and 
confusion as to what activities or conversations would constitute 
solicitations. 67 FR at 49,086-49,087 (July 29, 2002). By using the 
term ``ask,'' the Commission defined ``solicit'' to require some 
affirmative verbalization or writing, thereby providing members of 
Congress, candidates and committees with an understandable standard. It 
is the impressionistic or subjective aspects of the term ``suggest'' 
and ``request'' that the Commission rejected in the Title I rulemaking. 
The Commission also notes that while the terms ``suggest'' or 
``request'' recommended by one commenter encompass a wide array of 
activity, it is not clear that they would cover more direct 
verbalizations or writings captured by terms such as ``demand,'' 
``instruct,'' or ``tell,'' which the Commission believes are captured 
by the term ``ask.''
    The Commission is aware that the decision to define ``solicit'' as 
``ask'' rather than as ``request, suggest or recommend'' (proposed by 
the Commission staff) was controversial. The Commission notes that 
``request'' and ``ask'' are essentially synonymous. (See American 
Heritage College Dictionary, 34d Edition: ``request'' is defined as 
``1. To express a desire for; ask for. 2. To ``ask'' (a person) to do 
something;'' ``ask'' is defined as ``* * * 4. To make a request of or 
for.'') The Commission was unwilling to use the far more expansive term 
``suggest,'' for concern that such a vague term could subject persons 
to investigation and prosecution based on highly subjective judgments 
about whether a particular remark or action constituted a 
``suggestion.'' The definition of ``solicit'' is intended to include 
``a palpable communication intended to, and reasonably understood to, 
convey a request for some action * * *'' The Democratic National 
Committee, the Democratic Senatorial Campaign Committee, and the 
Democratic Congressional Campaign Committee, Comments on Coordinated 
and Independent Expenditures, 3 (Oct. 11, 2002).
    In addition, the basic canons of statutory construction argue 
strongly against using the phrase ``request or suggestion'' to define 
``solicit.'' BCRA, and FECA prior to passage of BCRA, use the term 
``request or suggestion'' in the definition of ``independent 
expenditure'' (See BCRA section 211, 2 U.S.C. 431(17)) and in the 
reciprocal definition of ``coordination'' (See BCRA section 213, 2 
U.S.C. 441a(a)(7)(B)). ``We find the contrasting language to be 
particularly telling. Where Congress includes particular language in 
one section of a statute but omits it in another * * * it is generally 
presumed that Congress acts intentionally and purposely in the 
disparate inclusion or exclusion.'' (FEC v. NRA Political Victory Fund, 
513 U.S. 88, 95 (1994) quoting Keene Corp. v. United States, 508 U.S. 
200, 208 (1993) (internal quotations and citation omitted).
    The Commission believes that the need to craft clear and 
understandable definitions marking the boundary between permissible and 
impermissible solicitations by candidates, parties, or their agents in 
the realm of non-Federal funds, applies equally to the realm of foreign 
national funds. A single definition has the added benefit of reducing 
confusion among those who solicit campaign funds often, and from a 
variety of individuals. Accordingly, the term ``solicit'' in the final 
rules at 11 CFR part 110.20 has the same meaning as in 11 CFR 300.2(m).
5. 11 CFR 110.20(a)(7) Safe Harbor for Knowledge Standard
    The Commission in the NPRM also sought comment on whether it should 
create safe harbors within which political committees would be deemed 
to have satisfied their duty to investigate contributions or donations 
in order to confirm that they do not come from foreign sources. One 
commenter requested that the Commission expressly create such a safe 
harbor if ``reasonable efforts'' have been made to follow guidelines in 
the regulations.
    Whether a person has the requisite knowledge under 11 CFR 
110.20(a)(4) and whether a contributor or donor is a foreign national 
are often fact-intensive determinations. Given the wide range of 
factual situations that could arise, and the likelihood that some 
foreign donors or contributors will take steps to conceal the illegal 
nature of their actions, it is not possible in all circumstances to 
craft appropriate safe harbors to safeguard recipient committees who do 
not and cannot know of the illegality while at the same time holding 
accountable those who do or should know.
    However, the Commission is adopting one narrowly tailored safe 
harbor. Under 11 CFR 103.3(b)(1), with respect to contributions that 
present ``enuine questions'' that they may come from a foreign source, 
political committee treasurers have an affirmative duty to investigate 
the contributions and use best efforts to determine the legality of the 
contribution. If, despite such due diligence, the treasurer is unable 
to determine the legality of the contribution within 30 days, the 
treasurer is required to refund the contribution to the contributor. 
Id. During the last several years, many political committees and other 
organizations, out of an abundance of caution, have adopted a policy of 
requesting and keeping on file copies of U.S. passport papers from all 
their contributors who reside outside the United States, or who list a 
foreign address, or who make a contribution through a foreign bank. The 
Commission believes such prudent practices are appropriate and satisfy 
a political committee's affirmative duty to investigate such 
questionable contributions. Accordingly, the Commission is creating a 
safe harbor at 11 CFR 110.20(a)(7) whereby any person shall be deemed 
to have conducted a reasonable inquiry under 11 CFR 110.20(a)(4)(iii) 
if he or she seeks and obtains copies of current and valid U.S. 
passport papers for U.S. citizens who are contributors or donors who 
(i) use a foreign passport or passport number for identification 
purposes, (ii) provide a foreign address, (iii) make a contribution or 
donation by means of a check or other written instrument drawn on a 
foreign bank or by a wire transfer from a foreign bank, or (iv) reside 
abroad. See 11 CFR 110.20(a)(5)(i) through (iv). Under those 
circumstances, the political committee shall also be deemed to have 
satisfied its

[[Page 69943]]

affirmative duty to investigate such contributions under 11 CFR 
103.3(b)(1).
    Current 11 CFR 103.3(b)(2) provides the steps necessary for a 
treasurer who discovers that an illegal contribution has been deposited 
to fully remedy the situation; this provision applies ``to 
contributions from foreign nationals * * * when there is no evidence of 
illegality on the face of the contributions themselves.'' Explanation 
and Justification, 52 FR 760, 768-69 (Jan. 9, 1987). In light of 11 CFR 
103.3(b)(2), the Commission has concluded that no additional safe 
harbor is necessary in this area.
6. 11 CFR 110.20(b) ``Indirectly''
    BCRA amends 2 U.S.C. 441e by banning foreign national contributions 
and donations, or express or implied promises to make such 
contributions or donations, that are made ``directly or indirectly.'' 
Previously, 2 U.S.C. 441e(a) banned foreign national contributions made 
directly ``or through any other person.'' The legislative history of 
BCRA does not reveal whether Congress intended ``indirectly'' to have a 
broader meaning than ``through any other person,'' the language used in 
pre-BCRA 2 U.S.C. 441e(a).
    The Commission solicited comments in the NPRM as to whether 
``indirectly'' should be construed to have a broader meaning than 
``through any other person'' and if so, whether the rules should 
explicitly reflect this interpretation by defining ``indirectly.'' 
Several of the commenters urged the Commission not to interpret 
``indirectly'' as having a broader meaning, arguing that there is 
nothing in the legislative history to support such a reading, and that 
to do so would involve speculation as to Congressional intent.
    The NPRM further solicited comments as to whether ``indirectly'' 
should be interpreted to cover U.S. subsidiaries of foreign 
corporations that make non-Federal donations with corporate funds or 
that have a separate segregated fund that makes Federal contributions. 
Specifically, the Commission sought comment on whether BCRA's new 
statutory language prohibits a foreign-controlled U.S. corporation, 
including a U.S. subsidiary of a foreign corporation, from making 
corporate donations, or from making Federal contributions from a 
separate segregated fund, or both.
    Numerous comments were received addressing the involvement in 
elections of U.S. subsidiaries of foreign corporations, all of which 
strongly urged the Commission not to extend the prohibition on foreign 
national involvement to the activities of foreign-owned U.S. 
subsidiaries. The comment submitted by the BCRA sponsors stated that 
Congress in this legislation did not address ``contributions by 
foreign-owned U.S. corporations, including U.S. subsidiaries of foreign 
corporations.'' A number of the other commenters cited the absence, in 
BCRA and in its legislative history, of express Congressional intent to 
reach either donations by such corporate entities in state elections, 
where permitted by state law, or the involvement of their separate 
segregated funds in Federal elections. They stressed the significance 
of such silence given the series of Commission advisory opinions over 
more than two decades that have affirmed the participation of such 
subsidiaries in elections in the United States, either directly in 
states where state law permits, or through separate segregated funds 
with regard to Federal elections, so long as there is no involvement of 
foreign nationals in decisions regarding such participation and so long 
as foreign nationals are not solicited for the funds to be used. See 
Advisory Opinions 2000-17, 1999-28, 1995-15, 1992-16, 1992-07, 1990-08, 
1989-29, 1982-34, 1981-36, 1980-100, and 1978-21. Several commenters 
asserted further that the impetus for Congress to amend 2 U.S.C. 441e 
in 2002 was the involvement of individual foreign nationals in the 
financing of the 1996 presidential election campaign, not the 
activities of foreign-owned U.S. subsidiaries.
    A number of commenters argued that the use of ``indirectly'' in 
BCRA with regard to foreign national contributions and donations 
represented only a codification of the Commission's earlier use of this 
word in advisory opinions and regulations to prohibit the direct or 
indirect involvement of individual foreign nationals in decisions 
concerning either corporate donations at the State or local level or 
Federal contributions made by separate segregated funds. See Advisory 
Opinions 2000-17, 1995-15, 1992-16, 1990-08, and 1989-29, and 11 CFR 
110.4(a)(3). A joint comment stressed that Congress had earlier 
addressed and rejected a ban on U.S. subsidiary participation, the 
House of Representatives in 1998 and the Senate earlier in 1992, and 
that this legislative history showed that the use of ``indirectly'' in 
BCRA addresses only foreign national involvement in corporate decision-
making.\7\ These comments, plus one received from two members of the 
U.S. Senate, argued that, because Congress was thus very familiar with 
the U.S. subsidiary issue, any Congressional intent to prohibit such 
activity in the context of BCRA would have been addressed in debate and 
made explicit in the legislation.
---------------------------------------------------------------------------

    \7\ These legislative references are to the histories of the 
Congressional Campaign Spending Limit and Election Reform Act of 
1992, which was vetoed by the President, and of the Bipartisan 
Campaign Reform Act, H.R. 2183, when it was considered by the House 
of Representatives in 1998. In 1992, Senator Bentsen offered an 
amendment to prohibit federal contributions by the separate 
segregated funds of U.S. subsidiaries when such a subsidiary is more 
than 50% owned or controlled by a foreign corporation. The amendment 
would have changed the definition of ``foreign national'' to include 
50% owned or controlled subsidiaries, and would also have applied 
the foreign national prohibition to the separate segregated funds of 
such subsidiaries.
    In response, Senator Breaux offered a substitute amendment that 
would have codified (1) the right of U.S. subsidiary employees to 
participate in elections through separate segregated funds and (2) 
the prohibition in the Commission's regulations against the 
participation of foreign nationals, ``directly or indirectly,'' in 
decision-making regarding contributions or expenditures made in 
connection with elections at all levels and in the administration of 
a political committee. The Senate voted to substitute the Breaux 
amendment. The commenters stressed the use of ``indirectly'' in the 
Breaux amendment and argued that its use in BCRA was for the same 
purpose; i.e., the codification of the regulation prohibiting the 
participation of foreign nationals in decision-making.
    In 1998, the House voted with no opposition for an amendment 
introduced by Representative Gillmor and Representative Tanner to 
assure the right of a U.S. subsidiary of a foreign owned or 
controlled corporation to maintain a separate segregated fund 
(``SSF''). An amendment proposed by Representative Kaptur to 
prohibit Federal contributions or expenditures by such SSFs was 
later modified to address only reporting by U.S. subsidiaries.
---------------------------------------------------------------------------

    Several commenters questioned the constitutionality of prohibiting 
U.S. employees of foreign-owned subsidiaries from participation in U.S. 
elections. They argued that such a ban would discriminate against these 
employees on the basis of their employers' parent companies. One 
commenter noted that, by definition, U.S. subsidiaries are U.S. 
companies. Another asserted that a ban on U.S. subsidiary election-
related activity would be counter to the globalization of financial 
activity; yet another argued that it would be counter to NAFTA and 
other treaties. One commenter noted possible negative effects upon U.S. 
trade associations if certain of their member corporations could not 
form separate segregated funds.
    The Commission agrees with those who have argued that 
``indirectly'' should not be deemed to cover U.S. subsidiaries of 
foreign corporations. This agreement is based upon the lack of evidence 
of Congressional intent to broaden the prohibition on foreign national 
involvement in U.S. elections to cover such entities, and upon the

[[Page 69944]]

substantial policy reasons set forth in the long line of Commission 
advisory opinions that have permitted U.S. subsidiaries to administer 
separate segregated funds and to make corporate donations for State and 
local elections where they are allowed to do so by state law.
    The Commission has determined that the activities of U.S. 
subsidiaries of foreign corporations are governed by new Sec.  
110.20(i), which prohibits involvement of foreign nationals in the 
decision-making of separate segregated funds, and of corporations that 
plan to make donations in connection with State and local elections 
where they are permitted to do so. (See further discussion below.) 
Thus, the final rules do not define ``indirectly'' or contain 
additional rules pertaining to U.S. subsidiaries of foreign 
corporations.
7. 11 CFR 110.20(b) Addition of ``Donation'' in the Foreign National 
Ban
    In BCRA, Congress added the ``donation'' of funds by foreign 
nationals to the existing ban on contributions by foreign nationals. In 
1999, 2000, and 2001 the Commission included in its legislative 
recommendations to Congress a proposal that 2 U.S.C. 441e be amended to 
clarify that the statutory prohibition on foreign national 
contributions extends to State and local elections. The Commission 
noted, inter alia, that this could be accomplished by changing 
``contribution'' to ``donation.''
    Congress chose to retain ``contribution'' and to add ``donation'' 
in BCRA as a prohibited activity. Congress also revised 2 U.S.C. 441e 
to delete references to ``elections'' and ``candidates'' for ``any 
political office,'' and substituted the broader phrase ``Federal, 
State, or local election.'' 2 U.S.C. 441e(a)(1)(A). Through this two-
fold approach, Congress left no doubt as to its intention to prohibit 
foreign national support of candidates and their committees and 
political organizations and foreign national activities in connection 
with all Federal, State, and local elections.
    The legislative history indicates that the revision to 2 U.S.C. 
441e ``prohibits foreign nationals from making any contribution to a 
committee of a political party or any contribution in connection with 
Federal, State or local elections, including any electioneering 
communications. This clarifies that the ban on contributions [by] 
foreign nationals applies to soft money donations.'' Statement of Sen. 
Feingold, 148 Cong. Rec. S1991-1997 (daily ed. Mar. 18, 2002). The NPRM 
proposed a definition of ``election,'' based to some extent on the 
definition in 11 CFR 100.2, which drew no comments. This proposed 
definition is not included in the final rules. Instead, the wording of 
new 11 CFR 110.20 tracks the statutory language in BCRA.
    As discussed above, the definition of ``donation'' in 11 CFR 
300.2(e) applies to paragraph 110.20(b). Under this provision, both 
contributions and donations by foreign nationals are prohibited.
8. 11 CFR 110.20(c) Contributions and Donations to Committees and 
Organizations of Political Parties
    BCRA expressly extends the prohibition on foreign national 
contributions and donations to those made to committees of political 
parties. 2 U.S.C. 441e(a)(1)(B). The particular committees covered 
include the national party committees; the national congressional 
campaign committees; and all State, district, local, and subordinate 
committees, including the non-Federal accounts of State, district, and 
local party committees.
    In light of BCRA's addition of ``donation'' to the statutory 
language, the proposed rules further extended the foreign national 
prohibition to organizations of political parties, whether or not they 
are political committees under the Act and 11 CFR 100.5. Because many 
party organization activities affect Federal, State, and local 
elections, this extension to all party organizations reinforces the 
prohibition at 2 U.S.C. 441e(a)(1)(A) on foreign national contributions 
and donations in connection with elections at all levels. Two 
commenters on the proposed rules agreed with this interpretation, and 
no commenters objected. Because of the interaction between 2 U.S.C. 
441e(a)(1)(A) and (B), the final rule at 11 CFR 110.20(c) adopts this 
extension to all political party organizations.
9. 11 CFR 110.20(d) Contributions and Donations to Building Funds
    BCRA prohibits foreign nationals from making any contribution or 
donation to national party committees, including donations for the 
purchase or construction of an office building. See 2 U.S.C. 441e. In 
addition, new 11 CFR 300.35(a) explicitly provides that the 
prohibitions in BCRA against contributions and donations by foreign 
nationals do not permit party committees to spend funds contributed or 
donated by foreign nationals for the purchase or construction of State 
or local party committee office buildings. Final Rule and Explanation 
and Justification, 67 FR 49,101, 49,127 (July 29, 2002). The 
Explanation and Justification for 11 CFR 300.35 indicates that this 
prohibition on foreign national funding also extends to in-kind 
contributions or donations.
    Consistent with new 11 CFR 300.35(a), new 11 CFR 110.20(d) 
explicitly states that foreign nationals are prohibited from making 
contributions or donations directly or indirectly to committees or 
organizations of a political party for the construction or purchase of 
any office building. This final rule is identical to the language in 
proposed Sec.  110.20(f). The only two commenters who addressed this 
topic agreed with this addition to the regulations.
10. 11 CFR 110.20(e) and (f) Expenditures, Independent Expenditures, 
and Disbursements
    BCRA prohibits a foreign national from making ``an expenditure, 
independent expenditure, or disbursement for an electioneering 
communication.'' 2 U.S.C. 441e(a)(1)(C). The Commission in the NPRM 
interpreted the prohibitions against an ``expenditure'' or an 
``independent expenditure'' by a foreign national as being general in 
scope, and the phrase ``for an electioneering communication'' at 2 
U.S.C. 441e(a)(1)(C) as modifying only ``disbursement.'' This 
interpretation is based upon the fact that BCRA expressly exempts from 
the definition of ``electioneering communication'' ``a communication 
which constitutes an expenditure or an independent expenditure under 
this Act * * *.'' 2 U.S.C. 434(f)(3)(B)(ii).\8\ This exemption 
apparently left ``disbursement'' as the sole transaction category 
applicable to electioneering communications. Several commenters agreed 
with this interpretation. The final rule at Sec.  110.20(e) 
specifically prohibits disbursements for electioneering communications 
by foreign nationals.
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    \8\ BCRA defines ``electioneering communication'' as a 
``broadcast, cable, or satellite communication'' that ``refers to a 
clearly identified candidate for Federal office,'' that is made 
within particular time frames, and that is targeted to the relevant 
electorate if it refers to a candidate other than those for the 
office of President or Vice-President. 2 U.S.C. 434(f)(3)(A)(i)(I). 
For a more extensive discussion of electioneering communications, 
see the Final Rules on ``Electioneering Communications,'' 67 FR 
65190 (Oct. 23, 2002).
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    Section 431(9)(A)(1) of FECA defines ``expenditure'' as ``any 
purchase, payment, * * * or anything of value made for the purpose of 
influencing any election for Federal office,'' and 2 U.S.C. 431(17) 
defines ``independent expenditure'' as ``an expenditure by a person 
expressly advocating the election or defeat of a clearly defined 
candidate which is made without cooperation or

[[Page 69945]]

consultation with any candidate * * *.'' Thus, the terms 
``expenditure'' and ``independent expenditure'' apply only to amounts 
spent with respect to Federal elections. In contrast, ``disbursement,'' 
a term used in both FECA and BCRA but not defined in the statutes, is 
defined in 11 CFR 300.2 as ``any purchase or payment made by any person 
that is subject to the Act.'' As discussed above, this definition of 
``disbursement'' covers payments beyond those that constitute 
``expenditures,'' and ``independent expenditures,'' such as those made 
in connection with non-Federal elections.
    BCRA does not contain an express prohibition against foreign 
national disbursements for activities other than electioneering 
communications. This omission left in question the status of 
disbursements by foreign nationals in connection with State and local 
elections that are by definition not ``expenditures'' or ``independent 
expenditures'' because they are not made in connection with Federal 
elections. The Commission's treatment of a similar issue in the past 
has, however, provided guidance on this question.
    Previously, 2 U.S.C. 441e contained no express prohibition against 
expenditures by foreign nationals. Nevertheless, the Commission revised 
11 CFR 110.4(a) in 1989 to state that foreign nationals were prohibited 
from making expenditures as well as contributions. The Explanation and 
Justification for that amendment stated: ``The FECA generally prohibits 
expenditures when it prohibits contributions by a specific category 
[of] persons, thereby ensuring that the persons cannot accomplish 
indirectly what they are prohibited from doing directly.'' 54 FR 4858 
(Nov. 24, 1989). The Explanation and Justification continued: ``Nothing 
in section 441e's legislative history suggests that Congress intended 
to deviate from the FECA's general pattern of treating contributions 
and expenditures in parallel fashion.'' Id.
    As discussed above, BCRA added ``donations'' to the activities 
prohibited to foreign nationals, this being one way in which the reach 
of the statute is extended to State and local elections to which the 
term ``contributions'' does not apply. As was the case earlier with the 
FECA, there is nothing in BCRA that would indicate an intent on the 
part of Congress to treat disbursements for State or local elections 
any differently than it now treats expenditures for Federal elections, 
or any intent to not consider donations and disbursements to be 
parallel concepts. The addition of ``disbursements'' also serves to 
strengthen even more the ban on foreign money.
    The proposed rule treated ``donations'' and ``disbursements'' in 
the same fashion as ``contributions'' and ``expenditures'' have been 
addressed in the past, by prohibiting at proposed paragraph (d) all 
disbursements for elections by foreign nationals, not just the 
disbursements made for electioneering communications that were 
explicitly prohibited at proposed 11 CFR 110.20(e). Three commenters 
affirmed the Commission's approach. No commenters were opposed.
    Consequently, while the final rule at Sec.  110.20(e) prohibits any 
disbursement for an electioneering communication by foreign nationals, 
the final rule at paragraph (f) prohibits all expenditures, independent 
expenditures, and disbursements by foreign nationals in connection with 
Federal, State and local elections for the reasons stated above.
11. 11 CFR 110.20(g) Solicitation, Acceptance or Receipt of 
Contributions and Donations From Foreign Nationals
    BCRA prohibits any person from soliciting, accepting, or receiving 
from a foreign national a contribution or donation made in connection 
with a Federal, State, or local election, or made to a party committee. 
2 U.S.C. 441e(a)(2). Proposed Sec.  110.20(g)(1) sought to prohibit the 
knowing solicitation, acceptance or receipt of contributions or 
donations from foreign nationals. As noted above, the final rule at 
Sec.  110.20(g) contains the same prohibition. The Commission's 
additions of a knowledge requirement and of knowledge standards with 
regard to the solicitation, acceptance or receipt of foreign national 
contributions and donations are discussed above in connection with 11 
CFR 110.20(a)(4) and (5).
12. 11 CFR 110.20(h) Assisting Foreign National Contributions or 
Donations
    The foreign national prohibition at 2 U.S.C. 441e as amended by 
BCRA also raised issues concerning the liability of persons who 
knowingly assist foreign nationals in making contributions or 
donations. The proposed rules included a prohibition on the assisting 
of foreign national contributions and donations. Section 441e of the 
Act does not explicitly address those who assist others to violate its 
prohibition on foreign national contributions, donations, expenditures, 
independent expenditures, and disbursements. Recently, however, the 
Commission has addressed in the enforcement context a number of 
situations in which there arose questions about the liability of 
individuals who had provided substantial assistance to a foreign 
national or to a recipient committee with regard to a foreign national 
contribution or donation. These individuals had functioned as conduits 
or intermediaries for the funds involved. See MUR 4530, et al. The 
Commission concluded in these enforcement matters that, because the 
wording of 2 U.S.C. 441e at the time prohibited foreign nationals from 
making contributions directly or through any other person, and because 
the statute also prohibited persons from soliciting, accepting or 
receiving such contributions from a foreign national, the activities of 
conduits and intermediaries of foreign national funds were prohibited 
when the funds involved had been passed on for the purpose of making 
contributions. It is also worth noting that, in some instances, the 
foreign national making a prohibited contribution can easily evade U.S. 
jurisdiction, while a U.S. citizen serving as a conduit or rendering 
substantial assistance can be more easily reached.
    The Commission has now concluded that, in light of Congressional 
intent in BCRA to strengthen the foreign money ban, nothing in amended 
2 U.S.C. 441e should be construed to alter the Commission's pre-BCRA 
determinations in this respect. Additionally, the Commission has broad 
rulemaking authority in 2 U.S.C. 437d(a)(8) to make rules that are 
``necessary to carry out the provisions of the Act.'' See also BCRA, 
Public Law 107-155, sec. 402(c). It has determined that a rule that 
prohibits persons from knowingly providing substantial assistance to 
foreign nationals to circumvent the FECA is necessary to effectuate one 
of the key purposes of BCRA, that is, to prevent foreign national funds 
from influencing elections. One commenter expressed agreement with 
extending the prohibition to those who assist foreign national 
contributions and donations.
    For purposes of paragraphs (h)(1) and (2), ``substantial 
assistance'' means active involvement in the solicitation, making, 
receipt or acceptance of a foreign national contribution or donation 
with an intent to facilitate successful completion of the transaction. 
See, e.g., IIT, An International Investment Trust v. Cornfield, 619 
F.2d 909, 922, 925-926, (2nd Cir. 1980), citing, inter alia, Rolf v. 
Blyth, Eastman Dillon & Co., Inc., 570 F.2d 38, 47-48 (2nd Cir.), cert. 
denied, 438 U.S. 1030 (1978); and U.S. v. Peoni,

[[Page 69946]]

100 F.2d 401 (2nd Cir. 1938).\9\ ``Substantial assistance'' does not 
include strictly ministerial activity undertaken pursuant to the 
instructions of an employer, manager or supervisor.
---------------------------------------------------------------------------

    \9\ As stated in IIT, Judge Learned Hand observed in Peoni, a 
criminal case involving possession of counterfeit money, that for 
centuries courts had required that an accessory to an activity be a 
person who must ``in some sort associate himself with the venture, 
that he participate in it as something that he wishes to bring 
about, that he seek by his action to make it succeed. All the words 
used [by courts] * * * carry an implication of purposive attitude 
towards it.'' 100 F.2d at 402.
---------------------------------------------------------------------------

    The final rule at paragraph (h)(1) combines proposed paragraphs 
(h)(3) and (4) by prohibiting any person from knowingly providing 
substantial assistance in the solicitation, making, receipt, or 
acceptance of a contribution or donation from a foreign national. This 
provision covers, but is not limited to, those persons who act as 
conduits or intermediaries for foreign national contributions or 
donations and who thus would also violate the statutory prohibition 
against receiving contributions or donations from a foreign national. 
The final rule at paragraph (h)(2) extends the prohibition on knowingly 
providing substantial assistance to assisting foreign nationals in the 
making of expenditures, independent expenditures and disbursements in 
connection with Federal or non-Federal elections.
    The three standards of knowledge set forth at Sec.  110.20(a)(4) 
are applicable to anyone who provides the kinds of assistance 
prohibited by paragraph (h).
13. 11 CFR 110.20(i) Prohibition on Participation by Foreign Nationals 
in Decisions Related to Election Activities
    Section 110.20(i) retains the prohibition at former 11 CFR 
110.4(a)(3) on participation by foreign nationals in decisions made by 
any person, including entities such as corporations, labor 
organizations or political committees, that are related to Federal and 
non-Federal elections. The only changes involve the addition of 
``political organization'' to the listing of decision-making entities 
and of ``donations'' and ``disbursements'' to the list of transactions 
about which decisions are made; all of these additions are needed to 
address fully the prohibition on the funding of State and local 
elections. Foreign nationals are prohibited from taking part in 
decisions about contributions and donations to any Federal, State, or 
local candidates or to, or by, any political committees or political 
organizations, and in decisions about expenditures and disbursements 
made in support of, or in opposition to, such candidates, political 
committees or political organizations. Foreign nationals also are 
prohibited from involvement in the management of a political committee, 
including a separate segregated fund, a non-connected committee or the 
non-Federal accounts of these committees.
    Numerous comments received regarding the proposed rules supported 
this provision as the appropriate way to prevent foreign nationals from 
engaging in election-related activities, particularly in the context of 
U.S. subsidiaries of foreign-owned corporations. No commenter opposed 
the proposed regulation.
14. Donations to Presidential Inaugural Committees
    In the NPRM the Commission proposed to include a BCRA-related rule 
prohibiting knowing acceptance by Presidential inaugural committees of 
donations from foreign nationals. Proposed 11 CFR 110.20(c), 67 FR at 
54,379. The Commission had stated in the NPRM entitled ``Disclaimers, 
Fraudulent Solicitations, Civil Penalties, and Personal Use of Campaign 
Funds,'' that it would address rules pertaining to inaugural committees 
in a future rulemaking. 67 FR 55, 348 (Aug. 29, 2002). The Commission 
has determined that the rules concerning inaugural committees should be 
addressed in a comprehensive manner. Therefore, donations by foreign 
nationals to Presidential inaugural committees will also be part of 
this future rulemaking and are not included in these final rules.

Certification of No Effect Pursuant to 5 U.S.C. 605(b) (Regulatory 
Flexibility Act)

    The Commission certifies that the attached final rules do not have 
a significant economic impact on a substantial number of small 
entities. The entities affected by these rules are political 
committees, minors, foreign nationals and U.S. nationals. The basis of 
this certification is that the national, State, and local party 
committees of the two major political parties are not small entities 
under 5 U.S.C. 601 because they are not small businesses, small 
organizations, or small governmental jurisdictions.
    Minors and many foreign nationals are individuals, and therefore, 
not small entities. Furthermore, the final rules, which are based on 
statutory language, clarify and describe in further detail the already 
existing ban on contributions by foreign nationals. Additionally, to 
the extent that there may be foreign nationals that may fall within the 
definition of ``small entities,'' their numbers are not substantial, 
particularly the number that would make a donation, expenditure, 
independent expenditure, or disbursement in connection with a Federal, 
State, or local election.
    In addition, to the extent that the rules apply to any small 
entities, they are not unduly burdened by the increased contribution 
limitations, which give such small entities more latitude in the amount 
they contribute. Furthermore, the new rules for redesignating 
contributions for a particular election and reattributing contributions 
to particular donors provide political committees with flexibility and 
additional means to ensure compliance with FECA and BCRA, thereby 
reducing any economic costs they may have incurred under the previous 
rules.

List of Subjects

11 CFR Part 102

    Political committees and parties, Reporting and recordkeeping 
requirements.

11 CFR Part 110

    Campaign funds, Political committees and parties.

    For the reasons set out in the preamble, Subchapter A of Chapter I 
of title 11 of the Code of Federal Regulations is amended as follows:

PART 102--REGISTRATION, ORGANIZATION, AND RECORDKEEPING BY 
POLITICAL COMMITEES (2 U.S.C. 433)

    1. The authority citation for part 102 continues to read as 
follows:

    Authority: 2 U.S.C. 432, 433, 434(a)(11), 438(a)(8), 441d.


    2. Section 102.9 is amended by adding paragraph (a)(4) and revising 
paragraph (e) to read as follows:


Sec.  102.9  Accounting for contributions and expenditures (2 U.S.C. 
432(c)).

* * * * *
    (a) * * *
    (4) In addition to the account to be kept under paragraph (a)(1) of 
this section, for contributions in excess of $50, the treasurer of a 
political committee or an agent authorized by the treasurer shall 
maintain:
    (i) A full-size photocopy of each check or written instrument; or
    (ii) A digital image of each check or written instrument. The 
political committee or other person shall provide the computer 
equipment and software needed to retrieve and read the digital images, 
if necessary, at no cost to the Commission.
* * * * *

[[Page 69947]]

    (e)(1) If the candidate, or his or her authorized committee(s), 
receives contributions that are designated for use in connection with 
the general election pursuant to 11 CFR 110.1(b) prior to the date of 
the primary election, such candidate or such committee(s) shall use an 
acceptable accounting method to distinguish between contributions 
received for the primary election and contributions received for the 
general election. Acceptable accounting methods include, but are not 
limited to:
    (i) The designation of separate accounts for each election, caucus 
or convention; or
    (ii) The establishment of separate books and records for each 
election.
    (2) Regardless of the method used under paragraph (e)(1) of this 
section, an authorized committee's records must demonstrate that, prior 
to the primary election, recorded cash on hand was at all times equal 
to or in excess of the sum of general election contributions received 
less the sum of general election disbursements made.
    (3) If a candidate is not a candidate in the general election, any 
contributions made for the general election shall be refunded to the 
contributors, redesignated in accordance with 11 CFR 110.1(b)(5) or 
110.2(b)(5), or reattributed in accordance with 11 CFR 110.1(k)(3), as 
appropriate.
* * * * *

PART 110--CONTRIBUTION AND EXPENDITURE LIMITATIONS AND PROHBITIONS

    3. The authority citation for part 110 is revised to read as 
follows:

    Authority: 2 U.S.C. 431(8), 431(9), 432(c)(2), 437d, 438(a)(8), 
441a, 441b, 441d, 441e, 441f, 441g, 441h and 441k.


    4. Section 110.1 is amended by revising paragraphs (a), (b)(1), 
(b)(3)(iii), (b)(5)(ii), (c)(1), (i), (k)(3)(ii), (l)(4), and (l)(5) to 
read as follows:


Sec.  110.1  Contributions by persons other than multicandidate 
political committees (2 U.S.C. 441a(a)(1)).

    (a) Scope. This section applies to all contributions made by any 
person as defined in 11 CFR 100.10, except multicandidate political 
committees as defined in 11 CFR 100.5(e)(3) or entities and individuals 
prohibited from making contributions under 11 CFR 110.19 and 110.20 and 
11 CFR parts 114 and 115.
    (b) * * *
    (1) No person shall make contributions to any candidate, his or her 
authorized political committees or agents with respect to any election 
for Federal office that, in the aggregate, exceed $2,000.
    (i) The contribution limitation in the introductory text of 
paragraph (b)(1) of this section shall be increased by the percent 
difference in the price index in accordance with 11 CFR 110.17.
    (ii) The increased contribution limitation shall be in effect for 
the 2-year period beginning on the first day following the date of the 
last general election in the year preceding the year in which the 
contribution limitation is increased and ending on the date of the next 
general election. For example, an increase in the contribution 
limitation made in January 2005 is effective from November 3, 2004 to 
November 7, 2006.
    (iii) In every odd numbered year, the Commission will publish in 
the Federal Register the amount of the contribution limitation in 
effect and place such information on the Commission's Web site.
* * * * *
    (3) * * *
    (iii) The amount of the net debts outstanding shall be adjusted as 
additional funds are received and expenditures are made. The candidate 
and his or her authorized political committee(s) may accept 
contributions made after the date of the election if:
    (A) Such contributions are designated in writing by the contributor 
for that election;
    (B) Such contributions do not exceed the adjusted amount of net 
debts outstanding on the date the contribution is received; and
    (C) Such contributions do not exceed the contribution limitations 
in effect on the date of such election.
* * * * *
    (5) * * *
    (ii) (A) A contribution shall be considered to be redesignated for 
another election if--
    (1) The treasurer of the recipient authorized political committee 
requests that the contributor provide a written redesignation of the 
contribution and informs the contributor that the contributor may 
request the refund of the contribution as an alternative to providing a 
written redesignation; and
    (2) Within sixty days from the date of the treasurer's receipt of 
the contribution, the contributor provides the treasurer with a written 
redesignation of the contribution for another election, which is signed 
by the contributor.
    (B) Notwithstanding paragraph (b)(5)(ii)(A) of this section or any 
other provision of this section, the treasurer of the recipient 
authorized political committee may treat all or part of the amount of 
the contribution that exceeds the contribution limits in paragraph 
(b)(1) of this section as made with respect to the general election, 
provided that:
    (1) The contribution was made before the primary election;
    (2) The contribution was not designated for a particular election;
    (3) The contribution would exceed the limitation on contributions 
set forth in paragraph (b)(1) of this section if it were treated as a 
contribution made for the primary election;
    (4) Such redesignation would not cause the contributor to exceed 
any of the limitations on contributions set forth in paragraph (b)(1) 
of this section;
    (5) The treasurer of the recipient authorized political committee 
notifies the contributor of the amount of the contribution that was 
redesignated and that the contributor may request a refund of the 
contribution; and
    (6) Within sixty days from the date of the treasurer's receipt of 
the contribution, the treasurer shall provide notification required in 
paragraph (b)(5)(ii)(B)(5) of this section to the contributor by any 
written method including electronic mail.
    (C) Notwithstanding paragraph (b)(5)(ii)(A) of this section or any 
other provision of this section, the treasurer of the recipient 
authorized political committee may treat all or part of the amount of 
the contribution that exceeds the contribution limits in paragraph 
(b)(1) of this section as made with respect to the primary election, 
provided that:
    (1) The contribution was made after the primary election but before 
the general election;
    (2) The contribution was not designated for a particular election;
    (3) The contribution would exceed the limitation on contributions 
set forth in paragraph (b)(1) of this section if it were treated as a 
contribution made for the general election;
    (4) Such redesignation would not cause the contributor to exceed 
any of the limitations on contributions set forth in paragraph (b)(1) 
of this section;
    (5) The contribution does not exceed the committee's net debts 
outstanding for the primary election;
    (6) The treasurer of the recipient authorized political committee 
notifies the contributor of how the contribution was redesignated and 
that the contributor may request a refund of the contribution; and
    (7) Within sixty days from the date of the treasurer's receipt of 
the contribution, the treasurer shall provide notification required in 
paragraph (b)(5)(ii)(C)(6) of this section to the

[[Page 69948]]

contributor by any written method, including electronic mail.
* * * * *
    (c) * * *
    (1) No person shall make contributions to the political committees 
established and maintained by a national political party in any 
calendar year that in the aggregate exceed $25,000.
    (i) The contribution limitation in paragraph (c)(1) of this section 
shall be increased by the percent difference in the price index in 
accordance with 11 CFR 110.17.
    (ii) The increased contribution limitation shall be in effect for 
the two calendar years starting on January 1 of the year in which the 
contribution limitation is increased.
    (iii) In every odd-numbered year, the Commission will publish in 
the Federal Register the amount of the contribution limitation in 
effect and place such information on the Commission's Web site.
* * * * *
    (i) Contributions by spouses. The limitations on contributions of 
this section shall apply separately to contributions made by each 
spouse even if only one spouse has income.
* * * * *
    (k) * * *
    (3) * * *
    (ii) (A) A contribution shall be considered to be reattributed to 
another contributor if--
    (1) The treasurer of the recipient authorized political committee 
asks the contributor whether the contribution is intended to be a joint 
contribution by more than one person, and informs the contributor that 
he or she may request the return of the excessive portion of the 
contribution if it is not intended to be a joint contribution; and
    (2) Within sixty days from the date of the treasurer's receipt of 
the contribution, the contributor provides the treasurer with a written 
reattribution of the contribution, which is signed by each contributor, 
and which indicates the amount to be attributed to each contributor if 
equal attribution is not intended.
    (B)(1) Notwithstanding paragraph (k)(3)(ii)(A) of this section or 
any other provision of this section, any excessive portion of a 
contribution described in paragraph (k)(3)(i) of this section that was 
made by a written instrument that is imprinted with the names of more 
than one individual may be attributed among the individuals listed 
unless a different instruction is on the instrument or in a separate 
writing signed by the contributor(s), provided that such attribution 
would not cause any contributor to exceed any of the limitations on 
contributions set forth in paragraph (b)(1) of this section.
    (2) The treasurer of the recipient authorized political committee 
shall notify each contributor of how the contribution was attributed 
and that the contributor may request the refund of the excessive 
portion of the contribution if it is not intended to be a joint 
contribution.
    (3) Within sixty days from the date of the treasurer's receipt of 
the contribution, the treasurer shall provide such notification to each 
contributor by any written method, including electronic mail.
    (l) * * *
    (4)(i) If a political committee chooses to rely on a postmark as 
evidence of the date on which a contribution was made, the treasurer 
shall retain the envelope or a copy of the envelope containing the 
postmark and other identifying information; and
    (ii) If a political committee chooses to rely on the redesignation 
presumption in 11 CFR 110.1(b)(5)(ii)(B) or (C) or the reattribution 
presumption in 11 CFR 110.1(k)(3)(ii)(B), the treasurer shall retain a 
full-size photocopy of the check or written instrument, of any signed 
writings that accompanied the contribution, and of the notices sent to 
the contributors as required by 11 CFR 110.1(b)(5)(ii)(B) and 
(k)(3)(ii)(B).
    (5) If a political committee does not retain the written records 
concerning designation required under 11 CFR 110.1(l)(1), the 
contribution shall not be considered designated in writing for a 
particular election, and the provisions of 11 CFR 110.1(b)(2)(ii) or 11 
CFR 110.2(b)(2)(ii) shall apply. If a political committee does not 
retain the written records concerning redesignation or reattribution 
required under 11 CFR 110.1(l)(2), (3), (4)(ii) or (6), including the 
contributor notices, the redesignation or reattribution shall not be 
effective, and the original designation or attribution shall control.
* * * * *

    5. Section 110.2 is amended by revising paragraph (e) to read as 
follows:


Sec.  110.2  Contributions by multicandidate political committees (2 
U.S.C. 441a(a)(2)).

* * * * *
    (e) Contributions by political party committees to Senatorial 
candidates.
    (1) Notwithstanding any other provision of the Act, or of these 
regulations, the Republican and Democratic Senatorial campaign 
committees, or the national committee of a political party, may make 
contributions of not more than a combined total of $35,000 to a 
candidate for nomination or election to the Senate during the calendar 
year of the election for which he or she is a candidate. Any 
contribution made by such committee to a Senatorial candidate under 
this paragraph in a year other than the calendar year in which the 
election is held shall be considered to be made during the calendar 
year in which the election is held.
    (2) The contribution limitation in paragraph (e)(1) of this section 
shall be increased by the percent difference in the price index in 
accordance with 11 CFR 110.17. The increased contribution limitation 
shall be in effect for the two calendar years starting on January 1 of 
the year in which the contribution limitation is increased. In every 
odd-numbered year, the Commission will publish in the Federal Register 
the amount of the contribution limitation in effect and place such 
information on the Commission's Web site.
* * * * *

    6. Section 110.4 is amended by revising the section heading and by 
removing and reserving paragraph (a) to read as follows.


Sec.  110.4  Contributions in the name of another; cash contributions 
(2 U.S.C. 441f, 441g, 432(c)(2)).

    (a) [Removed and reserved].
* * * * *

    7. Section 110.5 is amended by revising the section heading and 
paragraphs (a), (b), (d) and (e) to read as follows:


Sec.  110.5  Aggregate bi-annual contribution limitation for 
individuals (2 U.S.C. 441a(a)(3)).

    (a) Scope. This section applies to all contributions made by any 
individual, except individuals prohibited from making contributions 
under 11 CFR 110.19 and 110.20 and 11 CFR part 115.
    (b) Bi-annual limitations.
    (1) In the two-year period beginning on January 1 of an odd-
numbered year and ending on December 31 of the next even-numbered year, 
no individual shall make contributions aggregating more than $95,000, 
including no more than:
    (i) $37,500 in the case of contributions to candidates and the 
authorized committees of candidates; and
    (ii) $57,500 in the case of any other contributions, of which not 
more than $37,500 may be attributable to contributions to political 
committees that are not political committees of any national political 
parties.
    (2) Contributions to candidates made under the increased 
contribution limitations under 11 CFR part 400,

[[Page 69949]]

during periods in which such candidates may accept such contributions, 
are not subject to the contribution limitations of paragraph (b)(1) of 
this section.
    (3) The contribution limitations in paragraph (b)(1) of this 
section shall be increased by the percent difference in the price index 
in accordance with 11 CFR 110.17. The increased contribution 
limitations shall be in effect for the two calendar years starting on 
January 1 of the year in which the contribution limitations are 
increased.
    (4) In every odd-numbered year, the Commission will publish in the 
Federal Register the amount of the contribution limitations in effect 
and place such information on the Commission's Web site.
* * * * *
    (d) Independent expenditures. The bi-annual limitation on 
contributions in this section applies to contributions made to persons, 
including political committees, making independent expenditures under 
11 CFR part 109.
    (e) Contributions to delegates and delegate committees. The bi-
annual limitation on contributions in this section applies to 
contributions to delegate and delegate committees under 11 CFR 110.14.

    8. Section 110.9 is revised to read as follows:


Sec.  110.9  Violation of limitations.

    No candidate or political committee shall knowingly accept any 
contribution or make any expenditure in violation of the provisions of 
11 CFR part 110. No officer or employee of a political committee shall 
knowingly accept a contribution made for the benefit or use of a 
candidate, or make any expenditure on behalf of a candidate, in 
violation of any limitation imposed on contributions and expenditures 
under this part 110.


Sec. Sec.  110.15 and 110.16  [Reserved]

    9. Sections 110.15 and 110.16 are added and reserved.

    10. Section 110.17 is added to read as follows:


Sec.  110.17  Price index increase.

    (a) Price index increases for party committee expenditure 
limitations and Presidential candidate expenditure limitations. The 
limitations on expenditures established by 11 CFR 110.7 and 110.8 shall 
be increased by the percent difference between the price index, as 
certified to the Commission by the Secretary of Labor, for the 12 
months preceding the beginning of the calendar year and the price index 
for the base period.
    (1) Each expenditure limitation so increased shall be the 
expenditure limitation in effect for that calendar year.
    (2) For purposes of this paragraph (a), the term base period means 
calendar year 1974.
    (b) Price index increases for contributions by persons, by 
political party committees to Senatorial candidates, and the bi-annual 
aggregate contribution limitation for individuals. The limitations on 
contributions established by 11 CFR 110.1(b) and (c), 110.2(e), and 
110.5, shall be increased only in odd-numbered years by the percent 
difference between the price index, as certified to the Commission by 
the Secretary of Labor, for the 12 months preceding the beginning of 
the calendar year and the price index for the base period.
    (1) The increased contribution limitations shall be in effect as 
provided in 11 CFR 110.1(b)(1)(ii), 110.1(c)(1)(ii), 110.2(e)(2) and 
110.5(b)(3).
    (2) For purposes of this paragraph (b) the term base period means 
calendar year 2001.
    (c) Rounding of price index increases. If any amount after the 
increases under paragraph (a) or (b) of this section is not a multiple 
of $100, such amount shall be rounded to the nearest multiple of $100.
    (d) Definition of price index. For purposes of this section, the 
term price index means the average over a calendar year of the Consumer 
Price Index (all items--United States city average) published monthly 
by the Bureau of Labor Statistics.
    (e) Publication of price index increases. In every odd-numbered 
year, the Commission will publish in the Federal Register the amount of 
the expenditure and contribution limitations in effect and place such 
information on the Commission's Web site.


Sec.  110.18  [Reserved]

    11. Section 110.18 is added and reserved.

    12. Section 110.19 is added to read as follows:


Sec.  110.19  Contributions and donations by minors.

    (a) Contributions to candidates. An individual who is 17 years old 
or younger shall not make a contribution to a candidate for Federal 
office, including a contribution to any of the following:
    (1) A principal campaign committee designated pursuant to 11 CFR 
101.1(a);
    (2) Any other political committee authorized by a candidate under 
11 CFR 101.1(b) and 102.13 to receive contributions or make 
expenditures on behalf of such candidate; or
    (3) Any entity directly or indirectly established, financed, 
maintained or controlled by one or more Federal candidates.
    (b) Contributions and donations to committees of political parties. 
An individual who is 17 years old or younger shall not make a 
contribution or donation to:
    (1) A national, State, district, or local committee of a political 
party, including a national congressional campaign committee;
    (2) Any entity directly or indirectly established, financed, 
maintained or controlled by a national, State, district, or local 
committee of a political party, including a national congressional 
campaign committee; or
    (3) Any account of a committee or entity described in paragraphs 
(b)(1) and (b)(2) of this section.
    (c) Contributions to political committees that are not authorized 
committees or committees of political parties. An individual who is 17 
years old or younger may make contributions to a political committee 
not described in paragraph (a) or (b) of this section that in the 
aggregate do not exceed the limitations on contributions of 11 CFR 
110.1 and 110.5, if--
    (1) The decision to contribute is made knowingly and voluntarily by 
that individual;
    (2) The funds, goods, or services contributed are owned or 
controlled exclusively by that individual, such as income earned by 
that individual, the proceeds of a trust for which that individual is 
the beneficiary, or a savings account opened and maintained exclusively 
in that individual's name;
    (3) The contribution is not made from the proceeds of a gift, the 
purpose of which was to provide funds to be contributed, or is not in 
any other way controlled by another individual; and
    (4) The contribution is not earmarked or otherwise directed to one 
or more Federal candidates, authorized committees, political party 
committees, or other organizations covered by paragraph (a) or (b) of 
this section. See 11 CFR 110.6.
    (d) Volunteer Services. Nothing in this section shall prohibit an 
individual who is 17 years old or younger from providing volunteer 
services to any Federal candidate or political committee.
    (e) Definition of directly or indirectly establish, maintain, 
finance, or control. Directly or indirectly establish, maintain, 
finance, or control has the same meaning as in 11 CFR 300.2(c).

[[Page 69950]]


    13. Section 110.20 is added to read as follows:


Sec.  110.20  Prohibition on contributions, donations, expenditures, 
independent expenditure, and disbursements by foreign nationals. (2 
U.S.C. 441e).

    (a) Definitions. For purposes of this section, the following 
definitions apply:
    (1) Disbursement has the same meaning as in 11 CFR 300.2(d).
    (2) Donation has the same meaning as in 11 CFR 300.2(e).
    (3) Foreign national means--
    (i) A foreign principal, as defined in 22 U.S.C. 611(b); or
    (ii) An individual who is not a citizen of the United States and 
who is not lawfully admitted for permanent residence, as defined in 8 
U.S.C. 1101(a)(20); however,
    (iii) Foreign national shall not include any individual who is a 
citizen of the United States, or who is a national of the United States 
as defined in 8 U.S.C. 1101(a)(22).
    (4) Knowingly means that a person must:
    (i) Have actual knowledge that the source of the funds solicited, 
accepted or received is a foreign national;
    (ii) Be aware of facts that would lead a reasonable person to 
conclude that there is a substantial probability that the source of the 
funds solicited, accepted or received is a foreign national; or
    (iii) Be aware of facts that would lead a reasonable person to 
inquire whether the source of the funds solicited, accepted or received 
is a foreign national, but the person failed to conduct a reasonable 
inquiry.
    (5) For purposes of paragraph (a)(4) of this section, pertinent 
facts include, but are not limited to:
    (i) The contributor or donor uses a foreign passport or passport 
number for identification purposes;
    (ii) The contributor or donor provides a foreign address;
    (iii) The contributor or donor makes a contribution or donation by 
means of a check or other written instrument drawn on a foreign bank or 
by a wire transfer from a foreign bank; or
    (iv) The contributor or donor resides abroad.
    (6) Solicit has the same meaning as in 11 CFR 300.2(m).
    (7) Safe Harbor. For purposes of paragraph (a)(4)(iii) of this 
section, a person shall be deemed to have conducted a reasonable 
inquiry if he or she seeks and obtains copies of current and valid U.S. 
passport papers for U.S. citizens who are contributors or donors 
described in paragraphs (a)(5)(i) through (iv) of this section. No 
person may rely on this safe harbor if he or she has actual knowledge 
that the source of the funds solicited, accepted, or received is a 
foreign national.
    (b) Contributions and donations by foreign nationals in connection 
with elections. A foreign national shall not, directly or indirectly, 
make a contribution or a donation of money or other thing of value, or 
expressly or impliedly promise to make a contribution or a donation, in 
connection with any Federal, State, or local election.
    (c) Contributions and donations by foreign nationals to political 
committees and organizations of political parties. A foreign national 
shall not, directly or indirectly, make a contribution or donation to:
    (1) A political committee of a political party, including a 
national party committee, a national congressional campaign committee, 
or a State, district, or local party committee, including a non-Federal 
account of a State, district, or local party committee, or
    (2) An organization of a political party whether or not the 
organization is a political committee under 11 CFR 100.5.
    (d) Contributions and donations by foreign nationals for office 
buildings. A foreign national shall not, directly or indirectly, make a 
contribution or donation to a committee of a political party for the 
purchase or construction of an office building. See 11 CFR 300.10 and 
300.35.
    (e) Disbursements by foreign nationals for electioneering 
communications. A foreign national shall not, directly or indirectly, 
make any disbursement for an electioneering communication as defined in 
11 CFR 100.29.
    (f) Expenditures, independent expenditures, or disbursements by 
foreign nationals in connection with elections. A foreign national 
shall not, directly or indirectly, make any expenditure, independent 
expenditure, or disbursement in connection with any Federal, State, or 
local election.
    (g) Solicitation, acceptance, or receipt of contributions and 
donations from foreign nationals. No person shall knowingly solicit, 
accept, or receive from a foreign national any contribution or donation 
prohibited by paragraphs (b) through (d) of this section.
    (h) Providing substantial assistance.
    (1) No person shall knowingly provide substantial assistance in the 
solicitation, making, acceptance, or receipt of a contribution or 
donation prohibited by paragraphs (b) through (d), and (g) of this 
section.
    (2) No person shall knowingly provide substantial assistance in the 
making of an expenditure, independent expenditure, or disbursement 
prohibited by paragraphs (e) and (f) of this section.
    (i) Participation by foreign nationals in decisions involving 
election-related activities. A foreign national shall not direct, 
dictate, control, or directly or indirectly participate in the 
decision-making process of any person, such as a corporation, labor 
organization, political committee, or political organization with 
regard to such person's Federal or non-Federal election-related 
activities, such as decisions concerning the making of contributions, 
donations, expenditures, or disbursements in connection with elections 
for any Federal, State, or local office or decisions concerning the 
administration of a political committee.

    Dated: November 8, 2002.
David M. Mason,
Chairman, Federal Election Commission.
[FR Doc. 02-28886 Filed 11-18-02; 8:45 am]
BILLING CODE 6715-01-U