Contributions and Donations by Minors, 5565-5568 [05-2003]

Agencies

• Federal Election Commission

[Federal Register Volume 70, Number 22 (Thursday, February 3, 2005)]
[Rules and Regulations]
[Pages 5565-5568]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-2003]


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FEDERAL ELECTION COMMISSION

11 CFR Part 110

[Notice 2005-4]


Contributions and Donations by Minors

AGENCY: Federal Election Commission.

ACTION: Final rules and transmittal of rules to Congress.

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SUMMARY: The Federal Election Commission is amending its rules 
regarding contributions and donations by individuals aged 17 years or 
younger (``Minors''). These final rules conform to the decision of the 
United States Supreme Court in McConnell v. Federal Election 
Commission. In McConnell, the Supreme Court held unconstitutional 
section 318 of the Bipartisan Campaign Reform Act of 2002, which 
prohibited Minors from contributing to candidates and from contributing 
or donating to political party committees. Accordingly, this final rule 
amends the Commission's regulations to reflect the Supreme Court's 
decision by removing the regulatory prohibitions on contributions by 
Minors to candidates, and on contributions and donations by Minors to 
political party committees. Additional information appears in the 
SUPPLEMENTARY INFORMATION section.

DATES: Effective Date: The effective date for the revisions to 11 CFR 
part 110 is March 7, 2005.

FOR FURTHER INFORMATION CONTACT: Mr. Brad C. Deutsch, Assistant General 
Counsel, or Ms. Amy L. Rothstein, Attorney, 999 E Street NW., 
Washington, DC 20463, (202) 694-1650 or (800) 424-9530.

SUPPLEMENTARY INFORMATION: Section 318 of the Bipartisan Campaign 
Reform Act of 2002, Pub. L. 107-155, 116 Stat. 81 (Mar. 27, 2002) 
(``BCRA''), amended the Federal Election Campaign Act of 1971, as 
amended, 2 U.S.C. 431 et seq. (the ``Act''), to prohibit individuals 
aged 17 years or younger (``Minors'') from contributing to candidates, 
and from contributing or donating to political party committees.\1\ See 
2 U.S.C. 441k. The Commission promulgated regulations to implement the 
new statutory prohibitions in late 2002. See Final Rules and 
Transmittal of Regulations to Congress, 67 FR 69928 (Nov. 19, 2002). 
The 2002 rules amended the regulations governing contributions by 
Minors previously found at 11 CFR 110.1 and redesignated the 
regulations as 11 CFR 110.19. The 2002 rules also made conforming 
amendments to 11 CFR 110.1, regarding contributions by persons other 
than multi-candidate political committees, and 11 CFR 110.5, regarding 
aggregate bi-annual contribution limits for individuals, to exclude 
from their scope contributions by Minors prohibited under new 11 CFR 
110.19. See 11 CFR 110.1(a) and 11 CFR 110.5(a) (2002).
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    \1\ Before BCRA, the Commission's regulations had addressed only 
contributions, not donations, by Minors. A contribution includes a 
gift, subscription, loan, advance, or deposit of money or anything 
of value by any person for the purpose of influencing any election 
for Federal office. See, e.g., 11 CFR 100.52(a). A donation is a 
payment, gift, subscription, loan, advance, deposit or anything of 
value given to a person, other than a contribution. See, e.g., 11 
CFR 300.2(e).
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    The United States Supreme Court held BCRA section 318 to be 
unconstitutional in McConnell v. Federal Election Commission, 540 U.S. 
93 (2003) (``McConnell''). Accordingly, the Commission is amending its 
regulations at 11 CFR 110.19 to reflect the Supreme Court's decision by 
removing the prohibitions on contributions by Minors to candidates, and 
on contributions and donations by Minors to political party committees. 
This rulemaking also makes conforming amendments to 11 CFR 110.1, 
regarding contributions by persons other than multi-candidate political 
committees, and 11 CFR 110.5, regarding aggregate bi-annual 
contribution limits for individuals, to reflect that these regulations 
apply to contributions made by Minors.
    The practical effect of these changes is to return the substance of 
the regulations to its pre-BCRA state, with a single exception. The 
Commission has amended the requirement that a Minor exclusively own or 
control the funds, goods, or services contributed. Further information 
appears in the Explanation and Justification, below.
    These final rules are based on proposed rules that the Commission 
published for comment in the Federal Register in April 2004. See Notice 
of Proposed Rulemaking, 69 FR 18841 (Apr. 9, 2004) (``NPRM''). The 
comment period closed on May 10, 2004. The Commission received two 
comments in response to the NPRM.\2\
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    \2\ The Commission received written comments from The National 
Youth Rights Association and from the Oakland County (Michigan) 
Democratic Party.
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    Under the Administrative Procedure Act, 5 U.S.C. 553(d), and the 
Congressional Review of Agency Rulemaking Act, 5 U.S.C. 801(a)(1), 
agencies must submit final rules to the Speaker of the House of 
Representatives and the President of the Senate, and publish them in 
the Federal Register at least 30 calendar days before they take effect. 
The final rules that follow were transmitted to Congress on January 28, 
2005.

Explanation and Justification

11 CFR 110.1--Contributions by Persons Other Than Multicandidate 
Political Committees (2 U.S.C. 441a(a)(1))

    This rulemaking amends 11 CFR 110.1(a) by deleting the reference to 
11 CFR 110.19. Section 110.1 concerns contributions to candidates and 
political party committees by persons other than multi-candidate 
political committees.

[[Page 5566]]

After BCRA section 318 prohibited Minors from making contributions to 
candidates and political committees, the Commission amended 11 CFR 
110.1(a) to exclude individuals prohibited from making contributions 
under 11 CFR 110.19 (i.e., Minors). See 11 CFR 110.1(a) (2002).
    The Commission is returning 11 CFR 110.1(a) to its pre-BCRA state 
because the statutory prohibition on contributions by Minors no longer 
exists. As revised, contributions by Minors are once again subject to 
the provisions of 11 CFR 110.1.

11 CFR 110.5--Aggregate Biennial Contributions Limitation for 
Individuals (2 U.S.C. 441a(a)(3))

    This rulemaking amends 11 CFR 110.5(a) by deleting the reference to 
11 CFR 110.19. Section 110.5 sets out aggregate biennial contribution 
limits for individuals. After BCRA section 318 prohibited Minors from 
making contributions to candidates and political committees, the 
Commission amended 11 CFR 110.5(a) to exclude individuals prohibited 
from making contributions under 11 CFR 110.19 (i.e., Minors). See 11 
CFR 110.5(a) (2002).
    The Commission is returning 11 CFR 110.5(a) to its pre-BCRA state, 
because the statutory prohibition on contributions by Minors no longer 
exists. As revised, contributions by Minors are once again subject to 
the aggregate biennial limitations of 11 CFR 110.5.

11 CFR 110.19--Contributions by Minors

1. Deleted Paragraphs
    Consistent with McConnell, Sec.  110.19 is being revised by 
deleting the following paragraphs found in the former rule: Paragraph 
(a), which prohibited Minors from contributing to Federal candidates; 
paragraph (b), which prohibited Minors from contributing or donating to 
political party committees; and paragraph (c)(4), which prohibited 
Minors from making certain earmarked contributions. The following 
provisions in former 11 CFR 110.19 are also being deleted because they 
are no longer necessary: Paragraph (d), which specified that Minors may 
provide volunteer services to Federal candidates and political 
committees and paragraph (e), which defined the phrase ``directly or 
indirectly establish, finance, maintain, or control.''
2. Redesignated and Revised Paragraphs
    The Supreme Court's decision in McConnell invalidated BCRA's 
prohibition on donations by Minors. Accordingly, the Commission is 
revising the heading of 11 CFR 110.19 by deleting the reference to 
donations by Minors.
    Although it no longer regulates donations by Minors, revised 11 CFR 
110.19 continues to regulate contributions by Minors. Specifically, 
revised 11 CFR 110.19 permits Minors to contribute to Federal 
candidates and political committees in an amount that does not exceed 
the contribution limits that apply to individuals generally, so long as 
three conditions are met. These conditions are virtually identical to 
those currently in 11 CFR 110.19(c)(1) through (c)(3), which themselves 
were taken from the Commission's pre-BCRA rule governing contributions 
by Minors.\3\ See 11 CFR 110.1(i) (2001).
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    \3\ Consistent with the nomenclature of the pre-BCRA rule 
governing contributions by Minors, the Commission is substituting 
the term ``the Minor''--defined as an individual who is 17 years old 
or younger--for ``that individual'' in the revised 11 CFR 110.19. 
Because the substitution occurs throughout the revised rule and is 
for the convenience of the reader, rather than substantive, this 
Explanation and Justification does not identify it separately each 
time it appears.
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    Accordingly, the Commission is redesignating former 11 CFR 
110.19(c) as revised 11 CFR 110.19. It is redesignating former 
paragraph (c)(1) as revised 11 CFR 110.19(a); revising and 
redesignating former paragraph (c)(2) as revised 11 CFR 110.19(b); and 
redesignating former paragraph (c)(3) as revised 11 CFR 110.19(c). As 
redesignated, the conditions in revised 11 CFR 110.19 will apply to all 
contributions by Minors.
    The Commission's regulations have imposed special conditions on 
contributions by Minors since 1977. See 11 CFR 110.1(i)(2) (1977). 
Historically, the regulations permitted Minors to contribute to any 
candidate or political committee, including political party committees, 
within the limits that applied to contributions by individuals 
generally, so long as (1) the Minor made the decision to contribute 
knowingly and voluntarily; (2) the Minor had exclusive ownership or 
control of the funds, goods or services contributed; and (3) the 
contribution was not made from the proceeds of a gift, the purpose of 
which was to provide funds to be contributed, and was not controlled in 
any other way by another individual. The purpose of the conditions was 
``to assure that minors are not conduits for contributions which should 
be attributed to others, e.g. parents, guardians or other adults.'' 
Advisory Opinion 1983-13.

Revised 11 CFR 110.19(a)--Knowing and Voluntary

    Revised paragraph (a) of 11 CFR 110.19 requires the decision to 
contribute to a Federal candidate or political committee to be made 
knowingly and voluntarily by the Minor. This condition is identical to 
the proposed rule in the NPRM and former 11 CFR 110.19(c)(1).
    Consistent with the Supreme Court's decision in McConnell that 
Congress could not establish 18 years as the minimum age for making 
contributions and donations, in the NPRM the Commission invited 
comments on whether there was any age below which it should prohibit 
individuals from making contributions, ``recognizing that those 
individuals lack the capacity to manage their finances and dispose of 
property and therefore could not knowingly and voluntarily contribute 
on their own behalf.'' 69 FR at 18842. Both of the commenters strongly 
recommended against establishing a minimum age for making 
contributions, unless the Commission were to establish an extremely low 
minimum age.
    The Commission has decided not to establish a minimum age for the 
making of contributions. In rejecting BCRA's minimum age of 18 years in 
McConnell, the Supreme Court confirmed that Minors ``enjoy the 
protection of the First Amendment,'' which includes the right to make 
political contributions. McConnell, 540 U.S. at 231. While there may be 
a lower minimum age that the Supreme Court would uphold, an inflexible 
rule would run the risk of not being able to accommodate cases 
involving Minors below that age who desire to exercise their First 
Amendment rights.
    In the NPRM, the Commission also invited comments on whether it 
should establish a rebuttable presumption that individuals below a 
certain age cannot ``knowingly and voluntarily'' decide to make a 
contribution, or whether it should combine a categorical prohibition 
with a rebuttable presumption similar to the approach adopted by some 
jurisdictions with regard to the tort liability of children. One 
commenter rejected the analogy to tort law, arguing that the age at 
which a child should be held responsible for negligence is not a valid 
indicator of when a child can make a knowing decision to give away 
money. The other commenter embraced the analogy to tort law and 
recommended that the Commission establish a three-tiered approach, with 
any child below seven years of age rebuttably presumed not to have 
knowingly and voluntarily decided

[[Page 5567]]

to make a contribution; any child between seven and 14 years of age 
rebuttably presumed to have knowingly and voluntarily decided to make a 
contribution; and any child above the age of 14 years being treated as 
an adult.
    The Commission considers the approach advocated by the commenter to 
be unnecessarily complicated and unwieldy. It also concludes that a 
rebuttable presumption is not a sufficiently flexible means of ensuring 
that contributions by others are not made in the names of Minors. 
Accordingly, the Commission has decided not to adopt any presumptions 
in the revised rule.
    In light of the fact that the Commission is returning the ``knowing 
and voluntary'' standard in revised 11 CFR 110.19(a) to its pre-BCRA 
state, the Commission takes this opportunity to provide general 
guidance on the types of factors that it has considered in past 
enforcement actions to determine whether a Minor made a contribution 
``knowingly and voluntarily.'' The Commission emphasizes, however, that 
it determines the outcome of each enforcement action involving 
contributions by Minors in light of all relevant and available facts. 
In any given case, the Commission may consider factors in addition to 
those listed here, and need not consider all of the factors listed.
    One factor that the Commission typically considers is the age of 
the Minor at the time the contribution was made. See, e.g., MUR 4252, 
MUR 4254 and MUR 4255. The younger the Minor, the closer the Commission 
will scrutinize the contribution to determine whether the Minor 
knowingly and voluntarily decided to provide something of value ``for 
the purpose of influencing'' a federal election. 2 U.S.C. 431(8)(A)(i); 
11 CFR 100.52 (a contribution is ``a gift, subscription, loan * * * 
advance, or deposit of money or anything of value made by any person 
for the purpose of influencing any election for Federal office'').
    The Commission has also considered whether the value of the Minor's 
contribution, if attributed to an adult member of the Minor's immediate 
family (such as a parent, legal guardian, or sibling), would cause that 
family member to exceed the contribution limitations of the Act and 
Commission regulations. See, e.g., MUR 4255. A contribution that would 
not put any adult family member over the legal limit is less likely to 
be a disguised contribution by an adult family member.
    Another potential consideration is whether the Minor has a history 
of making routine financial decisions. Minors with a history of making 
routine decisions about their personal finances, such as how to earn 
money, how to manage and invest their money, and how to spend their 
money, may be more likely to make a knowing and voluntary decision to 
spend their money on political contributions than Minors without such a 
history.
    Other potentially relevant factors include the Minor's history of 
donating funds and the source of the funds contributed. A Minor with a 
history of donating funds to social, political, or cultural groups or 
causes may be more likely to make a knowing and voluntary decision to 
contribute than would a Minor whose giving pattern does not demonstrate 
a personal and substantial interest in social, political or cultural 
issues. By the same token, a Minor who makes a contribution from funds 
that the Minor earned through, for example, an after-school job, may 
have a greater personal interest in how those funds are spent, and thus 
be more likely to make a knowing and voluntary decision to contribute, 
than would a Minor who makes a contribution from passive income that 
the Minor received from, for example, a family trust.

Revised 11 CFR 110.19(b)--Ownership or Control of the Funds Contributed

    Revised paragraph (b) of 11 CFR 110.19 requires the funds, goods or 
services contributed to be owned or controlled by the Minor. As 
examples of the types of funds that could meet the requirement, the 
regulation lists income earned by the Minor, the proceeds from a trust 
for which the Minor is the beneficiary, or funds withdrawn by the Minor 
from a financial account opened and maintained in the Minor's name.
    Revised paragraph (b) is the same as the proposed rule in the NPRM 
and former 11 CFR 110.19(c)(2), with two exceptions. The first 
exception concerns the requirement in the proposed rule and former 11 
CFR 110.19(c)(2) that the funds, goods or services contributed be owed 
or controlled ``exclusively'' by the Minor. NPRM, 69 FR at 18842; 11 
CFR 110.19(c)(2) (2004). The revised rule continues to require a Minor 
to own or control the funds, goods or services contributed, but it no 
longer requires the Minor to exercise exclusive ownership or control.
    In the NPRM, the Commission invited comments on whether the 
exclusivity requirement in former 11 CFR 110.19(c)(2) was permissible 
in light of the Supreme Court's decision in McConnell. The Commission 
asked whether it should maintain the exclusivity requirement, 
``considering that in many jurisdictions a minor may not be able, for 
example, to open a bank account without a parent's or guardian's 
signature or manage an investment account without adult direction[.]'' 
NPRM, 69 FR at 18842.
    The commenters opined that the exclusivity requirement was not 
narrowly tailored, and that it created a potential conflict with state 
laws governing a Minor's ability to control assets without parental 
consent. One commenter suggested that the Commission remove the word 
``exclusively'' from the regulation. The other commenter suggested that 
the Commission amend the regulation to focus on whether a Minor has 
unlimited control over or access to the funds contributed, by 
prohibiting contributions from accounts over which the Minor has no 
control, such as accounts established under the Uniform Gifts to Minors 
Act and the Uniform Transfers to Minors Act, and by permitting 
contributions from accounts to which the Minor has complete access 
through checks issued in only the Minor's name or an ATM card issued to 
the Minor, even if a parent or legal guardian co-signed for the 
account.
    The Commission is deleting the requirement that the ownership or 
control that a Minor must exercise over the funds, goods or services 
contributed be exclusive. The Supreme Court reaffirmed in McConnell 
that Minors have a constitutional right to make contributions to 
Federal candidates and political committees. Retaining the exclusivity 
requirement in 11 CFR 110.19 would run the risk of effectively 
precluding some Minors from making contributions from their personal 
financial accounts for no other reason than because the Minor maintains 
an account in a jurisdiction or in a financial institution that 
requires an adult co-signatory on such accounts. The exclusivity 
requirement could also disadvantage some Minors vis-[agrave]-vis their 
similarly situated peers merely on the basis of where the Minors happen 
to bank. That is not the Commission's intention.
    Removing the exclusivity requirement will help to focus future 
inquiries on the substance of a Minor's contribution, rather than on 
the form of a Minor's bank account.\4\ The Commission does not intend, 
however, for removal of the exclusivity requirement to signal a 
loosening of the standards for conduit contributions through Minors. To 
the contrary, conduit contributions through

[[Page 5568]]

Minors remain a serious violation of both the Act and the Commission's 
regulations, which continue to prohibit contributions in the name of 
another. See 2 U.S.C. 441f; 11 CFR 110.4(b). Furthermore, revised 11 
CFR 110.19(b) continues to require a Minor to own or control the funds, 
goods or services contributed, even if the Minor no longer need 
exercise exclusive ownership or control.
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    \4\ The Commission has long permitted adults to make 
contributions from joint accounts. See 11 CFR 110.1(k).
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    In addition, the remaining criteria in 11 CFR 110.19 have not 
changed. A contribution by a Minor continues to be permissible only if 
``the decision to contribute is made knowingly and voluntarily by the 
Minor,'' and ``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.''
    The second way in which revised 11 CFR 110.19(b) differs from the 
proposed rule in the NPRM and former 11 CFR 110.19(c)(2) is in one of 
the examples. The proposed rule and former 11 CFR 110.19(c)(2) listed 
``a savings account opened and maintained exclusively in the Minor's 
name'' as an example of the types of funds that could qualify under 
former 11 CFR 110.19(c)(2). 11 CFR 110.19(c)(2) (2004).
    The Commission is making three changes to this example in revised 
11 CFR 110.19(b), for purposes of conformity and clarification. First, 
the Commission is deleting the word ``exclusively'' from the example, 
in conformity with the change to the text of 11 CFR 110.19(b), as 
discussed above. Second, the Commission is inserting the words ``funds 
withdrawn by the Minor from'' before ``a savings account'' in the 
example. As originally worded, the example seemed to require a Minor to 
contribute his or her entire account, which was not the Commission's 
intent. Third, the Commission is substituting the term ``financial 
account'' for ``savings account'' in the example, in recognition of the 
different kinds of accounts that a Minor might maintain today with 
banks, credit unions, brokerage firms, and similar institutions.

Revised 11 CFR 110.19(c)--Gift Proceeds

    Revised paragraph (c) in 11 CFR 110.19 provides that a permissible 
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.'' This requirement is identical 
to the proposed rule in the NPRM and former 11 CFR 110.19(c)(3).

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

    The Commission certifies that the attached rules will not have a 
significant economic impact on a substantial number of small entities. 
The basis of this certification is that these rules apply only to 
individuals 17 years of age or younger. Such individuals are not small 
entities under 5 U.S.C. 601. Moreover, these rules remove existing 
restrictions in accordance with controlling Supreme Court precedent and 
do not impose any additional costs on contributors, candidates, or 
political committees.

List of Subjects in 11 CFR Part 110

    Campaign funds, Political committees and parties.

0
For the reasons set forth in the preamble, the Federal Election 
Commission is amending subchapter A of Chapter 1 of Title 11 of the 
Code of Federal Regulations as follows:

PART 110--CONTRIBUTION AND EXPENDITURE LIMITATIONS AND PROHIBITIONS

0
1. Revise the authority citation for part 110 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 36 U.S.C. 510.


0
2. Amend Sec.  110.1 by revising paragraph (a) 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 110.10, except multicandidate political 
committees as defined in 11 CFR 100.5(e)(3) or entities and individuals 
prohibited from making contributions under 11 CFR 110.20 and 11 CFR 
parts 114 and 115.
* * * * *
0
3. Amend Sec.  110.5 by revising paragraph (a) to read as follows:


Sec.  110.5  Aggregate biennial 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 110.20 and 11 CFR part 115.
* * * * *

0
4. Revise Sec.  110.19 to read as follows:


Sec.  110.19  Contributions by minors.

    An individual who is 17 years old or younger (a Minor) may make 
contributions to any candidate or political committee that in the 
aggregate do not exceed the limitations on contributions of 11 CFR 
110.1 and 110.5, if--
    (a) The decision to contribute is made knowingly and voluntarily by 
the Minor;
    (b) The funds, goods, or services contributed are owned or 
controlled by the Minor, such as income earned by the Minor, the 
proceeds of a trust for which the Minor is the beneficiary, or funds 
withdrawn by the Minor from a financial account opened and maintained 
in the Minor's name; and
    (c) 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.

    Dated: January 28, 2005.
Scott E. Thomas,
Chairman, Federal Election Commission.
[FR Doc. 05-2003 Filed 2-2-05; 8:45 am]
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