$5,000 Exemption for Disbursements of Levin Funds by State, District, and Local Party Committees and Organizations, 69631-69633 [05-22778]
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69631
Rules and Regulations
Federal Register
Vol. 70, No. 221
Thursday, November 17, 2005
This section of the FEDERAL REGISTER
contains regulatory documents having general
applicability and legal effect, most of which
are keyed to and codified in the Code of
Federal Regulations, which is published under
50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by
the Superintendent of Documents. Prices of
new books are listed in the first FEDERAL
REGISTER issue of each week.
FEDERAL ELECTION COMMISSION
11 CFR Part 300
[Notice 2005–26]
$5,000 Exemption for Disbursements
of Levin Funds by State, District, and
Local Party Committees and
Organizations
Federal Election Commission.
Final rule.
AGENCY:
ACTION:
SUMMARY: The Federal Election
Commission is eliminating from its
regulations an exemption allowing
State, district, and local committees and
organizations of a political party to use
only Levin funds to pay for certain types
of Federal election activity aggregating
$5,000 or less in a calendar year. In
Shays v. FEC, the District Court
invalidated the exemption and
remanded the regulation to the
Commission for further action
consistent with the court’s opinion. The
Commission appealed this ruling, and
the Court of Appeals for the D.C. Circuit
affirmed the District Court’s decision.
The repeal of this rule means that State,
district, and local political party
committees and organizations must pay
for these specific types of Federal
election activity either entirely with
Federal funds, or with a mix of Federal
funds and Levin funds. Further
information is provided in the
supplementary information that follows.
DATES: The rules at 11 CFR 300.32(c)(4)
are effective on December 19, 2005.
FOR FURTHER INFORMATION CONTACT: Mr.
Brad C. Deutsch, Assistant General
Counsel, or Ms. Cheryl A.F. Hemsley,
Attorney, 999 E Street, NW.,
Washington, DC 20463, (202) 694–1650
or (800) 424–9530.
SUPPLEMENTARY INFORMATION: The
Commission issued a Notice of
Proposed Rulemaking (‘‘NPRM’’)
proposing to eliminate from its
VerDate Aug<31>2005
16:07 Nov 16, 2005
Jkt 208001
regulations at 11 CFR 300.32(c)(4) an
exemption that had allowed State,
district, and local committees of a
political party 1 to pay for certain types
of Federal election activity (‘‘FEA’’) 2
aggregating $5,000 or less in a calendar
year entirely with Levin funds 3
(‘‘$5,000 Exemption’’). The NPRM also
requested comments on the possibility
of creating a new, restructured
exemption. The NPRM was published in
the Federal Register on February 2,
2005. 70 FR 5385 (February 2, 2005).
The comment period closed on March 4,
2005. The Commission received five
comments from ten commenters on the
proposed rules.4 Eight commenters
favored elimination of the $5,000
Exemption and one commenter favored
maintaining the $5,000 Exemption.
Additionally, the Commission received
a comment from the Internal Revenue
Service, indicating ‘‘the proposed rules
do not pose a conflict with the Internal
Revenue Code or the regulations
thereunder.’’ The Commission is issuing
final rules eliminating the $5,000
Exemption and is declining to adopt a
restructured exemption.
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
1 In addition to political party committees, these
regulations are equally applicable to State, district,
and local party organizations that do not qualify as
political committees. See 11 CFR 300.33(a)(1) and
(2).
2 There are four types of FEA: Type 1—Voter
registration activity during the period that begins on
the date that is 120 days before a regularly
scheduled Federal election is held and ends on the
date of the election; Type 2—Voter identification,
get-out-the-vote activity, or generic campaign
activity conducted in connection with an election
in which a candidate for Federal office appears on
the ballot; Type 3—A public communication that
promotes or supports, or attacks or opposes a
clearly identified candidate for Federal office; and
Type 4—Services provided during any month by an
employee of a State, district, or local committee of
a political party who spends more than 25 percent
of his or her compensated time during that month
on activities in connection with a Federal election.
See 2 U.S.C. 431(20) and 11 CFR 100.24.
3 Levin funds are funds that are raised by State,
district, or local party committees and organizations
pursuant to the restrictions in 11 CFR 300.31 and
disbursed subject to the restrictions in 11 CFR
300.32. See 11 CFR 300.2(i).
4 All comments on the NPRM are available at
https://www.fec.gov/law/
law_rulemakings.shtml#levin.
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Fmt 4700
Sfmt 4700
least 30 calendar days before they take
effect. The final rule that follows was
transmitted to Congress on November
10, 2005.
Explanation and Justification
11 CFR 300.32(c)—Conditions and
Restrictions on Spending Levin Funds
The Bipartisan Campaign Reform Act
of 2002 (‘‘BCRA’’), Pub. L. 107–155, 116
Stat. 81 (2002), amended the Federal
Election Campaign Act of 1971 (the
‘‘Act’’), 2 U.S.C. 431 et seq., in many
respects. Section 441i(b)(1) of the Act,
as added by BCRA, provides that State,
district, and local political party
committees generally must use Federal
funds 5 to pay for FEA. However, the
Levin Amendment (2 U.S.C. 441i(b)(2))
provides an exception for two types of
FEA, for which State, district, and local
political party committees may allocate
disbursements between Federal funds
and Levin funds in accordance with
allocation ratios determined by the
Commission. 2 U.S.C. 441i(b)(2); see
also 11 CFR 300.2(i), 300.32, and
300.33. Types 1 and 2 FEA, which
involve certain voter registration, getout-the-vote, voter identification, and
generic campaign activity, are allocable
between Federal and Levin funds, so
long as the activities do not refer to a
clearly identified Federal candidate
(‘‘allocable Type 1&2 FEA’’). See 2
U.S.C. 441i(b)(2)(B)(i) and 11 CFR
300.32(c).
In 2002, the Commission promulgated
regulations at 11 CFR Part 300
implementing BCRA. See Final Rules
and Explanation and Justification for
Prohibited and Excessive Contributions;
Non-Federal Funds or Soft Money, 67
FR 49064 (July 29, 2002). Specifically,
11 CFR 300.32(c)(4) required any State,
district, or local committee or
organization of a political party that
disburses more than $5,000 for allocable
Type 1&2 FEA in a calendar year either
to pay for such allocable FEA entirely
with Federal funds or to allocate the
disbursements between Federal funds
and Levin funds. The same provision
also created a ‘‘de minimis exemption’’
for any State, district, or local party
committee or organization whose
disbursements for allocable Type 1&2
FEA aggregate $5,000 or less in a
5 ‘‘Federal funds’’ are funds that comply with the
limits, prohibitions, and reporting requirements of
the Act. See 11 CFR 300.2(g).
E:\FR\FM\17NOR1.SGM
17NOR1
69632
Federal Register / Vol. 70, No. 221 / Thursday, November 17, 2005 / Rules and Regulations
calendar year, thereby permitting such
party committees and organizations to
pay for these expenses entirely with
Levin funds.
The $5,000 Exemption was one of
several regulations at issue in Shays v.
FEC, 337 F.Supp.2d 28 (D.D.C. 2004)
(‘‘Shays District’’), aff’d, 414 F.3d 76
(D.C. Cir. July 15, 2005) (‘‘Shays
Appeal’’), reh’g en banc denied (October
21, 2005) (No. 04–5352). The District
Court in Shays District held that the
$5,000 Exemption in 11 CFR
300.32(c)(4) was inconsistent with
Congress’s intent, as expressed in
BCRA, to require State, district, and
local party committees to pay for
allocable Type 1&2 FEA either solely
with Federal funds or with an allocated
mix of Federal funds and Levin funds.
Shays District at 114–17.
The Commission appealed the District
Court’s ruling regarding several of its
regulations, including 11 CFR
300.32(c)(4). On July 15, 2005, the Court
of Appeals for the D.C. Circuit affirmed
the District Court’s invalidation of the
$5,000 Exemption. Shays Appeal at 115.
In affirming the District Court’s
invalidation of the $5,000 Exemption,
the Court of Appeals concluded that the
Commission had failed to establish that
the $5,000 Exemption was ‘‘in fact de
minimis.’’ Shays Appeal at 114. The
Court of Appeals also concluded that
because Congress had exercised its
judgment in enacting the Levin
Amendment, ‘‘Congress’s rationale for
including activities in the Levin
Amendment obviously affords no
justification for excluding them from
Levin allocation, the very form of
regulation Congress chose.’’ Id.
(emphasis in original).
The NPRM proposed to eliminate
entirely the $5,000 Exemption in 11
CFR 300.32(c)(4). In response to the
NPRM, eight commenters urged the
Commission to eliminate the $5,000
Exemption altogether. These
commenters stated that BCRA was clear
on its face and argued that the Levin
Amendment itself reflected Congress’s
narrowly-drawn exception allowing
State, district, and local party
committees to use only Federal funds or
to allocate between Federal and Levin
funds for allocable Type 1&2 FEA. Four
of the commenters noted that the Levin
Amendment was, itself, a compromise
reached during Congressional
deliberation. These commenters
asserted that Congress had
contemplated that Levin funds always
would be used in combination with
Federal funds for allocable Type 1&2
FEA, recognizing that FEA activities
influence Federal elections.
VerDate Aug<31>2005
16:07 Nov 16, 2005
Jkt 208001
On the other hand, one commenter
favored retaining the $5,000 Exemption,
stating that the exemption did not
undermine Congressional intent.
Specifically, this commenter asserted
that absent the $5,000 Exemption, a
strict application of the Levin
Amendment would lead to suppression
of ‘‘local grassroots activity in favor of
non-party or large institutional party
activity’’ and that this was ‘‘an unlikely
objective’’ for Congress.
1. Elimination of the Current $5,000
Exemption. In light of the conclusions
reached by the Court of Appeals in
Shays Appeal, which precluded
retaining the current rule, the
Commission has decided to eliminate
the $5,000 Exemption from paragraph
(c)(4) of section 300.32. Thus, revised
paragraph (c)(4) requires State, district,
and local committees and organizations
of political parties to pay for all
allocable Type 1&2 FEA either entirely
with Federal funds or with an allocated
mix of Federal funds and Levin funds,
without regard to the total amount of
their annual disbursements. The
wording of revised 11 CFR 300.32(c)(4)
also includes a conforming revision that
replaces the word ‘‘may’’ with ‘‘must’’
to reflect unambiguously that State,
district, and local party committees and
organizations must choose between
paying for such expenditures either
entirely with Federal funds or with an
allocated mix of Federal funds and
Levin funds.
2. Rejection of a Restructured
Exemption. As noted above, the NPRM
also requested comments on a possible
restructuring of the exemption in
section 300.32(c)(4) to mirror the
reporting exception contained in section
434(e)(2)(A) of the Act, which exempts
State, district, and local party
committees from reporting FEA if they
have combined receipts and
disbursements for FEA (whether
allocable or not) that together aggregate
to less than $5,000 in a calendar year.
Seven commenters addressed the
restructuring proposal, all of them
asserting that any restructured
exemption would be contrary to
Congressional intent.
As discussed above, the Court of
Appeals held that the careful balance
already reflected in the Levin
Amendment represents Congress’s
exercise of its judgment, and effectively
precludes the Commission from
promulgating a further exemption
unless such an exemption were ‘‘truly
de minimis.’’ Shays Appeal at 114. In
light of the comments received in this
rulemaking and the decision of the
Court of Appeals, the Commission has
PO 00000
Frm 00002
Fmt 4700
Sfmt 4700
decided not to adopt the restructuring
proposal contained in the NPRM.
Certification of No Effect Pursuant to 5
U.S.C. 605(b) Regulatory Flexibility Act
The Commission certifies that the
attached final rule does not have a
significant economic impact on a
substantial number of small entities.
The basis for this certification is that the
organizations affected by this final rule
are State, district, and local party
committees and organizations, which
are not ‘‘small entities’’ under 5 U.S.C.
601. These not-for-profit committees do
not meet the definition of ‘‘small
organization,’’ which requires that the
enterprise be independently owned and
operated and not dominant in its field.
5 U.S.C. 601(4). State political party
committees are not independently
owned and operated because they are
not financed and controlled by a small
identifiable group of individuals, and
they are affiliated with the larger
national political party organizations. In
addition, the State political party
committees representing the Democratic
and Republican parties have a major
controlling influence within the
political arena of their State and are
thus dominant in their field. District
and local party committees are generally
considered affiliated with the State
committees and need not be considered
separately. To the extent that any State
party committees representing minor
political parties might be considered
‘‘small organizations,’’ the number
affected by this final rule is not
substantial.
List of Subjects in 11 CFR Part 300
Campaign funds, Nonprofit
organizations, Political candidates,
Political committees and parties,
Reporting and recordkeeping
requirements.
For the reasons set out in the
preamble, the Federal Election
Commission is amending Subchapter C
of Chapter I of Title 11 of the Code of
Federal Regulations as follows:
I
PART 300—NON-FEDERAL FUNDS
1. The authority citation for Part 300
continues to read as follows:
I
Authority: 2 U.S.C. 434(e), 438(a)(8),
441a(a), 441i, 453.
2. Section 300.32 is amended by
revising paragraph (c)(4) to read as
follows:
I
§ 300.32
Expenditures and disbursements.
*
*
*
*
*
(c) Conditions and restrictions on
spending Levin funds. * * *
E:\FR\FM\17NOR1.SGM
17NOR1
Federal Register / Vol. 70, No. 221 / Thursday, November 17, 2005 / Rules and Regulations
(4) The disbursements for allocable
Federal election activity must be paid
for either entirely with Federal funds or
by allocating between Federal funds and
Levin funds according to 11 CFR 300.33.
*
*
*
*
*
Dated: November 10, 2005.
Scott E. Thomas,
Chairman, Federal Election Commission.
[FR Doc. 05–22778 Filed 11–16–05; 8:45 am]
BILLING CODE 6715–01–P
DEPARTMENT OF THE TREASURY
Office of the Comptroller of the
Currency
DATES:
12 CFR Parts 4 and 19
FOR FURTHER INFORMATION CONTACT:
RIN 1557–AC94
FEDERAL RESERVE SYSTEM
12 CFR Parts 263 and 264a
[Docket No. R–1230]
FEDERAL DEPOSIT INSURANCE
CORPORATION
12 CFR Parts 308 and 336
RIN 3064–AC92
DEPARTMENT OF THE TREASURY
Office of Thrift Supervision
12 CFR Parts 507 and 509
[No. 2005–48]
RIN 1550–AB99
One-Year Post-Employment
Restrictions for Senior Examiners
Office of the Comptroller of
the Currency (OCC), Treasury; Board of
Governors of the Federal Reserve
System (Board); Federal Deposit
Insurance Corporation (FDIC); and
Office of Thrift Supervision (OTS),
Treasury.
ACTION: Final rule.
AGENCIES:
SUMMARY: The OCC, Board, FDIC and
OTS (the Agencies) have jointly adopted
final rules to implement section 6303(b)
of the Intelligence Reform and
Terrorism Prevention Act of 2004
(Intelligence Reform Act), which
imposes post-employment restrictions
on senior examiners of depository
institutions and depository institution
holding companies. Under section
6303(b), and the Agencies’ final
implementing rules, a senior examiner
16:07 Nov 16, 2005
Effective Date: December 17,
2005.
[Docket No. 05–19]
VerDate Aug<31>2005
employed by an Agency or a Federal
Reserve Bank (Reserve Bank) may not
knowingly accept compensation as an
employee, officer, director, or
consultant from certain depository
institutions or depository institution
holding companies he or she examined,
or from certain related entities, for one
year after the examiner leaves the
employment or service of the Agency or
Reserve Bank. If an examiner violates
the one-year restriction, the statute
requires the appropriate Federal
banking agency to seek an order of
removal and prohibition, a civil money
penalty of up to $250,000, or both.
Section 10(k) will become effective on
December 17, 2005.
Jkt 208001
OCC: Mitchell Plave, Counsel,
Legislative and Regulatory Activities
Division, (202) 874–5090; Stuart
Feldstein, Assistant Director, Legislative
and Regulatory Activities Division,
(202) 874–5090; or Barrett Aldemeyer,
Senior Counsel, Administrative and
Internal Law Division, (202) 874–4460,
Office of the Comptroller of the
Currency, 250 E Street, SW.,
Washington, DC 20219.
Board: Cary K. Williams, Assistant
General Counsel, (202) 452–3295,
Kieran J. Fallon, Assistant General
Counsel, (202) 452–5270, Andrea
Tokheim, Attorney, (202) 452–2300,
Legal Division; William Spaniel, Deputy
Associate Director, (202) 452–3469, or
Jinai Holmes, Senior Financial Analyst,
(202) 452–2834, Division of Banking
Supervision and Regulation; for users of
Telecommunication Devices for the Deaf
(TDD) only, contact (202) 263–4869.
FDIC: Robert J. Fagan, Ethics Program
Manager, Legal Division, (202) 898–
6808; Stephen P. Gaddie, Special
Assistant to the Deputy Director,
Division of Supervision and Consumer
Protection, (202) 898–6575; Richard
Osterman, Senior Counsel, Legal
Division, (202) 898–7028; and Kymberly
K. Copa, Counsel, Legal Division, (202)
898–8832, Federal Deposit Insurance
Corporation, 550 17th Street, NW.,
Washington, DC 20429.
OTS: Elizabeth Moore, Special
Counsel, Litigation Division, (202) 906–
7039; or Karen Osterloh, Special
Counsel, Regulations and Legislation
Division, (202) 906–6639, Chief
Counsel’s Office, Office of Thrift
Supervision, 1700 G Street, NW.,
Washington, DC 20552.
SUPPLEMENTARY INFORMATION:
PO 00000
Frm 00003
Fmt 4700
Sfmt 4700
69633
I. Background
Under section 6303(b) of the
Intelligence Reform Act,1 which added
a new section 10(k) to the Federal
Deposit Insurance Act (FDI Act), an
officer or employee of an Agency or
Reserve Bank who acts as a ‘‘senior
examiner’’ for a particular depository
institution may not, within one year
after terminating employment with the
relevant Agency or Reserve Bank,
knowingly accept compensation as an
officer, director, employee or consultant
from that depository institution or any
company (including a bank holding
company or savings and loan holding
company) that controls the depository
institution.2 Section 10(k) imposes a
similar post-employment restriction on
an officer or employee who acts as the
‘‘senior examiner’’ of a particular
depository institution holding company,
but in these circumstances, the postemployment restrictions apply to
relationships with the depository
institution holding company and any
depository institution subsidiary of the
holding company.3 The restrictions in
section 10(k) apply only to examiners
who served as a senior examiner for a
particular depository institution or
holding company for two or more
months during the final twelve months
of their employment at the Agency or
Reserve Bank.
If a senior examiner violates the oneyear post-employment restrictions in
section 10(k), the statute requires the
appropriate Federal banking agency to
initiate proceedings to impose an order
of removal and prohibition or a civil
money penalty, or both, on the former
senior examiner. Congress directed each
Agency to prescribe regulations to
administer and carry out section 10(k),
including rules, regulations or
guidelines to define the scope of
persons who are ‘‘senior examiners.’’
The post-employment restrictions in
section 10(k) are in addition to any
other conflict of interest and ethics rules
and restrictions that may apply to
1 Pub. L. 108–458, 118 Stat. 3638, 3751–53 (Dec.
17, 2004).
2 For purposes of section 10(k), the term
‘‘depository institution’’ includes an uninsured
branch or agency of a foreign bank, if the branch
or agency is located in a state of the United States.
See 12 U.S.C. 1820(k)(2)(A). The FDIC has made a
minor technical change to the definition of
‘‘depository institution’’ in its regulation to
recognize that the term may include uninsured
branches or agencies of foreign banks for these
purposes.
3 For purposes of the post-employment restriction
of section 10(k), the term ‘‘depository institution
holding company’’ means a bank holding company
or a savings and loan holding company, and also
includes, among other things, a foreign bank that
has a branch, agency, or commercial lending
company subsidiary in the United States.
E:\FR\FM\17NOR1.SGM
17NOR1
Agencies
[Federal Register Volume 70, Number 221 (Thursday, November 17, 2005)]
[Rules and Regulations]
[Pages 69631-69633]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-22778]
========================================================================
Rules and Regulations
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains regulatory documents
having general applicability and legal effect, most of which are keyed
to and codified in the Code of Federal Regulations, which is published
under 50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by the Superintendent of Documents.
Prices of new books are listed in the first FEDERAL REGISTER issue of each
week.
========================================================================
Federal Register / Vol. 70, No. 221 / Thursday, November 17, 2005 /
Rules and Regulations
[[Page 69631]]
FEDERAL ELECTION COMMISSION
11 CFR Part 300
[Notice 2005-26]
$5,000 Exemption for Disbursements of Levin Funds by State,
District, and Local Party Committees and Organizations
AGENCY: Federal Election Commission.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: The Federal Election Commission is eliminating from its
regulations an exemption allowing State, district, and local committees
and organizations of a political party to use only Levin funds to pay
for certain types of Federal election activity aggregating $5,000 or
less in a calendar year. In Shays v. FEC, the District Court
invalidated the exemption and remanded the regulation to the Commission
for further action consistent with the court's opinion. The Commission
appealed this ruling, and the Court of Appeals for the D.C. Circuit
affirmed the District Court's decision. The repeal of this rule means
that State, district, and local political party committees and
organizations must pay for these specific types of Federal election
activity either entirely with Federal funds, or with a mix of Federal
funds and Levin funds. Further information is provided in the
supplementary information that follows.
DATES: The rules at 11 CFR 300.32(c)(4) are effective on December 19,
2005.
FOR FURTHER INFORMATION CONTACT: Mr. Brad C. Deutsch, Assistant General
Counsel, or Ms. Cheryl A.F. Hemsley, Attorney, 999 E Street, NW.,
Washington, DC 20463, (202) 694-1650 or (800) 424-9530.
SUPPLEMENTARY INFORMATION: The Commission issued a Notice of Proposed
Rulemaking (``NPRM'') proposing to eliminate from its regulations at 11
CFR 300.32(c)(4) an exemption that had allowed State, district, and
local committees of a political party \1\ to pay for certain types of
Federal election activity (``FEA'') \2\ aggregating $5,000 or less in a
calendar year entirely with Levin funds \3\ (``$5,000 Exemption''). The
NPRM also requested comments on the possibility of creating a new,
restructured exemption. The NPRM was published in the Federal Register
on February 2, 2005. 70 FR 5385 (February 2, 2005). The comment period
closed on March 4, 2005. The Commission received five comments from ten
commenters on the proposed rules.\4\ Eight commenters favored
elimination of the $5,000 Exemption and one commenter favored
maintaining the $5,000 Exemption. Additionally, the Commission received
a comment from the Internal Revenue Service, indicating ``the proposed
rules do not pose a conflict with the Internal Revenue Code or the
regulations thereunder.'' The Commission is issuing final rules
eliminating the $5,000 Exemption and is declining to adopt a
restructured exemption.
---------------------------------------------------------------------------
\1\ In addition to political party committees, these regulations
are equally applicable to State, district, and local party
organizations that do not qualify as political committees. See 11
CFR 300.33(a)(1) and (2).
\2\ There are four types of FEA: Type 1--Voter registration
activity during the period that begins on the date that is 120 days
before a regularly scheduled Federal election is held and ends on
the date of the election; Type 2--Voter identification, get-out-the-
vote activity, or generic campaign activity conducted in connection
with an election in which a candidate for Federal office appears on
the ballot; Type 3--A public communication that promotes or
supports, or attacks or opposes a clearly identified candidate for
Federal office; and Type 4--Services provided during any month by an
employee of a State, district, or local committee of a political
party who spends more than 25 percent of his or her compensated time
during that month on activities in connection with a Federal
election. See 2 U.S.C. 431(20) and 11 CFR 100.24.
\3\ Levin funds are funds that are raised by State, district, or
local party committees and organizations pursuant to the
restrictions in 11 CFR 300.31 and disbursed subject to the
restrictions in 11 CFR 300.32. See 11 CFR 300.2(i).
\4\ All comments on the NPRM are available at https://
www.fec.gov/law/law_rulemakings.shtml#levin.
---------------------------------------------------------------------------
Under the Administrative Procedure Act, 5 U.S.C. 553(d), and the
Congressional Review of Agency Rulemaking Act, 5 U.S.C. 801(a)(1),
agencies must submit final rules to the Speaker of the House of
Representatives and the President of the Senate and publish them in the
Federal Register at least 30 calendar days before they take effect. The
final rule that follows was transmitted to Congress on November 10,
2005.
Explanation and Justification
11 CFR 300.32(c)--Conditions and Restrictions on Spending Levin Funds
The Bipartisan Campaign Reform Act of 2002 (``BCRA''), Pub. L. 107-
155, 116 Stat. 81 (2002), amended the Federal Election Campaign Act of
1971 (the ``Act''), 2 U.S.C. 431 et seq., in many respects. Section
441i(b)(1) of the Act, as added by BCRA, provides that State, district,
and local political party committees generally must use Federal funds
\5\ to pay for FEA. However, the Levin Amendment (2 U.S.C. 441i(b)(2))
provides an exception for two types of FEA, for which State, district,
and local political party committees may allocate disbursements between
Federal funds and Levin funds in accordance with allocation ratios
determined by the Commission. 2 U.S.C. 441i(b)(2); see also 11 CFR
300.2(i), 300.32, and 300.33. Types 1 and 2 FEA, which involve certain
voter registration, get-out-the-vote, voter identification, and generic
campaign activity, are allocable between Federal and Levin funds, so
long as the activities do not refer to a clearly identified Federal
candidate (``allocable Type 1&2 FEA''). See 2 U.S.C. 441i(b)(2)(B)(i)
and 11 CFR 300.32(c).
---------------------------------------------------------------------------
\5\ ``Federal funds'' are funds that comply with the limits,
prohibitions, and reporting requirements of the Act. See 11 CFR
300.2(g).
---------------------------------------------------------------------------
In 2002, the Commission promulgated regulations at 11 CFR Part 300
implementing BCRA. See Final Rules and Explanation and Justification
for Prohibited and Excessive Contributions; Non-Federal Funds or Soft
Money, 67 FR 49064 (July 29, 2002). Specifically, 11 CFR 300.32(c)(4)
required any State, district, or local committee or organization of a
political party that disburses more than $5,000 for allocable Type 1&2
FEA in a calendar year either to pay for such allocable FEA entirely
with Federal funds or to allocate the disbursements between Federal
funds and Levin funds. The same provision also created a ``de minimis
exemption'' for any State, district, or local party committee or
organization whose disbursements for allocable Type 1&2 FEA aggregate
$5,000 or less in a
[[Page 69632]]
calendar year, thereby permitting such party committees and
organizations to pay for these expenses entirely with Levin funds.
The $5,000 Exemption was one of several regulations at issue in
Shays v. FEC, 337 F.Supp.2d 28 (D.D.C. 2004) (``Shays District''),
aff'd, 414 F.3d 76 (D.C. Cir. July 15, 2005) (``Shays Appeal''), reh'g
en banc denied (October 21, 2005) (No. 04-5352). The District Court in
Shays District held that the $5,000 Exemption in 11 CFR 300.32(c)(4)
was inconsistent with Congress's intent, as expressed in BCRA, to
require State, district, and local party committees to pay for
allocable Type 1&2 FEA either solely with Federal funds or with an
allocated mix of Federal funds and Levin funds. Shays District at 114-
17.
The Commission appealed the District Court's ruling regarding
several of its regulations, including 11 CFR 300.32(c)(4). On July 15,
2005, the Court of Appeals for the D.C. Circuit affirmed the District
Court's invalidation of the $5,000 Exemption. Shays Appeal at 115. In
affirming the District Court's invalidation of the $5,000 Exemption,
the Court of Appeals concluded that the Commission had failed to
establish that the $5,000 Exemption was ``in fact de minimis.'' Shays
Appeal at 114. The Court of Appeals also concluded that because
Congress had exercised its judgment in enacting the Levin Amendment,
``Congress's rationale for including activities in the Levin Amendment
obviously affords no justification for excluding them from Levin
allocation, the very form of regulation Congress chose.'' Id. (emphasis
in original).
The NPRM proposed to eliminate entirely the $5,000 Exemption in 11
CFR 300.32(c)(4). In response to the NPRM, eight commenters urged the
Commission to eliminate the $5,000 Exemption altogether. These
commenters stated that BCRA was clear on its face and argued that the
Levin Amendment itself reflected Congress's narrowly-drawn exception
allowing State, district, and local party committees to use only
Federal funds or to allocate between Federal and Levin funds for
allocable Type 1&2 FEA. Four of the commenters noted that the Levin
Amendment was, itself, a compromise reached during Congressional
deliberation. These commenters asserted that Congress had contemplated
that Levin funds always would be used in combination with Federal funds
for allocable Type 1&2 FEA, recognizing that FEA activities influence
Federal elections.
On the other hand, one commenter favored retaining the $5,000
Exemption, stating that the exemption did not undermine Congressional
intent. Specifically, this commenter asserted that absent the $5,000
Exemption, a strict application of the Levin Amendment would lead to
suppression of ``local grassroots activity in favor of non-party or
large institutional party activity'' and that this was ``an unlikely
objective'' for Congress.
1. Elimination of the Current $5,000 Exemption. In light of the
conclusions reached by the Court of Appeals in Shays Appeal, which
precluded retaining the current rule, the Commission has decided to
eliminate the $5,000 Exemption from paragraph (c)(4) of section 300.32.
Thus, revised paragraph (c)(4) requires State, district, and local
committees and organizations of political parties to pay for all
allocable Type 1&2 FEA either entirely with Federal funds or with an
allocated mix of Federal funds and Levin funds, without regard to the
total amount of their annual disbursements. The wording of revised 11
CFR 300.32(c)(4) also includes a conforming revision that replaces the
word ``may'' with ``must'' to reflect unambiguously that State,
district, and local party committees and organizations must choose
between paying for such expenditures either entirely with Federal funds
or with an allocated mix of Federal funds and Levin funds.
2. Rejection of a Restructured Exemption. As noted above, the NPRM
also requested comments on a possible restructuring of the exemption in
section 300.32(c)(4) to mirror the reporting exception contained in
section 434(e)(2)(A) of the Act, which exempts State, district, and
local party committees from reporting FEA if they have combined
receipts and disbursements for FEA (whether allocable or not) that
together aggregate to less than $5,000 in a calendar year. Seven
commenters addressed the restructuring proposal, all of them asserting
that any restructured exemption would be contrary to Congressional
intent.
As discussed above, the Court of Appeals held that the careful
balance already reflected in the Levin Amendment represents Congress's
exercise of its judgment, and effectively precludes the Commission from
promulgating a further exemption unless such an exemption were ``truly
de minimis.'' Shays Appeal at 114. In light of the comments received in
this rulemaking and the decision of the Court of Appeals, the
Commission has decided not to adopt the restructuring proposal
contained in the NPRM.
Certification of No Effect Pursuant to 5 U.S.C. 605(b) Regulatory
Flexibility Act
The Commission certifies that the attached final rule does not have
a significant economic impact on a substantial number of small
entities. The basis for this certification is that the organizations
affected by this final rule are State, district, and local party
committees and organizations, which are not ``small entities'' under 5
U.S.C. 601. These not-for-profit committees do not meet the definition
of ``small organization,'' which requires that the enterprise be
independently owned and operated and not dominant in its field. 5
U.S.C. 601(4). State political party committees are not independently
owned and operated because they are not financed and controlled by a
small identifiable group of individuals, and they are affiliated with
the larger national political party organizations. In addition, the
State political party committees representing the Democratic and
Republican parties have a major controlling influence within the
political arena of their State and are thus dominant in their field.
District and local party committees are generally considered affiliated
with the State committees and need not be considered separately. To the
extent that any State party committees representing minor political
parties might be considered ``small organizations,'' the number
affected by this final rule is not substantial.
List of Subjects in 11 CFR Part 300
Campaign funds, Nonprofit organizations, Political candidates,
Political committees and parties, Reporting and recordkeeping
requirements.
0
For the reasons set out in the preamble, the Federal Election
Commission is amending Subchapter C of Chapter I of Title 11 of the
Code of Federal Regulations as follows:
PART 300--NON-FEDERAL FUNDS
0
1. The authority citation for Part 300 continues to read as follows:
Authority: 2 U.S.C. 434(e), 438(a)(8), 441a(a), 441i, 453.
0
2. Section 300.32 is amended by revising paragraph (c)(4) to read as
follows:
Sec. 300.32 Expenditures and disbursements.
* * * * *
(c) Conditions and restrictions on spending Levin funds. * * *
[[Page 69633]]
(4) The disbursements for allocable Federal election activity must
be paid for either entirely with Federal funds or by allocating between
Federal funds and Levin funds according to 11 CFR 300.33.
* * * * *
Dated: November 10, 2005.
Scott E. Thomas,
Chairman, Federal Election Commission.
[FR Doc. 05-22778 Filed 11-16-05; 8:45 am]
BILLING CODE 6715-01-P