Public Financing of Presidential Primary and General Election Candidates; Proposed Rule FEDERAL ELECTION COMMISSION

summary: The Federal Election Commission is seeking comments on

proposed revisions to its regulations governing publicly financed

Presidential primary and general election candidates. These regulations

implement the provisions of the Presidential Election Campaign Fund Act

and the Presidential Primary Matching Payment Account Act, which

establish eligibility requirements for Presidential candidates seeking

public financing and indicate how funds received under the public

financing system may be spent. They also require the Commission to

audit publicly financed campaigns and seek repayment where appropriate.

The proposed rules reflect the Commission's experience in administering

this program during the 1992 election cycle and also seek to anticipate

some questions that may arise during the 1996 Presidential election

cycle. The Commission is requesting comments on the draft rules set out

in this Notice, and is also seeking comments on several issues for

which no specific regulatory language is proposed at this time. No

final decisions have been made by the Commission on any of the proposed

revisions in this Notice. Further information is provided in the

supplementary information which follows.

dates: Comments must be received on or before December 5, 1994.

addresses: Comments must be in writing and addressed to: Ms. Susan E.

Propper, Assistant General Counsel, 999 E Street, NW., Washington, DC

20463.

for further information contact: Ms. Susan E. Propper, Assistant

General Counsel, 999 E Street, NW., Washington, DC 20463, (202) 219-

3690 or (800) 424-9530.

supplementary information: The Commission is considering revising parts

of its regulations governing public financing of Presidential

campaigns, 11 CFR Parts 9001 et seq. and 9031 et seq., in order to more

effectively administer the public financing program during the 1996

election cycle. The Commission is publishing this Notice of Proposed

Rulemaking to invite comments on the proposed revisions.

The areas in which the Commission is considering possible revisions

are described in this portion of the Notice in narrative form. Those

revisions that would affect both primary and general election campaigns

are described in the first section of the narrative. The revisions that

would affect only primary or general elections, respectively, are set

out in the next two sections. The fourth section summarizes other

miscellaneous and technical amendments the Commission is proposing for

the public financing rules.

The Commission has prepared proposed regulatory language for many

of these revisions, and included this language in the last section of

the Notice. However, the Commission is also interested in receiving

comments on other possible changes for which no regulatory language has

been prepared. The narrative describes these approaches and highlights

the issues to which commenters are encouraged to direct their

attention. Please note that the narrative discussion is arranged by

topic, whereas the draft rules are set out in numerical order. Readers

should use the citations contained in the narrative to locate the

corresponding proposed language in the draft rules.

Primary and General Election Regulations

A. Qualified Campaign Expenses

1. Negligent Handling of Public Funds

Accounting procedures employed by the Commission make allowance for

reasonable loss and normal spoilage of equipment leased or purchased by

a campaign. However, the Commission has at times encountered incidents

involving the mismanagement or negligent handling of public funds that

do not fall into either of these categories. The proposed rules

therefore seek to clarify how such negligence and mismanagement is

handled in the audit process.

The Commission is seeking comment on whether, as a precondition for

the receipt of public funds, the candidate should agree to meet certain

standards in handling public monies as well as in overseeing the use of

and accounting for public funds. Such standards would be specified at

11 CFR 9003.1(b) and 9033.1(b). If this approach is taken, the

Commission welcomes comment on what standard(s) would be appropriate.

The proposed rules would amend 11 CFR 9004.4(b) and 9034.4(b), to

clarify that the cost of items that are lost or misplaced due to

negligence of a campaign committee will be considered a non-qualified

expense for purposes of these rules. However, the Commission recognizes

that there are varying degrees of negligence in this area, and that

certain factors should be considered prior to any determination that a

repayment is required. For example, these factors could include, but

would not be listed to, whether the committee demonstrates that it made

careful efforts to safeguard the missing equipment; the type of

equipment involved; the number of items that were lost; and the value

of the lost equipment as a percentage of the total value of the

equipment leased or owned by the committee. On this latter point, the

Commission notes that a lost item, such as a newly-acquired vehicle,

may involve a major investment of taxpayer funds, irrespective of the

fact that its cost is only a small percentage of the total amount of

equipment leased or owned by the campaign committee. The Commission

welcomes comments on other factors that should be considered in making

this determination.

Another approach would be to limit the dollar amount of lost

property that could be considered a qualified campaign expense. If a

committee lost goods worth more than the specified amount, any amount

over that figure would be a non-qualified campaign expense. This would

have the advantage of not requiring the Commission to get involved in

what could become a substantial number of negligence determinations,

while recognizing that some loss is inevitable in large, lengthy

campaigns. The Commission welcomes comments on this approach as well as

on what reimbursement limit should be specified, if this were to be

adopted.

The Commission is also seeking comments on how lost or stolen

uninsured items should be reflected on statements of net outstanding

campaign obligations [``NOCO'']. If an item is lost through negligence,

the question is whether it should continue to be treated as an asset

for purposes of the NOCO statement to avoid increasing the committee's

entitlement. Comments are welcome on how this should be done.

Please note that other proposed amendments to the NOCO requirements

are discussed under ``NOCO Statements,'' infra. A related topic, the

treatment of insurance proceeds, is discussed under ``Gains on the Use

of Public Funds,'' infra.

2. Closed Captioning

In 1992, Congress amended 26 U.S.C. 9003 to add a new paragraph

(e), stating that no publicly funded candidate may receive funding for

either the primary or general election campaign unless the candidate

agrees that all of his or her television commercials will be closed

captioned or otherwise capable of being viewed by deaf and hearing

impaired individuals. Pub. L. 102-393, section 534, 106 Stat. 1764

(1992). Although no corresponding amendment was made to 26 U.S.C. 9033,

section 9003(e) states that this requirement applies not only to

candidates who are eligible to receive amounts from the Presidential

Election Campaign Fund, but also to those eligible for funding ``under

chapter 96'' of Title 26 of the United States Code, that is, the

Presidential Primary Matching Payment Account Act. The Commission is

therefore proposing to add the statutory language to the candidate and

committee agreement requirements found at both 11 CFR 9003.1(b) and

9033.1(b).

3. Media Reimbursements

Section 9004.6 contains rules governing expenditures for

transportation and other services provided to media and Secret Service

personnel by presidential campaign committees receiving public

financing for the general election. Section 9034.6 is a parallel

provision governing primary committees that receive public funds from

the matching payment account. These provisions indicate that

expenditures for these purposes will, in most cases, be regarded as

qualified campaign expenses subject to the overall limitations of

sections 9003.2 and 9035.1, respectively.

However, sections 9004.6 and 9034.6 also allow committees to accept

limited reimbursement for these expenses from the media, and deduct any

reimbursements received from the amount of expenditures subject to the

overall expenditure limitation. These rules set limits on the amount of

reimbursement that a committee can accept, and require committees to

repay a portion of any reimbursement that exceeds those limits to the

Treasury.

The proposed rules seek to clarify the application of sections

9004.6 and 9034.6 by reorganizing them without any substantive change.

Under the proposed revisions, paragraphs (a) and (b) have been broken

into smaller subparagraphs. Paragraph (c) has been renumbered as

paragraph (e). Paragraph (d) has been renumbered as paragraph (c) and

broken into smaller paragraphs, and new paragraph (d) has been inserted

in order to clarify the interplay between two aspects of the existing

rules: The requirement that the committee return to the media

representative that portion of any reimbursement received that exceeds

the actual cost of the transportation and services provided by more

than 10%, and the requirement that the committee repay to the Treasury

any part of the reimbursements it receives that exceeds the actual and

administrative costs incurred by the committee. The Commission welcomes

comments on the proposed revisions to sections 9004.6 and 9034.6.

4. Travel Expenditures

The Commission seeks comments on modifying 11 CFR 9004.7 and 9034.7

to address several issues regarding the cost of campaign-related travel

using government airplanes, helicopters and other vehicles. The current

rules contemplate that for plane flights between cities served by a

regularly scheduled commercial airline service, the campaign must

reimburse the appropriate governmental entity for the first class

airfare, and that this amount is treated as a qualified campaign

expense. New language in section 9004.7(b)(5)(i) and section

9034.7(b)(5)(i) would specify that, for travel by airplane, the amount

of the lowest unrestricted non-discounted first class commercial

airfare available for the time traveled is to be used. Discounted fares

that are subject to restrictions on the dates and times of travel, or

restrictions on changing flights, are not comparable to the service

provided when the campaign uses a government conveyance. Campaign

committees are responsible for determining these amounts at the time of

the flight to ensure that the right amount is paid to the appropriate

government entity, and would need to maintain documentation supporting

these amounts. The lowest unrestricted non-discounted first class

airfare is available from several sources including travel agents and

the Official Airline Guide.

Questions have also arisen regarding cities that are served by

regular air service, but first class flights are not available. In this

case, the Commission proposes specifying that committees should use the

lowest unrestricted non-discounted coach fare available for the time

traveled. This approach is consistent with the valuation method

established by the Select Committee on Ethics of the United States

Senate for the use of private aircraft. See Interpretive Ruling No.

412, Select Committee on Ethics, United States Senate, 101st Cong., 1st

Sess., S. Prt. 101-18 at 251-52 (1989). It is also consistent with the

valuation methods used by the House of Representatives' Committee on

Standards of Official Conduct with respect to gifts of private

transportation not associated with official travel. See, Valuation of

Gifts of Transportation on Private Aircraft, Committee on Standards of

Official Conduct, Letter dated June 11, 1987.

For cities not served by regularly scheduled commercial service,

the current rules specify that the amount to be reimbursed is the

charter rate. The proposed revisions would clarify that the charter

rate used should be for a comparable airplane of similar make, model

and size. This provision would also be consistent with the approaches

used by the Congressional Committees.

Questions have also arisen regarding the costs of ``positioning''

flights that are needed to bring the government aircraft from one stop

where it dropped off the candidate and campaign staff to another stop

where it will pick them up to continue the trip or return to the point

of origin. New language in sections 9004.7(b)(5)(ii) and

9034.7(b)(5)(ii) would incorporate the Commission's policy that the

committee should pay the costs noted above for one passenger plus fuel

used and crew time. This approach recognizes that positioning flights

are campaign-related, and therefore these costs are properly treated as

qualified campaign expenses.

Paragraphs (b)(5)(iii) in sections 9004.7 and 9034.7 would contain

provisions regarding travel on government conveyances other than

airplanes. For travel by helicopter or ground conveyance, the

commercial rental rate should be paid for a comparable conveyance in

terms of size, model and make. Additional guidance on this area can be

found in Advisory Opinion 1992-34. Proposed sections 9004.7(b)(5)(iv)

and 9034.7(b)(5)(iv) would continue to require payment for the use of

accommodations paid for by a government entity. Under 11 CFR

100.7(a)(1)(iii)(B), the committee should use the usual and normal

charge in the market from which it ordinarily would have purchased the

accommodations. The term ``accommodations'' includes both lodging and

meeting rooms.

New paragraph (B)(8) of these sections would explicitly reflect

Commission policy that travel on corporate conveyances is governed by

11 CFR 114.9(e).

Finally, new language in paragraph (b)(2) of these sections would

provide additional guidance as to when a stop will be considered

campaign-related. Campaign activity includes soliciting, making or

accepting contributions, and expressly advocating the nomination,

election or defeat of any candidate. See, e.g., AOs 1994-15, 1992-6,

and opinions cited therein. The Commission has also indicated that the

absence of solicitations for contributions or express advocacy

regarding candidates will not preclude a determination that an activity

is ``campaign related.'' Id. Accordingly, the proposed rules would

include other factors to be considered in determining whether a stop is

campaign-related. The rules would also retain the current language

indicating that incidental campaign-related contacts during an

otherwise noncampaign-related stop would not cause the stop to be

considered campaign-related.

5. Winding Down Costs; Gifts and Bonuses

The current regulations at 11 CFR 9004.4(a)(4)(i) and

9034.4(a)(3)(i) permit candidates to receive contributions and matching

funds, and make disbursements, for the purpose of defraying winding

down costs over an extended period after the candidate's date of

ineligibility [``DOI'']. These amounts are treated as qualified

campaign expenses, and can result in additional audit fieldwork and

preparation of addenda to audit reports to focus on these receipts and

disbursements.

The Commission is proposing several ways to streamline and shorten

the audit process, discussed below. In addition, comments are welcome

on whether the amount that a candidate may receive for winding down

costs should be limited to no more than a flat dollar amount, or a set

percentage of the candidate's total expenditures during the campaign,

or a set percentage of total matching funds certified for the

candidate. If so, what should the amount or percentage be? If campaigns

receive a set dollar amount, but do not use the entire amount for

winding down costs, should they be permitted to retain the unspent

amount? Allowing them to keep the remainder would serve as an incentive

to complete the winding down process promptly. However, there are

public policy reasons for requiring the remaining funds to be returned

to the U.S. Treasury. Placing a cap on winding down expenses would

assist the Commission's goal of streamlining, but the amount chosen

would have to be sufficient to meet reasonable expenses incurred in

winding down the campaign. Another option would be to establish a

cutoff date after which winding down expenses would not longer be

considered qualified campaign expenses. Other suggestions that would

simplify and shorten the required audit process are encouraged. The

proposed rules do not include language regarding these proposals.

The Commission seeks comments on new language in section 9034.4(A)

incorporating the current practice of permitting publicly-funded

primary committees to treat 100% of salary, overhead and computer

expenses incurred after the candidate's date of ineligibility (DOI) as

exempt compliance expenses, beginning with the first full reporting

period after DOI. See, Financial Control and Compliance Manual for

Presidential Primary Candidates Receiving Public Financing, p. 25

(January, 1992). Please note that this approach does not apply to

expenses incurred during the period between DOI and the date on which a

candidate either re-establishes eligibility or ceases to continue to

campaign. Similarly, for general election candidates, new language

would be added to section 9004.4(a) to allow 100% of salary and

overhead expenses incurred after the end of the expenditure report

period to be paid from the legal and accounting compliance fund,

provided these expenses are solely to ensure compliance with the FECA

and the Fund Act.

Finally, new language in sections 9004.4(a) and 9034.4(a) would

permit campaign committees to use federal funds to defray the costs of

gifts or monetary bonuses for committee staff and consultants, as long

as the gifts do not exceed $150 per individual and as long as all gifts

and bonuses (except bonuses provided for at the outset in employment

and consulting contracts) are limited to $20,000. This approach is

somewhat similar to a provision included in the public funding rules

for convention committees at 11 CFR 9008.7(a)(4)(xii). See 59 FR 33618

(June 29, 1994). With regard to bonus arrangements provided for in

advance in employment and consulting contracts, comments are sought on

whether the amount of these bonuses should be restricted to a fixed

percentage of the compensation paid as provided by the contract, or

whether these bonuses should be subject to the overall $20,000 limit.

Such an approach would be intended to ensure that committees do not

give out sizable bonuses simply because they have surplus public funds

at the end of the campaign.

B. Documentation and Reporting

1. Documentation of Disbursements

Sections 9003.5(b)(1)(i) and 9033.11(b)(1)(i) set forth the

documentation required for disbursements in excess of $200. Although a

canceled check, negotiated by the payee, is required in most

situations, it is not currently required if the committee presents a

receipted bill from the payee stating the purpose of the disbursement.

The proposed rules would change the documentation requirements so that

committees must provide canceled checks negotiated by the payees for

all disbursements over $200. This change would assist the Commission's

audit staff in verifying that public funds are spent on qualified

campaign expenses. Committees should already have canceled checks in

their possession, so production would not be burdensome. Please note

that, as in the past, the proposed rules would require that

documentation in addition to the committee's check be provided for

disbursements exceeding $200.

2. Alphabetized Schedules

The proposed rules include two new sections, 11 CFR 9006.3 and

9037.4, which would require that presidential campaign committee

reports containing schedules generated from computerized files, list in

alphabetical order the sources of the receipts, the payees and

creditors. For individuals, including contributors, the list must be in

alphabetical order by surname. However, presidential campaign

committees would not be required to computerize their records if they

do not wish to do so. The new provision is intended to remedy

situations in which committees maintain computerized records of

contributors or payees in alphabetical order, but file schedules with

the order of the names scrambled. That practice makes it very

difficult, if not impossible, to locate particular names on the

committee's reports if the schedules are voluminous, thereby thwarting

the public disclosure purposes of the Federal Election Campaign Act, 2

U.S.C. 431 et seq. [``FECA''] and making it more difficult to monitor

compliance with the contribution limits.

C. Audits

1. Sampling and Disgorgement

The Commission has a statutory obligation to complete the audits of

publicly funded committees in a thorough and timely manner. In the

past, the resources required to conduct reviews of the contributions

received by presidential committees contributed to the Commission's

difficulty in fulfilling that obligation.

Beginning with the 1992 election cycle, however, the Commission

began to make more extensive use of statistical sampling for audits of

contributions received by publicly financed presidential primary

election committees, and to use the sample results to quantify, in

whole or in part, the dollar value of any related audit findings. While

the Commission continues to conduct a limited non-sample review of

contributions received by these committees, most audit testing of

contributions and supporting documentation is now done on a sample

basis. The Commission is now proposing that new paragraph (f) be added

to 11 CFR 9007.1 and 9038.1 to incorporate these procedures.

The Commission notes that this approach would apply in a general

election only to contributions raised due to a deficiency in the

Presidential Election Campaign Fund, or to contributions raised by new

or minor party candidates. See 26 U.S.C. 9003(c)(2), 9006(c); 11 CFR

9003.2(b)(2), 9003.3(b).

The use of statistical sampling is legally acceptable for

projecting certain components of a large universe, such as excessive

and prohibited contributions. See, e.g., Chavez County Home Health

Service v. Sullivan, 931 F.2d 904 D.C. Cir. 1991) (sampling audit used

to recoup Medicaid overpayments to health care providers); Michigan

Dep't of Education v. U.S. Dep't of Education, 875 F.2d 1196 (6th Cir.

1989) (sampling of 259 out of 66,368 total payment authorizations

upheld as proper basis for determining amount of misexpended federal

funds in vocational-rehabilitative program); Georgia v. Califano, 446

F. Supp. 404 (N.D. Ga. 1977) (Medicaid overpayments).

The statistical sampling technique currently employed in this

process, known as Dollar Unit Sampling, Probability Proportional to

Size, or Combined Attribute Variable Sampling, is widely accepted in

the auditing profession. This plan is discussed in the American

Institute of Certified Public Accounts' Audit and Accounting Guide

entitled Audit Sampling, and is the only sampling plan capable of

producing dollar projections supported by the audit software package

IDEA, which is marketed by the American Institute of Certified Public

Accountants. This same technique has been used by the Commission since

1980 to determine the amount of committees' matching fund payments.

The Commission is using this sampling plan to evaluate committees'

compliance with contribution prohibitions and limitations, itemization

of contributions, omission of disclosure information and receipts

documentation. See 2 U.S.C. 432(c), 434(b), 441a, 441b, 441c, 441e,

441g. For example, the Commission projects the total amount of

excessive or prohibited contributions based on apparent excessive or

prohibited contributions identified in a sample of a committee's

contributions. This projection becomes the basis, in whole or in part,

of the audit finding.

The Commission informs the committee which items serve as the basis

for the sample, and the committee responds only to the specific sample

items used to make the projection. If the committee shows that any

errors found among the sample items were not excessive or prohibited

contributions, timely refunded, reattributed or redesignated, or for

some other reason were not errors, a new projection is made, based on

the reduced number of errors in the sample.

The Commission is further proposing to clarify at new paragraphs

9007.1(f)(3) and 9038.1(f)(3) that the amount of any excessive or

prohibited contributions that are not refunded, reattributed or

redesignated in a timely manner shall be paid to the United States

Treasury. Committees have 30 days from the date of receipt in which to

refund prohibited contributions, and 60 days in which to seek the

reattribution, redesignation or refund of excessive contributions. 11

CFR 103.3(b) (1), (2) and (3). A committee's failure to take action on

these contributions, as well as attempts to cure them outside of the

specified time periods, would cause these contributions to be treated

as in violation of the FECA.

The equitable doctrine of disgorgement supports the payment to the

Treasury under these circumstances. See generally, United States v.

Bonanno Organized Crime Family of La Cosa Nostra, 683 F. Supp. 1411

(E.D.N.Y. 1988), aff'd 879 F.2d 20 (2d Cir. 1989) (disgorgement an

appropriate, non-punitive remedy to deprive wrongdoers of their ill-

gotten gains and to deter future violations). A payment to the Treasury

is an equitable remedy for contributions that have been accepted in

violation of 2 U.S.C. 441a and 441b, and is also consistent with past

Commission practice. See Matter Under Review [``MUR''] 1704 (based upon

preliminary estimates, Commission directed respondents to pay $350,000

to the United States Treasury for contributions that would have

exceeded section 441a limits); Plaintiff's Motion to Effectuate

Judgment, FEC v. Populist Party, No. 92-0674 (HHG) (D.D.C. filed May 4,

1993).

Moreover, this proposed payment is analogous to, and consistent

with, the requirement at 11 CFR 9038.6 that stale-dated checks be paid

to the Treasury. This issue arose after the 1984 election cycle, and

the rule was promulgated as a means to codify the Commission practice

of requiring disgorgement, which was implemented during that cycle.

See, e.g., 52 FR 20864, 20874 (June 3, 1987).

Disgorgement eliminates the need for the Commission to monitor a

committee's refunds of excessive or prohibited contributions. In

addition, it is easier for a committee to make one payment to the

Treasury, as opposed to refunding multiple contributions. Finally, this

is a practical approach in those situations where it is difficult to

discern the original contributors.

2. Further Streamlining the Audit Process

The Commission is seeking comments and suggestions on ways to

further reduce the amount of time it takes to audit publicly funded

presidential committees, to make repayment determinations, and to

complete the enforcement process for these committees. The Commission's

responsibility for conducting a thorough audit and examination of

qualified campaign expenses is set out at 26 U.S.C. 9007(a) and

9038(a). The Commission has an additional responsibility to conduct

adjudications as to whether any portion of the public funds received

should be subject to a repayment. 26 U.S.C. 9007(b) and 9038(b). The

public financing statutes at 26 U.S.C. 9007(c) and 9038(c) specify a

three year time period in which the Commission will notify publicly

funded committees of repayment determinations. Separate enforcement

procedures are prescribed under 2 U.S.C. 437g.

The Commission has taken several actions to help insure that the

audit and repayment processes are completed as expeditiously as

possible. For example, the 1991 revisions to the public financing

regulations eased compliance with the state-by-state allocation rules

set forth at 11 CFR 106.2, and implemented improved use of subpoenas in

presidential audits. See 56 FR 35899-900, 35903-04 (July 29, 1991). In

addition, as noted above, the Commission has begun to use generally

accepted sampling procedures in conducting these audits, and has

instituted a policy that limits a committee to one extension of time in

which to respond to the Interim and Final Audit Reports [``IAR'' and

``FAR'']. These actions are having the desired effect, in that the

Commission is currently on schedule, or ahead of schedule, with respect

to nearly all 1992 audits.

Given this situation, one approach would be to wait until after the

new rules and procedures have been in place for an entire presidential

election cycle before evaluating what additional streamlining methods

are warranted, if any. In the alternative, the Commission welcomes

suggestions for further streamlining these processes, and seeks

comments on several possible changes that are explained below.

The Commission notes that it is important to ensure that whatever

streamlining measures are adopted do not adversely affect the

statutorily required audit process, the committees' due process rights

when repayment determinations are made, or the Commission's ability to

effectively conduct subsequent enforcement actions.

As for modifications to the actual audit and repayment processes,

the Commission is first considering whether the committee's oral

presentation should be held at an earlier point. Currently a committee

may request the opportunity to make an oral presentation if the

committee submits written materials disputing the initial repayment

determination contained in the FAR. 11 CFR 9007.2(c)(3), 9038.2(c)(3).

Please note that the Commission is not considering adding a second

hearing to the audit and repayment processes, but only whether the

current hearing should be held at a different point.

The Commission recognizes that some committees might prefer to make

this presentation earlier in the process. Moving up the hearing could

also help the Commission resolve issues at an earlier date. However, it

is unclear whether advancing the hearing would in and of itself shorten

either the audit or repayment process.

The Commission's experience has been that many issues are resolved

or narrowed as the audit progresses and the amount of the repayment is

further refined. Hence, an earlier date could result in a longer, less

manageable hearing on more issues. To date, the Commission has averaged

only five oral hearings per cycle, because sufficient issues were

resolved in or before the FAR in the other audits to make a hearing

unnecessary. The earlier in the process a hearing is held, the more

likely it is that a committee will request one. This approach could

thus slow down, rather than speed up, the audit process.

The Commission also seeks comments on whether to shorten the time

between various stages of the audit, repayment, and enforcement

processes, or to eliminate some of these stages. For example, the IAR

currently includes a preliminary repayment calculation, while the FAR

includes an initial repayment determination. 11 CFR 9007.1(c), (d);

9038.1(c), (d). The Commission issues the final repayment determination

following consideration of the initial repayment determination in the

FAR, along with, inter alia, information contained in the committee's

written response or presented at the hearing, if one is held. 11 CFR

9007.2(c)(4), 9038.2(c)(4).

One alternative would be to include the initial repayment

determination in the IAR, and include the final repayment determination

and statement of reasons in the FAR. The committee would then respond

to the IAR with a written statement and could request the opportunity

to make an oral presentation, as is now done following the FAR. This

hearing and related documentation would serve as the basis for the FAR.

The committee would continue to have the right to petition for a

rehearing, in accordance with 11 CFR 9007.5 and 9038.5, but would

exercise this right following the FAR/final repayment determination,

rather than after the later, separately-issued final repayment

determination that occurs under the present rules. Please note that

including the initial repayment determination in the IAR would not

change the rule that issuance of an IAR serves as notification of

repayment determinations. See 11 CFR 9007.2(a)(2) and 9038.2(a)(2).

A variation of this approach would be to provide a staff draft of

the IAR to the committee at the same time it is sent to the Commission,

much in the manner that the Commission currently provides a probable

cause to believe brief to respondents pursuant to 2 U.S.C. 437g(a)(3).

The committee could provide a written response to the staff-prepared

IAR and request a hearing before the Commission. The hearing and

additional materials submitted would serve as the basis for the

Commission's adoption of the FAR. The Commission would subsequently

issue the final repayment determination and statement of reasons.

While this approach could take less time, committees might prefer

to know when they are preparing their responses whether the Commission

agrees with the staff's analysis of the issues presented. This would

not be possible if the committee received the staff draft of the IAR at

the same time it was sent to the Commission. Also, the staff draft

could not contain an interim repayment determination, as that must be

approved by the Commission.

The Commission is also concerned with how confidentiality

requirements could impact on these proposed revisions. When committee

activities raise both repayment and enforcement issues, the current

confidentiality provisions require that matters already determined by

the Commission to warrant enforcement action not be made public during

the Commission's discussion of the initial repayment determination. For

example, the publicly released FAR does not discuss the referral of

specific matters for enforcement under 2 U.S.C. 437g. See 11 CFR

9007.1(e)(2), 9038.1(e)(2).

Regardless of what other changes might be made, the Commission is

considering whether the IAR should be made public at the time it is

sent to the committee. If this were done, the Commission's ``sunshine''

rules might require a public discussion of the IAR, unless the document

met other criteria requiring closed discussion under 11 CFR 2.4.

The Commission recognizes that committees may prefer that the

preliminary repayment calculation, which is now contained in the IAR,

not be publicly released, because the amount of the requested repayment

may be substantially altered prior to the issuance of the FAR or the

final repayment determination. On the other hand, publicly releasing

the IAR could encourage committees to address issues at an earlier

point, rather than waiting until the later stages of the audit and

repayment processes, as now sometimes occurs. If the decision is made

to release the IAR, the revised rules would note that the repayment

sought could be adjusted upwards or downwards, based on any subsequent

information.

Finally, the Commission is considering whether, in those audits

that lead to enforcement actions, the enforcement process should begin

at an earlier point, such as by making reason to believe findings when

the IAR is issued. This would permit the investigation to proceed

concurrently with the audit and repayment processes, so that the final

repayment determination and statement of reasons could be issued when

the enforcement matter is concluded.

The Commission already has begun to initiate enforcement actions at

an earlier point, in appropriate cases. However, it may prove

difficult, if not impossible, to formulate a specific policy that would

apply equitably to all audits as to when the enforcement process should

begin and when it should be completed. The Commission would not want

the completion of the audit and repayment processes to be delayed

because the enforcement action is still underway. Also, in some

situations, it may not be possible for the Commission to open an

enforcement matter before it issues a final repayment determination, if

that determination constitutes the Commission's earliest analysis of

whether certain actions may constitute violations. Thus the current

case-by-case approach may prove to be the best alternative.

3. Administrative Record

The Commission also has prepared new sections 9007.7 and 9038.7 to

explain which documents constitute the administrative record for

purposes of judicial review of final determinations regarding candidate

certification, eligibility, ineligibility, and repayment. For example,

the administrative record includes documents and other supporting

evidence on which the Commission's decision is based such as the

candidate agreement, matching fund submissions, Interim Audit Report,

NOCO statement, the Final Audit Report, transcript of the committee's

oral presentation, the final repayment determination, statements of

reasons, and the certifications of Commission votes. On the other hand,

the Commission has never considered the administrative record to

include documents in the files of individual Commissioners, or

documents in FEC employees' files which do not constitute a basis for

the Commission's decisions. It would also not be appropriate to include

in the administrative record transcripts or tapes of Commission

discussions of audit or repayment matters. Although these materials may

sometimes be made available under the Freedom of Information and

Government in the Sunshine Acts, they do not provide an adequate

explanation of the reasons for the Commission's decisions because they

represent pre-decisional discussions. Documents properly subject to

privileges such as an attorney-client privilege, or items constituting

attorney work product, would also not be made part of the

administrative record. The Commission welcomes comments regarding the

types of documents and materials that should or should not be

considered part of the administrative record.

D. Applicability of the Debt Collection Act to the Certification

Process

The Debt Collection Act, 31 U.S.C. 3701 et seq. [``DCA''], at

section 3716, authorizes the practice of administrative offset, whereby

amounts owed to the Government may be deducted from amounts due from

the Government to a debtor if certain requirements are met. This means,

for example, that the Commission could obtain repayments from certain

publicly funded campaigns that have failed to make timely restitution

of improperly-utilized public funds, if that candidate qualified for

public funding in a future election cycle.

One of the DCA's requirements is that, before an agency can utilize

this procedure, it must have prescribed regulations describing how this

will be done. However, the DCA has other ramifications both for public

funding, and for the Commission's enforcement process under the FECA.

For example, in some situations, section 3717 of the DCA would require

charging interest, penalties and processing and handling costs on

overdue debts. This could include both overdue repayments and overdue

civil penalties.

The Commission has an ongoing rulemaking that would revise various

FECA enforcement procedures, and is planning to publish an additional

Notice in connection with that rulemaking to seek comments on how the

DCA might be utilized in both the FECA and the public funding context.

Comments received in response to that Notice will serve as the basis

for deciding whether to amend the public funding rules to provide for

administrative offset, interest and other charges.

The Commission is also seeking comment on the related question of

whether, absent implementation of the DCA, it would be appropriate to

assess interest on late repayments (those made after 90 days following

notice of the Commission's repayment determination) and during

extensions of time on repayment determinations, especially those that

exceed the 90-day period established at 11 CFR 9007.2(d)(1) and

9038.2(d)(1).

While the presidential fund Acts contain no language on interest

assessment, federal common law holds that interest may be assessed on

debts owed the government, even without a statutory provision granting

that power. Robinson v. Watts Detective Agency, 685 F.2d 729, 741 (1st

Cir. 1982). In particular, a statute is not necessary to compel payment

of interest where equitable principles allow this. Young v. Godbe, 82

U.S. 562, 565 (1872).

In the absence of charges for delinquent payments, debtors have

little or no incentive to make timely payments. Without this

requirement, debtors may be more likely to pay their private sector

debts first, as these generally accrue interest, and their government

debts last.

The Commission has already established the precedent that it may

assess interest when a presidential committee seeks a stay of a

repayment determination pending appeal. 11 CFR 9007.5(c)(4),

9038.5(c)(4). One reason cited by the Commission for taking this action

was to protect the Treasury ``by helping to ensure that the repayment

challenge is a serious one and not a dilatory tactic.'' Agenda Document

#86-118, Proposed Revision of Title 26 Regulations (Nov. 26, 1986).

Another was that, if the candidate is earning interest on the disputed

repayment amount, the Treasury and not the candidate should receive the

benefit if the Commission's repayment determination is upheld. Id. Both

reasons are equally applicable to this discussion.

Another argument in support of collecting interest is that, by

agreeing to certain conditions, including an audit and appropriate

repayment, the presidential committees have established a contractual

relationship with the Commission under which interest assessment

becomes appropriate. See West Virginia v. United States, 479 U.S. 305,

310 (1987). Also, if a debtor-creditor relationship is established,

``interest is allowed as a means of compensating a creditor for loss of

use of his money.'' United States v. United Drill and Tool Corporation,

183 F.2d 998, 999 (D.C. Cir. 1950). Such a relationship exists in this

context in that, prior to the receipt of public funds, the candidate

must agree to repay unexpended funds, money determined to be spent in

an unqualified manner, and amounts received in excess of entitlement.

11 CFR 9003.1(b)(6), 9033.1(b)(7).

If the Commission decides to expand the current interest assessment

policy, it would seem appropriate that the same interest computation

formula be utilized across the board. Under current 11 CFR 9007.5(c)(4)

and 9038.5(c)(4), the interest assessed is the greater of that

calculated using the formula set forth at 28 U.S.C. 1961 (a) and (b)

for computing interest on money judgments in federal civil cases, or

the amount actually earned on the set-aside funds in controversy. The

Commission welcomes comments on whether this or some other approach

should be taken, should additional regulations be promulgated.

Please note that there is no specific language in the regulatory

text that addresses this situation. The Commission welcomes comments on

any aspect of this proposal.

Primary elections

A. Eligibility for Matching Payments; Amount of Entitlement

1. Complete Contributor Identifications

Treasurers of political committees, including authorized committees

of Presidential candidates, are required by 2 U.S.C. 432(i) and 434(b)

to use their best efforts to obtain, maintain and report the name,

address, occupation and employer of all contributors who give over $200

per calendar year. The Commission recently issued revised rules

regarding this reporting obligation. See 58 FR 57725 (Oct. 27, 1993).

During that rulemaking, two commenters suggested revising 11 CFR 9036.2

so that Presidential primary candidates would only receive matching

funds for contributions exceeding $200 containing complete contributor

information. While full contributor identifications are required for

such contributions in threshold submissions under 11 CFR 9036.1(b),

they are not currently required under 11 CFR 9036.2(b)(1)(v) for

additional submissions for matching funds. Accordingly, comments are

requested on whether to delete section 9036.2(b)(1)(v), thereby

requiring complete contributor information for all matchable

contributions exceeding $200. In the alternative, comments are sought

on only matching these contributions if committees can provide evidence

demonstrating they made their best efforts to obtain the information.

Please note that neither of these alternatives is included in the

proposed regulations which follow.

2. NOCO Statements

Section 9034.5(a) of the regulations requires the candidate to

submit a statement of net outstanding campaign obligations [``NOCO'']

within 15 days of his or her date of ineligibility. Section

9034.5(f)(1) also requires the candidate to submit a revised statement

of net outstanding campaign obligations with each subsequent matching

payment request. These NOCO statements provide the Commission with an

indication of the campaign's financial status. The Commission uses

these statements to determine whether the candidate is entitled to

receive any additional matching funds.

In some circumstances, the NOCO statements do not provide adequate

information about the candidate's remaining obligations. For example,

many NOCO statements list the candidate's estimated necessary winding

down costs as a single lump sum, making it difficult for the Commission

to review the cost estimate to determine whether the candidate is

entitled to receive the entire estimated amount. In addition, because

several weeks now elapse between submission of the NOCO statement and

certification of the matching payments due to changes in the Treasury

Department's payment policy, the certification often does not reflect

the true financial status of the committee at the time of

certification. The candidate's financial situation invariably changes

during this period, and any change in the committee's net outstanding

campaign obligations should result in a change in the committee's

entitlement.

The proposed rule seeks to address these problems. Section

9034.5(b) would be amended to require a breakdown of the estimated

winding down costs listed on the NOCO statement by category and time

period. This breakdown would include estimates of quarterly or monthly

costs for office space rental, staff salaries, office supplies,

equipment rental, telephone expenses, postage and other mailing costs,

printing, and storage from the date of the NOCO statement until the

expected termination of the committee's political activity.

The proposed rule would also require a candidate who submits a

matching payment request and accompanying NOCO statement after his or

her date of ineligibility to submit an additional revised NOCO

statement. This statement would be due just before the certification

date, on a date that would be published by the Commission with the

dates for matching fund submissions and matching payment

certifications. The candidate would be required to prepare the

statement so that it reflects the financial status of the campaign

three business days before the statement's due date. The Commission

would then use this statement to determine whether the amount of

matching payments to be certified should be adjusted to reflect a

committee's changed financial situation. This would ensure that the

amount certified accurately reflects the committee's financial

situation at the time of certification. The Commission welcomes

comments on these proposed rules.

B. Qualified Campaign Expenses

1. Funding General Election Expenses with Primary Funds

The Presidential Election Campaign Fund Act, the Presidential

Primary Matching Payment Account Act, and Commission regulations

require that publicly funded presidential candidates use primary

election funds only for expenses incurred in connection with primary

elections, and that they use general election funds only for general

election expenses. 26 U.S.C. 9002(11), 9032(9); 11 CFR 9002.11, 9032.9.

These requirements are tied to the overall primary and general election

expenditure limits set forth at 2 U.S.C. 441a (b) and (c), and at 26

U.S.C. 9004(b) and 9034(b). See also 11 CFR 9004.1, 9004.3(b),

9034.1(d). Therefore, once a primary candidate is the clear and

projected winner of the primary election process and begins to campaign

by addressing issues and comparability with other projected general

election candidates, certain costs incurred prior to the candidate's

primary election date of ineligibility are considered general election

expenses that are reimbursable by the general election committee.

The Commission is seeking comments on whether the pertinent rules

should provide more specific guidance on how certain expenditures might

be characterized. Questions have arisen in recent election cycles as to

whether certain primary funding was in fact used to benefit the general

election. As additional states choose to hold their state nominating

conventions or primary elections early in the election cycle, the major

parties' selection of a nominee is increasingly likely to be decided

long before the convention. Once a candidate has secured enough

delegates to win the nomination, the focus of the campaign may turn in

large part to the general election. However, the Commission realizes

that it can be difficult to distinguish between legitimate primary

campaign activity, such as that which is designed to lock up delegates,

or is related to the primary outcomes or pre-convention preparation,

from activity that is geared towards the general election.

The Commission is considering several alternatives that would

provide additional guidance to presidential campaign committees on how

such expenditures are treated. The Commission welcomes comments on any

of these approaches, as well as suggestions on other ways available to

deal with this situation.

One question concerns depreciation of primary committee assets in

this situation. Section 9034.5(c)(1) currently permits a standard 40%

depreciation of capital assets held by a primary campaign committee,

except for items acquired after the committee's DOI. A higher

depreciation is allowed for a particular item if the committee

demonstrates through documentation that the asset's fair market value

is lower.

Under certain circumstances, however, the 40% figure may be overly

generous. For example, if the primary committee purchases a $20,000

computer system shortly before the primary election DOI and then sells

it to the general election committee, allowing the primary campaign to

assume a 40% depreciation would result in a nearly $8,000 subsidy from

the primary to the general election committee. The Commission is

therefore proposing that paragraph 9034.5(c)(1) be amended to clarify

that a higher, lower, or no depreciation may be claimed in appropriate

cases.

Current 11 CFR 9034.4(b)(3) states that expenses incurred after a

candidate's primary election DOI are not considered qualified campaign

expenses, except for certain winding down costs and costs incurred in

continuing to campaign. See 11 CFR 9034.4(a)(3). The Commission is

considering whether this language should be expanded to clarify that,

consistent with 26 U.S.C. 9002(11)(B) and 11 CFR 9002.11(b), goods

received prior to the DOI that are used for the general election, and

pre-DOI services that provide a benefit to the general election

campaign, are considered qualified campaign expenses for the general

election and not for the primary election.

One approach would be to allocate the cost of each capital asset

between the primary and the general election, based on when the asset

was acquired and the time the committee began to focus on the general

election. This could be difficult to administer, however, requiring as

it would an asset-by-asset determination.

Another approach would be to include a presumption in section

9034.4(b)(3) that capital assets purchased during a certain period

before the first day of the candidate's party's national nominating

convention are general election assets. Section 9034.4(b)(3) of the

proposed rules would set a presumed cutoff date of 60 days before the

start of the candidate's party's national nominating convention.

However, the Commission is requesting comments on whether some other

cutoff point would better serve this purpose, as well as whether a

uniform cutoff date, such as June 15 preceding the national nominating

convention, would be more appropriate. If so, what date should be

selected? If a more flexible approach is desirable, how should the

applicable timeframe be computed? Should it be the date of the

candidate's party's last state primary election?

Whatever approach is adopted, the presumption would be rebuttable

based on each candidate's particular circumstances. If a candidate

could demonstrate that he or she was still largely involved in

campaigning for the nomination after the presumptive cutoff date, that

date could be moved back. In the case of a brokered convention, several

candidates might be found to have focused nearly exclusively on

securing the nomination until the date during the convention on which

one in fact did so. Conversely, a candidate who became the clear and

projected nominee of a party early in the presidential election year

might be found to have made expenditures in connection with the general

election well in advance of the designated cutoff date.

In determining how expenditures made as of a certain date should be

characterized, the Commission might consider such information as how

many delegates the candidate has, the number of candidates who received

votes in each of the candidate's party's most recent state primary

elections or other state nominating procedures, the relative

percentages received by each candidate in these proceedings, and

whether the candidate had begun to focus on issues raised by other

projected general election candidates and his or her comparability with

such candidates. The Commission welcomes suggestions of other factors

that could prove helpful in making this determination.

Another question involves local campaign offices that continue to

operate after a state's primary election or other nominating procedure

is over, when the office is no longer focused on securing the

nomination in that state. The Commission is proposing a rebuttable

presumption that a local campaign office that remains open more than 30

days after a state's primary election, or the close of any other

nomination process in that state, is operating in support of the

general election campaign. The Commission welcomes comments on this

approach, as well as suggestions for others that would result in a fair

attribution of these expenditures.

This situation becomes more complicated when applied to supplies

and materials. The Commission is therefore seeking comments on how such

items should be treated. One approach would be to require an inventory

of everything on hand, including campaign materials but perhaps

excluding items below a certain threshold amount, as of the DOI. These

items would then be sold to the general election at cost. If there was

no inventory, everything purchased or delivered in the last 60 days

before the DOI would be presumed to be a general election expense. The

Commission notes that this approach could be difficult to verify, since

the inventory would be at a point in time which could not be recreated.

Nevertheless, it is important that primary election funds not be used

to subsidize the general election.

Finally, the Commission welcomes comments on how other foods and/or

services, such as campaign-related travel and media expenses, should be

treated in this context. For example, if a candidate travels to a state

where the primary has already been held, some of the travel could be

for fundraising to help obtain the nomination, but some or all might be

for general election purposes.

Nothing in this NPRM is intended to revise the Commission's

``continuing to campaign'' rules set forth at 11 CFR 9034.4(a)(3)(ii).

These rules allow a candidate who is no longer eligible for matching

funds but is still seeking the nomination to use post-DOI contributions

to pursue his or her primary campaign--a different situation than that

addressed in this proposal.

The Commission recognizes that, under unusual circumstances, a

candidate who appears to have been eliminated early in the election

cycle may later secure the nomination. As is currently true, these

special situations would be evaluated on a case-by-case basis.

Conversely, a candidate who appears to have secured the nomination

early in the campaign may in fact fail to obtain it, and thus not

qualify for general election funding. The Commission is less concerned

with this possibility, as the focus of this portion of the rulemaking

is on how certain expenditures should be treated by those candidates

who go on to become the convention's nominee.

2. Convention Expenses of Ineligible Candidates

The Commission is seeking comments on whether expenses incurred by

losing primary election candidates in attending their party's national

nominating convention should be considered a qualified campaign expense

under 11 CFR 9032.9. Such attendance could provide a defeated candidate

the opportunity to continue to fundraise, perhaps to campaign for the

vice presidential nomination, and to maintain contact with his or her

pledged convention delegates.

The Commission notes, however, that qualified campaign expenses are

defined in the Presidential Primary Matching Payment Account Act at 26

U.S.C. 9032(9)(A) as those ``incurred by a candidate, or by his

authorized committee, in connection with his campaign for nomination

for election.'' This definition seemingly does not apply to those no

longer seeking the presidential nomination. Also, the term

``candidate'' is defined as ``an individual who seeks nomination for

election to be President of the United States,'' and thus does not on

its face include those seeking the vice presidential nomination. 26

U.S.C. 9032(2). Further, in recent years presidential candidates have

increasingly announced their vice presidential selections in advance

(at times well in advance) of the national convention. Finally, under

11 CFR 9034.1(b), candidates can already count fundraising expenses

incurred following their Date of Ineligibility (DOI), including those

incurred at a national nominating convention, as qualified campaign

expenses.

The Commission is also concerned about potential practical problems

with this approach. For example, if a candidate's DOI occurs early in

the election cycle, there will be a substantial gap between the DOI and

the date of the convention. The purpose of the 10% rule (26 U.S.C.

9033(c)(1)(B); 11 CFR 9033.5(b)), under which a candidate becomes

ineligible for additional funding on the 30th day following the date of

the second consecutive primary election in which he or she receives

less than 10% of the popular vote, is to discontinue funding of

candidates who have not received substantial support following their

initial establishment of eligibility. See 122 Congressional Record

S.3787 (daily ed. March 18, 1976) (remarks of Sen. Taft).

A related concern is that, under these circumstances, the

Commission may be well along in the audit of a candidate's campaign by

the time the convention opens. Providing an additional matching fund

period to such candidates could substantially complicate the audit

process.

If this approach were to be adopted, the Commission welcomes

comments on who should be covered by the new provision, and during what

timeframe it should apply. Should this be limited to expenses incurred

by the candidate, or the candidate and his or her immediate family, or

should it also include campaign staff? If the latter, should such staff

be limited, either by number or position held in the campaign? The

Commission notes that, where a number of candidates sought the

nomination, the expenses of these candidates, their families, and

accompanying campaign staff could be substantial.

Please note that the draft rules that follow do not include any

specific regulatory language on this point.

C. Audits

1. Calculation of Repayment Ratio

Under section 9038.2(b)(2), committees are required to repay

amounts received from the matching payment account that are used for

non-qualified campaign expenses. The amount of any repayment sought

under section 9038.2(b)(2) bears the same ratio to the total amount of

non-qualified campaign expenses as the amount of matching funds

certified to the candidate bears to the candidate's total deposits, as

of the candidate's date of ineligibility. Repayment determinations

under this section include all non-qualified campaign expenses paid

between the committee's date of inception and the point when committee

accounts no longer contain matching funds. Thus, the repayment amount

is calculated by multiplying the total non-qualified campaign expenses

by the repayment ratio, as determined on the candidate's date of

ineligibility.

However, this section does not serve its intended purpose when

applied to a candidate that receives a significant amount of matching

payments after his or her date of ineligibility. Section 9038.2(b)(2)

does not take into account private contributions received by the

candidate after his or her date of ineligibility. Consequently, when

this section is applied to a candidate that receives a significant

amount of private contributions after that date, it generates a

repayment amount that does not accurately reflect the ratio of matching

payments to private contributions actually received by that candidate

during the courts of the campaign.

Similarly, section 9038.2(b)(2) is inconsistent with the statute

when applied to a candidate who does not receive matching payments

until after his or her date of ineligibility. Section 9038(b)(2) of the

Matching Payment Account Act requires a candidate who uses public funds

for non-qualified campaign expenses to repay a portion of the public

funds he or she received to the Treasury. However, when section

9038.2(b)(2) of the regulations is applied to a candidate who does not

receive matching payments until after his or her date of ineligibility,

the rule arguably generates a repayment ratio of zero even if the

candidate incurred numerous non-qualified campaign expenses. Thus,

under the regulations, the candidate would not be required to repay any

of those funds, even though the statute specifically requires repayment

in this situation.

Section 9038.2(b)(2)(iii) of the proposed rules contains two

proposed revisions that would address these situations. The first

proposal would change the date for determining the candidate's

repayment ratio from the date of ineligibility to 90 days after the

date of ineligibility. A ratio determined on the later date would take

into account most of the post-DOI private contributions received by the

candidate. As a result, the ratio will more accurately reflect the

amount of matching payments and private contributions actually

received. This approach would also produce an accurate repayment ratio

and repayment amount for those candidates that do not receive any

matching payments until after their date of ineligibility. As a result,

this proposed revision would address both of the situations described

above.

The second proposal, which is set out in paragraph (A) of this

section, would take a narrower approach. Under this proposal, the

Commission would treat all matching funds certified in response to

matching payment submissions received as of the candidate's date of

ineligibility as though they were certified as of the candidate's date

of ineligibility. Treating these funds as though they were certified

pre-DOI would allow the Commission to use these funds to calculate the

repayment ratio, resulting in a ratio of an amount greater than zero

that reflects the mix of public funds and private contributions

actually received. The Commission could then use this ratio to

determine the amount that the candidate is required to repay under

section 9038(b)(2) of the statute.

The Commission welcomes comments on which approach would be

preferable. Please note that, if the first approach is adopted,

paragraph (A) will be unnecessary, and therefore will not be included

in the final rules. If paragraph (A) is adopted, the candidate's

repayment ratio will continue to be determined as of the candidate's

date of ineligibility, as it is under the current rules.

In an effort to improve clarity, the proposed rules would also

break this section down in to separate paragraphs. The Commission

welcomes comments on the proposed changes to section 9038.2(b)(2).

D. Part 9039 Investigations

1. Commission Actions Following Part 9039 Investigations

The Commission's review and investigatory authority for

administering the matching fund program is set forth at 26 U.S.C.

9039(b). In carrying out these responsibilities, the Commission must

perform a continuing review of candidate and committee reports and

submissions, and other relevant information. The implementing

regulations are found at 11 CFR part 9039.

For the most part the Commission's review is routine, carried out

in accordance with the eligibility, audit and repayment procedures

contained elsewhere in the regulations. 26 U.S.C. 9039(b) and its

implementing regulations provide authority to conduct audits and

investigations outside of the audits required under 26 U.S.C. 9038 and

11 CFR part 9038. Most of these cases have involved issues relating to

a candidate's continuing eligibility or the amount of his or her

entitlement during the course of the campaign, although they could also

involve a post-election inquiry.

Section 9039.3 of the regulations describes how examinations,

audits and investigations are conducted in these inquiries. The

Commission is considering whether to provide in the final rules a

fuller explanation of actions that may be taken at the conclusion of

any such action. Please note that there is no specific language in the

text of the proposed rules on this point.

Under this approach, if the Commission decided to take no further

action in a 9039 case, the candidate(s) and committee(s) involved would

be so notified. If the Commission decided that there was a sufficient

basis to take further action, such action would follow as closely as

possible the procedures already in place for comparable situations. See

e.g., 11 CFR 9033.10. For example, a post election inquiry could lead

to either an additional repayment determination, in which case the

procedures set forth at 11 CFR 9038.2 for making and challenging

repayment determinations would apply, or a 2 U.S.C. 437g enforcement

action.

The Commission welcomes comments on these proposed amendments to 11

CFR part 9039.

General Elections

A. General Election Legal and Accounting Compliance Costs

On March 1, 1994, the Commission received a Petition for Rulemaking

from the Center for Responsive Politics requesting that the Commission

repeal its rules providing for the use of privately-financed general

election legal and accounting compliance funds [``GELAC''] in

Presidential campaigns. Specifically, the petitioner seeks repeal of 11

CFR 100.8(b)(15) (last two sentences), 106.2(b)(2)(iii) (last

sentence), 9002.11(b)(5), 9003.3(a), and 9035.1(c)(1). The petition

argues that the Commission's rules undermine the ability of the public

financing laws to achieve the objective of reducing the influence of

large contributions in Presidential elections. It charges that these

regulations permit evasion of the prohibition on accepting

contributions to defray qualified campaign expenses established by the

Presidential Election Campaign Fund Act. 26 U.S.C. 9003(b).

Furthermore, the petition claims that the Commission's regulations

violate the spending limits established by the FECA. 2 U.S.C. 441a.

On March 30, 1994, the Commission published a Notice of

Availability seeking statements in support of or in opposition to the

petition. 59 FR 14794 (March 30, 1994). In response to the Notice, four

statements have been received from the Internal Revenue Service, Public

Citizen, Common Cause, and a joint comment from the Democratic National

Committee and the Republican National Committee. Two were supportive

while one opposed the reversal of the Commission's long standing

policies regarding legal and accounting costs. The Internal Revenue

Service found no conflict with the Internal Code or the Regulations

thereunder.

The Commission is continuing to consider the petition as part of

this rulemaking and seeks further comment on abolishing the GELAC. The

Commission is also seeking evidence either supporting or refuting the

petitioner's claim that the privately-funded GELAC undermines the

public financing of general election campaigns by allowing the

actuality and the appearance of improper influence in Presidential

elections. Absent evidence supporting the petitioner's claim, the

Commission would be reluctant to completely eliminate the GELAC because

Presidential campaigns would need to devote some of their public funds

for compliance expenses, instead of using public moneys for campaign

expenses. The result could be significant difficulty in complying with

the public financing statutes and the FECA. The GELAC is also used to

make repayments, which would need to be funded from other sources.

Moreover, the elimination of monetary contributions of $1000 or less

for compliance purposes could force some committees to turn to much

larger in-kind donation of legal and accounting services to ensure that

their compliance obligations are satisfied. See 2 U.S.C. 431(8)(B)(ix)

and (9)(B)(vii).

Accordingly, comments are requested on several alternative

revisions to the GELAC. For example, should the amount raised and spent

for compliance costs be limited to a fixed percentage of the general

election spending limit? If so, what amount or percentage would be

sufficient to ensure that adequate amounts are available for meeting

compliance obligations? Please note that this approach is not included

in the proposed rules which Follow.

The petitioners and one commenter also challenge the

appropriateness of allowing fundraising costs for the GELAC to be paid

for by the GELAC on the ground these expenses are campaign expenses

that should be subject to the spending limits. The current rules permit

fundraising costs to be paid by the GELAC because it would not be

appropriate to sue public funds to solicit private contributions that

are used solely for legal and accounting compliance purposes. However,

the Commission is concerned that fundraising activities for the GELAC

could be used to generate electoral support for the candidate's

campaign, and if so, should be treated as qualified campaign expenses.

Accordingly, comments are sought on whether to continue to permit the

GELAC to pay the entire amount of these costs, or whether a fixed

percentage of GELAC fundraising costs should be paid by the general

election campaign committee. Splitting the costs would recognize that

solicitations and other activities conducted to raised GELAC funds have

a campaign-related component. Comments are sought as to the appropriate

percentage that should be paid from general election funds. Please note

that this approach is not included in the proposed rules which follow.

The Commission is also considering modifying section

9003.3(a)(1)(i)(A), which currently requires solicitations to clearly

state that the contributions are solicited for the GELAC. A new

sentence would also require solicitations to state that contributions

to the GELAC may not be used for campaign purposes.

Please note that the provisions regarding predesignations and

transfer of primary funds to the GELAC in paragraphs (a)(1) (ii)-(iv)

would be reorganized.

Current paragraphs (a)(2)(i) (A) through (H) of section 9003.3 set

forth the permissible sues of GELAC funds. The Petition for Rulemaking

urged the Commission to delete current paragraph (H) allowing GELAC

funds to be used to pay unreimbursed costs of providing transportation

for the Secret Service and national security staff. Although this

provisions is included in the attached proposed rules, the Commission

seeks further comment on whether it is appropriate to use GELAC funds

for this purpose. Please note that GELAC funds may not be used to pay

transition costs (cf. AO 1980-97); legal defense fund expenses (cf. AO

1979-37); legal expenses not related to ensuring compliance, such as

contract litigation or electoral college expenses; and winding down

expenses that are not for legal and accounting compliance purposes.

In addition, the Commission proposes reducing from 70% to 50% the

standard amount that the GELAC may pay for computer-related costs, and

the corresponding exclusion from the spending limits. See 11 CFR 9003.3

(a)(2)(ii)(A), (b)(6) and (c)(6). The GELAC is relatively small in

comparison to the publicly funded general election account. Much of the

computer costs are for basic accounting purposes, which the campaign

committee would need to perform regardless of the need to comply with

the campaign financing laws. Please note, however, that committees

would still be able to deduct a higher amount if they can show that

their computer-related compliance costs are higher.

Section 9003.3(a)(2)(iv) would be modified slightly to clarify that

funds remaining in the GELAC may only be used to pay debts remaining

from the primary or for other lawful purposes if all GELAC expenses

have been paid. Finally the Commission is proposing to revise two

citations contained in 11 CFR 9003.3(a)(2)(iii). The first sentence of

this paragraph currently refers to paragraphs 9003.3(a)(2)(i) (A)

through (E). This would be updated to read, ``11 CFR 9003.3(a)(2)(i)

(A) through (F) and (H).'' Also, the citation to paragraph

9003.3(a)(2)(i)(F) in the second sentence should instead refer

paragraph 9003.3(a)(2)(i)(G).

B. Gains on the Use of Public Funds

Section 9004.5 of the Commission's regulations allows a committee

to invest public funds or use them in other ways to generate income,

provided that an amount equal to the net income derived from those

investments, minus any taxes paid, is repaid to the Treasury. Section

9007.2(b)(4) also lists the receipt of any income as a result of

investment or other use of payments from the fund pursuant to 11 CFR

9004.5 as one of the basis for requiring repayment. These provisions

seek to ensure that any income received through these use of public

funds benefits the public financing system.

The proposed rules would indicate that section 9004.5 applies to

any use of public funds that results in come to the committee,

regardless of whether the committee engaged in that use with the

intention of generating income. The proposed rules also contain a

conforming amendment to section 9007.2(b)(4), which would indicate that

income on investment or other use of payments from the Fund must be

repaid to the Treasury. The Comission notes that if a committee loses

an item that is insured, and the insurance proceeds exceeds the cost of

replacing the item, such excess would be considered income for the

purposes of proposed sections 9004.5 and 9007.2(b)(4).

These provisions are not meant to require repayment of income that

qualifies as exempt function income under section 527(c)(3) of the

Internal Revenue Code, 26 U.S.C. 527(c)(3), such as receipts from

fundraising activities. The Commission welcomes comments on these

proposed revisions.

Miscellaneous and Technical Amendments

In the interests of clarity, the Commission is proposing to add a

comma in the last sentence of 11 CFR 9003.1(b)(4), and in the second

sentence of 11 CFR 9033.1(b)(5). Both paragraphs concern candidate and

committee agreements to furnish certain documentation to the

Commission.

Current 11 CFR 9033.4(b) states that, in evaluating a candidate's

matching funds submission, the Commission may consider other relevant

information in its possession, including but not limited to past

actions of the candidate in an earlier campaign. This provision was

held to exceed the Commission's statutory authority in LaRouche v. FEC,

996 F.2d 1263 (D.C. Cir. 1993), cert. denied 114 S. Ct. 550. The

Commission is therefore proposing to delete this paragraph from the

rule.

Conclusion

The Commission welcomes comments on the foregoing proposed

amendments to the public financing regulations, the issues raised in

this notice, and on other aspects of the public financing process that

could be addressed in these regulations. No final decision has been

made by the Commission concerning any of the proposals contained in

this Notice.

Certification of No Effect Pursuant to 5 U.S.C. Section 605(b)

(Regulatory Flexibility Act)

The attached proposed rules, if promulgated, will not have a

significant economic impact on a substantial number of small entities.

The basis for this certification is that few, if any, small entities

will be affected by these proposed rules. Further, any small entities

affected are already required to comply with the requirements of the

Presidential Election Campaign Fund Act and the Presidential Primary

Matching Payment Account Act in these areas.

List of Subjects

11 CFR Parts 9003-9004

Campaign funds, Elections, Political candidates.

11 CFR Parts 9006-9007

Administrative practice and procedure, Campaign funds, Elections,

Political candidates, Reporting requirements.

11 CFR Parts 9033-9034

Campaign funds, Elections, Political candidates.

11 CFR Parts 9037-9038

Administrative practice and procedure, Campaign funds, Political

candidates.

For the reasons set out in the preamble, it is proposed to amend

subchapters E and F of chapter I of title 11 of the Code of Federal

Regulations as follows:

PART 9003--ELIGIBILITY FOR PAYMENTS

1. The authority citation for Part 9003 would continue to read as

follows:

Authority: 26 U.S.C. 9003 and 9009(b).

2. In Sec. 9003.1, the introductory text of paragraph (b) would be

republished, paragraph (b)(4) would be revised, and new paragraph

(b)(10) would be added, to read as follows:

Sec. 9003.1 Candidate and committee agreements.

* * * * *

(b) Conditions. The candidates shall:

* * * * *

(4) Agree that they and their authorized committee(s) will keep and

furnish to the Commission all documentation relating to receipts and

disbursements (including all books and bank records for all accounts),

all documentation required by this subchapter (including those required

to be maintained under 11 CFR 9003.5), and other information that the

Commission may request. If the Candidate or the candidate's authorized

committee maintains or uses computerized information containing any of

the categories of data listed in 11 CFR 9003.6(a), the committee will

provide computerized magnetic media, such as magnetic tapes or magnetic

diskettes, containing the computerized information at the times

specified in 11 CFR 9007.1(b)(1) that meets the requirements of 11 CFR

9003.6(b). Upon request, documentation explaining the computer system's

software capabilities shall be provided, and such personnel as are

necessary to explain the operation of the computer system's software

and the computerized information prepared or maintained by the

committee shall also be made available.

* * * * *

(10) Agree that any television commercial prepared or distributed

by the candidate will be prepared in a manner which ensures that the

commercial contains or is accompanied by closed captioning of the oral

content of the commercial to be broadcast in line 21 of the vertical

blanking interval, or is capable of being viewed by deaf and hearing

impaired individuals via any comparable successor technology to line 21

of the vertical blanking interval.

3. Section 9003.3 would be revised to read as follows:

Sec. 9003.3 Allowable Contributions.

(a) Legal and accounting compliance fund--major party candidates.

(1) Sources.

(i) A major party candidate may accept contributions to a legal and

accounting compliance fund if such contributions are received and

disbursed in accordance with this section. A legal and accounting

compliance fund may be established by such candidate prior to being

nominated or selected as the candidate of a political party for the

Office of President or Vice President of the United States.

(A) All solicitations for contributions to this fund shall clearly

state that such contributions will be used by this fund solely for

legal and accounting services to ensure compliance with Federal law.

Such solicitations shall also state that contributions to the fund will

not be used for the candidate's election.

(B) Contributions to this fund shall be subject to the limitations

and prohibitions of 11 CFR Parts 110, 114, and 115.

(ii)(A) Contributions made during the matching payment period that

do not exceed the contributor's limit for the primary election may be

redesignated and deposited in the legal and accounting compliance fund

before the nomination only if--

(1) The contributions represent funds in excess of any amount

needed to pay remaining primary expenses;

(2) The redesignations are received within 60 days of the

Treasurer's receipt of the contributions;

(3) The requirements of 11 CFR 110.1(b)(5) and (l) regarding

redesignations are satisfied; and

(4) The contributions have not been submitted for matching.

(B) All contributions redesignated and deposited pursuant to

paragraph (a)(1)(ii)(A) of this section shall be subject to the

contribution limitations applicable for the general election, pursuant

to 11 CFR 110.1(b)(2)(i).

(iii) Fund received during the matching payment period that are

remaining in a candidate's primary election account after the

nomination may be transferred to the legal and accounting compliance

fund without regard to the contribution limitations of 11 CFR Part 110

and used for any purpose permitted under this section, only if the

funds are in excess of any amount needed to pay remaining net

outstanding campaign obligations under 11 CFR 9034.1(b) and any amount

required to be reimbursed to the Presidential Primary Matching Payment

Account under 11 CFR 9038.2. The excess funds so transferred may

include contributions made before the beginning of the expenditure

report period, which contributions do not exceed the contributor's

limit for the primary election. Such contributions need not be

redesignated by the contributors for the legal and accounting

compliance fund.

(iv) Contributions that are made after the beginning of the

expenditure report period but which are designated for the primary

election may be redesignated for the legal and accounting compliance

fund and transferred to or deposited in such fund if--

(A) The candidate obtains the contributor's redesignation in

accordance with 11 CFR 110.1;

(B) The funds are in excess of any amount needed to pay remaining

net outstanding campaign obligation under 11 CFR 9034.1(b) and any

amount required to be reimbursed to the Presidential Primary Matching

Payment Account under 11 CFR 9038.2; and

(C) The contributions have not been submitted for matching.

(v) Contributions made with respect to the primary election that

exceed the contributor's limit for the primary election may be

redesignated for the legal and accounting compliance fund and

transferred to or deposited in such fund if the candidate obtains the

contributor's redesignation in accordance with 11 CFR 110.1.

(2) Uses.

(i) Contributions to the legal and accounting compliance fund shall

be used only for the following purposes:

(A) To defray the cost of legal and accounting services provided

solely to ensure compliance with 2 U.S.C. 431 et seq. and 26 U.S.C.

9001 et seq. in accordance with paragraph (a)(2)(ii) of this section;

(B) To defray in accordance with paragraph (a)(2)(ii)(A) of this

section, that portion of expenditures for payroll, overhead, and

computer services related to ensuring compliance with 2 U.S.C. 431 et

seq. and 26 U.S.C. 9001 et seq.;

(C) To defray any civil or criminal penalties imposed pursuant to 2

U.S.C. 437g or 26 U.S.C. 9012;

(D) To make repayments under 11 CFR 9007.2;

(E) To defray the cost of soliciting contributions to the legal and

accounting compliance fund;

(F) To defray the cost of producing, delivering and explaining the

computerized information and materials provided pursuant to 11 CFR

9003.6 and explaining the operation of the computer system's software;

(G) To make a loan to an account established pursuant to 11 CFR

9003.4 to defray qualified campaign expenses incurred prior to the

expenditure report period or prior to receipt of federal funds,

provided that the amounts so loaned are restored to the legal and

accounting compliance fund; and

(H) To defray unreimbursed costs incurred in providing

transportation and services for the Secret Service and national

security staff pursuant to 11 CFR 9004.6.

(ii) (A) Expenditures for payroll (including payroll taxes),

overhead and computer services, a portion of which are related to

ensuring compliance with title 2 of the United States Code and chapter

95 of title 26 of the United States Code, shall be initially paid from

the candidate's federal fund account under 11 CFR 9005.2 and may be

later reimbursed by the compliance fund. For purposes of paragraph

(a)(2)(i)(B) of this section, a candidate may use contributions to the

compliance fund to reimburse his or her federal fund account an amount

equal to 10% of the payroll and overhead expenditures of his or her

national campaign headquarters and state offices. Overhead expenditures

include, but are not limited to rent, utilities, office equipment,

furniture, supplies and all telephone charges except for telephone

charges related to a special use such as voter registration and get out

the vote efforts. In addition, a candidate may use contributions to the

compliance fund to reimburse his or her federal fund account an amount

equal to 50% of the costs (other than payroll) associated with computer

services. Such costs include but are not limited to rental and

maintenance of computer equipment, data entry services not performed by

committee personnel, and related supplies. If the candidate wishes to

claim a larger compliance exemption for payroll or overhead

expenditures, the candidate shall establish allocation percentages for

each individual who spends all or a portion of his or her time to

perform duties which are considered necessary to ensure compliance with

title 2 of the United States Code or chapter 95 of title 26 of the

United States Code. The candidate shall keep detailed records to

support the derivation of each percentage. Such records shall indicate

which duties are considered compliance and the percentage of time each

person spends on such activity. If the candidate wishes to claim a

larger compliance exemption for costs associated with computer

services, the candidates shall establish allocation percentages for

each computer function that is considered necessary, in whole or in

part, to ensure compliance within 2 U.S.C. 431 et seq., and 26 U.S.C.

9001 et seq. The allocation shall be based on a reasonable estimate of

the costs associated with each computer function, such as the costs for

data entry services performed by persons other than committee personnel

and processing time. The candidate shall keep detailed records to

support such calculations. The records shall indicate which computer

functions are considered compliance-related and shall reflect which

costs are associated with each computer function. The Commission's

Financial Control and Compliance Manual for General Election Candidates

Receiving Public Funding contains some accepted alternative allocation

methods for determining the amount of salaries and overhead

expenditures that may be considered exempt compliance costs.

(B) Reimbursement from the compliance fund may be made to the

separate account maintained for federal funds under 11 CFR 9005.2 for

legal and accounting compliance services disbursements that are

initially paid from the separate federal funds account. Such

reimbursement must be made prior to any final repayment determination

by the Commission pursuant to 11 CFR 9007.2. Any amounts so reimbursed

to the federal fund account may not subsequently be transferred back to

the legal and accounting compliance fund.

(iii) Amounts paid from this account for the purposes permitted by

paragraphs (a)(2)(i) (A) through (F) and (H) of this section shall not

be subject to the expenditure limits of 2 U.S.C. 221a(b) and 11 CFR

110.8. (See also 11 CFR 100.8(b)(15).) When the proceeds of loans made

in accordance with paragraph (a)(2)(i)(G) of this section are expended

on qualified campaign expenses, such expenditures shall count against

the candidate's expenditure limit.

(iv) Contributions to or funds deposited in the legal and

accounting compliance fund may not be used to retire debts remaining

from the Presidential primaries, except that, if after payment of all

expenses set out in paragraph (a)(2)(i) of this section, there are

excess campaign funds, such funds may be used for any purpose permitted

under 2 U.S.C. 439a and 11 CFR Part 113, including payment of primary

election debts.

(3) Deposit and disclosure.

(i) Amounts received pursuant to paragraph (a)(1) of this section

shall be deposited and maintained in an account separate from that

described in 11 CFR 9005.2 and shall not be commingled with any money

paid to the candidate by the Secretary pursuant to 11 CFR 9005.2.

(ii) The receipts to and disbursements from this account shall be

reported in a separate report in accordance with 11 CFR 9006.1(b)(2).

All contributions made to this account shall be recorded in accordance

with 11 CFR 102.9. Disbursements made from this account shall be

documented in the same manner provided in 11 CFR 9003.5.

(b) Contributions to defray qualified campaign expenses--major

party candidates.

(1) A major party candidate or his or her authorized committee(s)

may solicit contributions to defray qualified campaign expenses to the

extent necessary to make up any deficiency in payments received from

the Fund due to the application of 11 CFR 9005.2(b).

(2) Such contributions must either be deposited in a separate

account or be deposited with federal funds received under 11 CFR

9005.2. Disbursements from this account shall be made only to defray

qualified campaign expenses and to defray the cost of soliciting

contributions to such account. All disbursements from this account

shall be documented in accordance with 11 CFR 9003.5 and shall be

reported in accordance with 11 CFR 9006.1.

(3) A candidate may make transfers to this account from his or her

legal and accounting compliance fund.

(4) The contributions received under this section shall be subject

to the limitations and prohibitions of 11 CFR Parts 110, 114 and 115

and shall be aggregated with all contributions made by the same persons

to the candidate's legal and accounting compliance fund under paragraph

(a) of this section for the purposes of such limitations.

(5) Any costs incurred for soliciting contributions to this account

shall not be considered expenditures to the extent that the aggregate

of such costs does not exceed 20 percent of the expenditure limitation

under 11 CFR 9003.2(a)(1). These costs shall, however, be reported as

disbursements in accordance with 11 CFR Part 104 and 11 CFR 9006.1. For

purposes of this section, a candidate may exclude from the expenditure

limitation an amount equal to 10% of the payroll (including payroll

taxes) and overhead expenditures of his or her national campaign

headquarters and state offices as exempt fundraising costs.

(6) Any costs incurred for legal and accounting services which are

provided solely to ensure compliance with 2 U.S.C. 431 et seq. and 26

U.S.C. 9001 et seq. shall not count against the candidate's expenditure

limitation. Such costs include the cost of producing, delivering and

explaining the computerized information and materials provided pursuant

to 11 CFR 9003.6 and explaining the operation of the computer system's

software. For purposes of this section, a candidate may exclude from

the expenditure limitation an amount equal to 10% of the employee

payroll (including payroll taxes) and overhead expenditures of his or

her national campaign headquarters and state offices. In addition, a

candidate may exclude from the expenditure limitation an amount equal

to 50% of the costs (other than payroll) associated with computer

services.

(i) For purposes of this paragraph, overhead costs include, but are

not limited to, rent, utilities, office equipment, furniture, supplies

and all telephone charges except for telephone charges related to a

special use such as voter registration and get out the vote efforts.

(ii) For purposes of this paragraph, costs associated with computer

services include, but are not limited to, rental and maintenance of

computer equipment, data entry services not performed by committee

personnel, and related supplies.

(7) If the candidate wishes to claim a larger compliance or

fundraising exemption under paragraph (b)(5) or (b)(6) of this section

for employee payroll and overhead expenditures, the candidate shall

establish allocation percentages for each individual who spends all or

a portion of his or her time to perform duties which are considered

compliance or fundraising. The candidate shall keep detailed records to

support the derivation of each percentage. Such records shall indicate

which duties are considered compliance or fundraising and the

percentage of time each person spends on such activity.

(8) If the candidate wishes to claim a larger compliance exemption

under paragraph (b)(6) of this section for costs associated with

computer services, the candidate shall establish allocation percentages

for each computer function that is considered necessary, in whole or in

part, to ensure compliance with 2 U.S.C. 431 et seq. and 26 U.S.C. 9001

et seq. The allocation shall be based on a reasonable estimate of the

costs associated with each computer function, such as the costs for

data entry services performed by other than committee personnel and

processing time. The candidate shall keep detailed records to support

such calculations. The records shall indicate which computer functions

are considered compliance-related and shall reflect which costs are

associated with each computer function.

(9) The Commission's Financial Control and Compliance Manual for

General Election Candidates Receiving Public Funding contains some

accepted alternative allocation methods for determining the amount of

salaries and overhead expenditures that may be considered exempt

compliance costs or exempt fundraising costs.

(c) Contributions to defray qualified campaign expenses--minor and

new party candidates.

(1) A minor or new party candidate may solicit contributions to

defray qualified campaign expenses which exceed the amount received by

such candidate from the Fund, subject to the limits of 11 CFR

9003.2(b).

(2) The contributions received under this section shall be subject

to the limitations and prohibitions of 11 CFR Parts 110, 114 and 115.

(3) Such contributions must either be deposited in a separate

account or be deposited with federal funds received under 11 CFR

9005.2. Disbursements from this account shall be made only for the

following purposes:

(i) To defray qualified campaign expenses;

(ii) To make repayments under 11 CFR 9007.2;

(iii) To defray the cost of soliciting contributions to such

account;

(iv) To defray the cost of legal and accounting services provided

solely to ensure compliance with 2 U.S.C. 431 et seq. and 26 U.S.C.

9001 et seq;

(v) To defray the cost of producing, delivering and explaining the

computerized information and materials provided pursuant to 11 CFR

9003.6 and explaining the operation of the computer system's software.

(4) All disbursements from this account shall be documented in

accordance with 11 CFR 9003.5 and shall be reported in accordance with

11 CFR Part 104 and 9006.1.

(5) Any costs incurred for soliciting contributions to this account

shall not be considered expenditures to the extent that the aggregate

of such costs does not exceed 20 percent of the expenditure limitation

under 11 CFR 9003.2(a)(1). These costs shall, however, be reported as

disbursements in accordance with 11 CFR Part 104 and 9006.1. For

purposes of this section, a candidate may exclude from the expenditure

limitation an amount equal to 10% of the payroll (including payroll

taxes) and overhead expenditures of his or her national campaign

headquarters and state offices as exempt fundraising costs.

(6) Any costs incurred for legal and accounting services which are

provided solely to ensure compliance with 2 U.S.C. 431 et seq. and 26

U.S.C. 9001 et seq. shall not count against the candidate's expenditure

limitation. For purposes of this section, a candidate may exclude from

the expenditure limitation an amount equal to 10% of the employee

payroll (including payroll taxes) and overhead expenditures of his or

her national campaign headquarters and state offices. In addition, a

candidate may exclude from the expenditure limitation an amount equal

to 50% of the costs (other than payroll) associated with computer

services.

(i) For purposes of this paragraph, overhead costs include, but are

not limited to, rent, utilities, office equipment, furniture, supplies

and all telephone charges except for telephone charges related to a

special use such as voter registration and get out the vote efforts.

(ii) For purposes of this paragraph, costs associated with computer

services include but are not limited to, rental and maintenance of

computer equipment, data entry services not performed by committee

personnel, and related supplies.

(7) If the candidate wishes to claim a larger compliance or

fundraising exemption under paragraph (c)(6) of this section for

payroll and overhead expenditures, the candidate shall establish

allocation percentages for each individual who spends all or a portion

of his or her time to perform duties which are considered compliance or

fundraising. The candidate shall keep detailed records to support the

derivation of each percentage. Such records shall indicate which duties

are considered compliance or fundraising and the percentage of time

each person spends on such activity.

(8) If the candidate wishes to claim a larger compliance exemption

under paragraph (c)(6) of this section for costs associated with

computer services, the candidate shall establish allocation percentages

for each computer function that is considered necessary, in whole or in

part, to ensure compliance with 2 U.S.C. 431 et seq. and 26 U.S.C. 9001

et seq. The allocation shall be based on a reasonable estimate of the

costs associated with each computer function, such as the costs for

data entry services performed by other than committee personnel and

processing time. The candidate shall keep detailed records to support

such calculations. The records shall indicate which computer functions

are considered compliance-related and shall reflect which costs are

associated with each computer function.

(9) The candidate shall keep and maintain a separate record of

disbursements made to defray exempt legal and accounting costs under

paragraphs (c)(6) and (7) of this section and shall report such

disbursements in accordance with 11 CFR Part 104 and 11 CFR 9006.1.

(10) The Commission's Financial Control and Compliance Manual for

General Election Candidates Receiving Public Funding contains some

accepted alternative allocation methods for determining the amount of

salaries and overhead expenditures that may be considered exempt

compliance costs or exempt fundraising costs.

4. Section 9003.5 would be revised to read as follows:

Sec. 9003.5 Documentation of disbursements.

(a) Burden of proof. Each candidate shall have the burden of

proving the disbursements made by the candidate or his or her

authorized committee(s) or persons authorized to make expenditures on

behalf of the candidate or authorized committee(s) are qualified

campaign expenses as defined in 11 CFR 9002.11. The candidate and his

or her authorized committee(s) shall obtain and furnish to the

Commission on request any evidence regarding qualified campaign

expenses made by the candidate, his or her authorized committees and

agents or persons authorized to make expenditures on behalf of the

candidate or committee(s) as provided in paragraph (b) of this section.

(b) Documentation required.

(1) For disbursements in excess of $200 to a payee, the candidate

shall present a canceled check negotiated by the payee that states the

purpose of the disbursement and either:

(i) A receipted bill from the payee that states the purpose of the

disbursement; or

(ii) If such a receipt is not available,

(A) One of the following documents generated by the payee: a bill,

invoice, or voucher that states the purpose of the disbursement; or

(B) Where the documents specified in paragraph (b)(1)(ii)(A) of

this section are not available, a voucher or contemporaneous memorandum

from the candidate or the committee that states the purpose of the

disbursement; or

(iii) Where the supporting documentation required in paragraphs

(b)(1) (i) or (ii) of this section is not available, the candidate or

committee may present collateral evidence to document the qualified

campaign expense. Such collateral evidence may include, but is not

limited to:

(A) Evidence demonstrating that the expenditure is part of an

identifiable program or project which is otherwise sufficiently

documented such as a disbursement which is one of a number of

documented disbursements relating to a campaign mailing or to the

operation of a campaign office; and

(B) Evidence that the disbursement is covered by a pre-established

written campaign committee policy, such as a daily travel expense

policy.

(2) For all disbursements of $200 or less, the candidate shall

present:

(i) A record disclosing the full name and mailing address of the

payee, and the amount, date and purpose of the disbursement, if made

from a petty cash fund; or

(ii) A canceled check negotiated by the payee that states the full

name and mailing address of the payee, and the amount, date and purpose

of the disbursement.

(3) For purposes of this section:

(i) ``Payee'' means the person who provides the goods or services

to the candidate or committee in return for the disbursement; except

that an individual will be considered a payee under this section if he

or she receives $500 or less advanced for travel and/or subsistence and

if the individual is the recipient of the goods or services purchased.

(ii) ``Purpose'' means the full name and mailing address of the

payee, the date and amount of the disbursement, and a brief description

of the goods or services purchased.

(c) Retention of records. The candidate shall retain records with

respect to each disbursement and receipt, including bank records,

vouchers, worksheets, receipts, bills and accounts, journals, ledgers,

fundraising solicitation material, accounting systems documentation,

and any related materials documenting campaign receipts and

disbursements, for a period of three years pursuant to 11 CFR 102.9(c),

and shall present these records to the Commission on request.

(d) List of capital and other assets.

(1) Capital assets. The candidate or committee shall maintain a

list of all capital assets whose purchase price exceeded $2,000 when

acquired by the campaign. The list shall include a brief description of

each capital asset, the purchase price, the date it was acquired, the

method of disposition and the amount received in disposition. For

purposes of this section, ``capital asset'' shall be defined in

accordance with 11 CFR 9004.9(d)(1).

(2) Other assets. The candidate or committee shall maintain a list

of other assets acquired for use in fundraising or as collateral for

campaign loans, if the aggregate value of such assets exceeds $5,000.

The list shall include a brief description of each such asset, the fair

market value of each asset, the method of disposition and the amount

received in disposition. The fair market value of other assets shall be

determined in accordance with 11 CFR 9004.9(d)(2).

PART 9004--ENTITLEMENT OF ELIGIBLE CANDIDATES TO PAYMENTS; USE OF

PAYMENTS

5. The authority citation for Part 9004 would continue to read as

follows:

Authority: 26 U.S.C. 9004 and 9009(b).

6. In section 9004.4 paragraph (a) would be revised, paragraph

(b)(1) would be republished, and paragraph (b)(8) would be added, to

read as follows:

Sec. 9004.4 Use of payments.

(a) Qualified campaign expenses. An eligible candidate shall use

payments received under 11 CFR Part 9005 only for the following

purposes:

(1) To defray qualified campaign expenses;

(2) To repay loans that meet the requirements of 11 CFR 100.7(a)(1)

or 100.7(b)(11) or to otherwise restore funds (other than contributions

received pursuant to 11 CFR 9003.3(b) and expended to defray qualified

campaign expenses) used to defray qualified campaign expenses;

(3) To restore funds expended in accordance with 11 CFR 9003.4 for

qualified campaign expenses incurred by the candidate prior to the

beginning of the expenditure report period.

(4) Winding down costs. The following costs shall be considered

qualified campaign expenses:

(i) Costs associated with the termination of the candidate's

general election campaign such as complying with the post-election

requirements of the Act and other necessary administrative costs

associated with winding down the campaign, including office space

rental, staff salaries, and office supplies; or

(ii) Costs incurred by the candidate prior to the end of the

expenditure report period for which written arrangement or commitment

was made on or before the close of the expenditure report period.

(iii) 100% of salary and overhead expenses incurred after the end

of the expenditure report period may be paid from a legal and

accounting compliance fund established pursuant to 11 CFR 9003.3,

provided that these expenses are solely to ensure compliance with 2

U.S.C. 431 et seq. and 26 U.S.C. 9001 et seq.

(5) Gifts and monetary bonuses. Gifts and monetary bonuses for

committee employees, consultants and volunteers in recognition for

campaign-related activities or services shall be considered qualified

campaign expenses, provided that the gifts do not exceed $150 total per

individual, and provided that the total for all gifts and monetary

bonuses (except bonus arrangements provided for in advance in an

employment or consulting contract) does not exceed $20,000

(b) Non-qualified campaign expenses--

(1) General. The following are examples of disbursements that are

not qualified campaign expenses.

* * * * *

(8) Negligent Handling of Public Funds. The cost of items that are

lost or misplaced due to negligence shall not be considered a qualified

campaign expense. Factors in making this determination shall include,

but not be limited to, whether the committee demonstrates that it made

conscientious efforts to safeguard the missing equipment; the type of

equipment involved; the number of items that were lost; and the value

of the lost equipment as a percentage of the total value of the

equipment leased or owned by the committee.

* * * * *

7. Section 9004.5 would be revised to read as follows:

Sec. 9004.5 Investment of public funds; other uses resulting in

income.

Investment of public funds or any other use of public funds that

results in income is permissible, provided that an amount equal to all

net income derived from such a use, less Federal, State and local taxes

paid on such income, shall be repaid to the Secretary. Any net loss

from an investment or other use of public funds will be considered a

non-qualified campaign expense and an amount equal to the amount of

such loss shall be paid to the United States Treasury as provided under

11 CFR 9007.2(b)(2)(i).

8. Section 9004.6 would be revised to read as follows:

Sec. 9004.6 Expenditures for transportation and services made

available to media personnel; reimbursements.

(a) General.

(1) Expenditures by an authorized committee for transportation,

ground services or facilities (including air travel, ground

transportation, housing, meals, telephone service, typewriters) made

available to media personnel, Secret Service personnel or national

security staff will be considered qualified campaign expenses, and,

except for costs relating to Secret Service personnel or national

security staff, will be subject to the overall expenditure limitations

of 11 CFR 9003.2(a)(1) and (b)(1).

(2) Subject to the limitations in paragraphs (b) and (c) of this

section, committees may seek reimbursement for these expenses and may

deduct any amounts received as reimbursements from the amount of

expenditures subject to the overall expenditure limitations of 11 CFR

9003.2(a)(1) and (b)(1). Expenses for which the committee receives no

reimbursement will be considered qualified campaign expenses, and, with

the exception of those expenses relating to Secret Service personnel

and national security staff, will be subject to the overall expenditure

limitation.

(b) Reimbursement limits.

(1) The committee may seek reimbursement of the expenses described

in paragraph (a)(1) of this section from the media representatives to

whom those services were provided. The amount sought shall not exceed

the media representative's pro rata share, or a reasonable estimate of

the media representative's pro rata share, of the actual cost of the

transportation and services mad available by more than 10%. Any

reimbursement received in excess of 110% of the actual pro rata cost of

the transportation and services made available shall be disposed of in

accordance with paragraph (d) of this section. For the purposes of this

section:

(i) A media representative's pro rata share shall be calculated by

dividing the total actual cost of the transportation and services by

the total number of individuals to whom such transportation and

services are made available. For purposes of this calculation, the

total number of individuals shall include committee staff, media

personnel, Secret Service personnel, national security staff and any

other individuals to whom such transportation and services are made

available; and

(ii) ``Administrative costs'' shall include all costs incurred by

the committee for making travel arrangements and for seeking

reimbursement, whether performed by committee staff or independent

contractors.

(c) Deduction of reimbursements from expenditures subject to the

overall expenditure limitation. The committee may deduct from the

amount of expenditures subject to the overall expenditure limitation:

(1) The amount of reimbursements received in payment for the

transportation and services described in paragraph (a) of this section,

up to the actual cost of transportation and services provided; and

(2) An amount of reimbursements received representing the

administrative costs incurred by the committee in providing these

services and seeking reimbursement for them, equal to:

(i) Three percent of the actual cost of transportation and services

provided under this section; or

(ii) An amount in excess of 3% representing the administrative

costs actually incurred by the committee, provided that the committee

is able to document that it incurred these higher administrative costs.

(d) Disposal of excess reimbursements. If the committee receives

reimbursements in excess of the amount deductible under paragraph (c)

of this section, it shall dispose of the excess amount in the following

manner:

(1) Any reimbursement received in excess of 110% of the actual pro

rata cost of the transportation and services made available to a media

representative shall be returned to the media representative.

(2) Any amount in excess of the amount deductible under paragraph

(c) of this section that is not required to be returned to the media

representative under paragraph (d)(1) shall be repaid to the Treasury.

(e) Reporting. The total amount paid by an authorized committee for

the cost of transportation or for ground services and facilities shall

be reported as an expenditure in accordance with 11 CFR 104.3(b)(2)(i).

Any reimbursement received by such committee for transportation or

ground services and facilities shall be reported in accordance with 11

CFR 104.3(a)(3)(ix).

9. Section 9004.7 would be revised to read as follows:

Sec. 9004.7 Allocation of travel expenditures.

(a) Notwithstanding the provisions of 11 CFR 106.3, expenditures

for travel relating to a Presidential or Vice Presidential candidate's

campaign by any individual, including a candidate, shall, pursuant to

the provisions of paragraph (b) of this section, be qualified campaign

expenses and be reported by the candidate's authorized committee(s) as

expenditures.

(b)(1) For a trip which is entirely campaign-related, the total

cost of the trip shall be a qualified campaign expense and a reportable

expenditure.

(2) For a trip which includes campaign-related and non-campaign

related stops, that portion of the cost of the trip allocable to

campaign activity shall be a qualified campaign expense and a

reportable expenditure. Such portion shall be determined by calculating

what the trip would have cost from the point of origin of the trip to

the first campaign-related stop and from the stop through each

subsequent campaign-related stop to the point of origin. If any

campaign activity, other than incidental contacts, is conducted at a

stop, that stop shall be considered campaign-related. Campaign activity

includes soliciting, making, or accepting contributions, and expressly

advocating the election or defeat of any candidate. Other factors,

including the setting, timing and statements or expressions of the

purpose of an event, the substance of the remarks or speech made, and

the audience, will also be considered in determining whether a stop is

campaign-related.

(3) For each trip, an itinerary shall be prepared and such

itinerary shall be made available for Commission inspection.

(4) For trips by government conveyance or by charter, a list of all

passengers on such trip, along with a designation of which passengers

are and which are not campaign-related, shall be made available for

Commission inspection.

(5)(i) If any individual, including, candidate, uses a government

airplane for campaign-related travel, the candidate's authorized

committee shall pay the appropriate government entity an amount equal

to:

(A) The lowest unrestricted and non-discounted first class

commercial air fare available for the time traveled, in the case of

travel to a city served by a regularly scheduled commercial airline

service; or

(B) The lowest unrestricted and non-discounted coach commercial air

fare available for the time traveled, in the case of travel to a city

served by regularly scheduled coach airline service, but not regularly

scheduled first class airline service; or

(C) The commercial charter rate for a comparable airplane (in terms

of size, model and make), in the case of travel to a city not served by

a regularly scheduled commercial airline service.

(ii) If a government airplane is flown to a campaign-related stop

where it will pick up passengers, or from a campaign-related stop where

it left off passengers, the candidate's authorized committee shall pay

the appropriate government entity an amount equal to the amount

required under paragraph (b)(5)(i) of this section for one passenger

plus costs for fuel and crew.

(iii) If any individual, including a candidate, uses a government

conveyance, other than an airplane, for campaign-related travel, the

candidate's authorized committee shall pay the appropriate government

entity an amount equal to the commercial rental rate for a comparable

conveyance, in terms of size, model and make.

(iv) If any individual, including a candidate, uses accommodations,

including lodging and meeting rooms, during campaign-related travel,

and the accommodations are paid for by a government entity, the

candidate's authorized committee shall pay the appropriate government

entity an amount equal to the usual and normal charge for the

accommodations, and shall maintain documentation supporting the amount

paid.

(v) For travel by airplane, the committee shall maintain

documentation of the lowest unrestricted nondiscounted air fare

available for the time traveled, including the airline or travel

service providing that fare. For travel by other conveyances, the

committee shall maintain documentation of the commercial rental rate

for a comparable conveyance, including the provider of the conveyance

and the size, model and make of the conveyance. For travel under

paragraph (b)(5)(ii) of this section, the committee shall maintain

documentation of fuel and crew costs.

(6) Travel expenses of a candidate's spouse and family when

accompanying the candidate on campaign-related travel may be treated as

qualified campaign expenses and reportable expenditures. If the spouse

or family members conduct campaign-related activities, their travel

expenses shall be qualified campaign expenses and reportable

expenditures.

(7) If any individual, including a candidate, incurs expenses for

campaign-related travel, other than by use of government conveyance or

accommodations, an amount equal to that portion of the actual cost of

the conveyance or accommodations which is allocable to all passengers,

including the candidate, who are traveling for campaign purposes shall

be a qualified campaign expense and shall be reported by the committee

as an expenditure.

(i) If the trip is by charter, the actual cost for each passenger

shall be determined by dividing the total operating cost for the

charter by the total number of passengers transported. The amount which

is a qualified campaign expense and a reportable expenditure shall be

calculated in accordance with the formula set forth at 11 CFR

9004.7(b)(2) on the basis of the actual cost per passenger multiplied

by the number of passengers traveling for campaign purposes.

(ii) If the trip is by non-charter commercial transportation, the

actual cost shall be calculated in accordance with the formula set

forth at 11 CFR 9004.7(b)(2) on the basis of the commercial fare. Such

actual cost shall be a qualified campaign expense and a reportable

expenditure.

(8) Travel on corporate airplanes and other corporate conveyances

is governed by 11 CFR 114.9(e).

PART 9006--REPORTS AND RECORDKEEPING

10. The authority citation for Part 9006 would continue to read as

follows:

Authority: 2 U.S.C. 434 and 26 U.S.C. 9006(b).

11. Section 9006.3 would be added to read as follows:

Sec. 9006.3 Alphabetized schedules.

If the authorized committee(s) of a candidate file a schedule of

itemized receipts, disbursements, or debts and obligations pursuant to

11 CFR 104.3 that was generated directly or indirectly from

computerized files or records, the schedule shall list in alphabetical

order the sources of the receipts, the payees or the creditors, as

appropriate. Such schedule shall list all individuals, including

contributors, payees, and creditors in alphabetical order by surname.

PART 9007--EXAMINATIONS AND AUDITS; REPAYMENTS

12. The authority citation for Part 9007 would continue to read as

follows:

Authority: 26 U.S.C. 9007 and 9009(b).

13. In section 9007.1, new paragraph (f) would be added, to read as

follows:

Sec. 9007.1 Audits.

* * * * *

(f)(1) Sampling. In conducting an audit of contributions pursuant

to this section, the Commission may utilize generally accepted sampling

techniques to quantify, in whole or in part, the dollar value of

related audit findings. A projection of the total amount of violations

based on apparent violations identified in such a sample may become the

basis, in whole or in part, of any audit finding.

(2) A committee in responding to a sample-based finding concerning

excessive or prohibited contributions shall respond only to the

specific sample items used to make the projection. If the committee

demonstrates that any errors found among the sample items were not

excessive or prohibited contributions; were timely refunded,

reattributed or redesignated pursuant to 11 CFR 103.3(b)(1), (2) and

(3); or for some other reason were not errors; the Commission shall

make a new projection based on the reduced number of errors in the

sample.

(3) The committee shall submit a check to the United States

Treasury for the total amount of any contributions not refunded,

reattributed or redesignated in a timely manner in accordance with 11

CFR 103.3(b)(1), (2) or (3).

14. In section 9007.2, the introductory language of paragraph (b)

would be republished, and paragraph (b)(4) would be revised, to read as

follows:

Sec. 9007.2 Repayments.

* * * * *

(b) Bases for repayment. The Commission may determine that an

eligible candidate of a political party who has received payments from

the fund must repay the United States Treasury under any of the

circumstances described below.

* * * * *

(4) Income on investment or other use of payments from the Fund. If

the Commission determines that a candidate received any income as a

result of an investment or other use of payments from the fund pursuant

to 11 CFR 9004.5, it shall so notify the candidate, and such candidate

shall pay to the United States Treasury an amount equal to the amount

determined to be income, less any Federal, State or local taxes on such

income.

* * * * *

15. Section 9007.7 would be added to read as follows:

Sec. 9007.7 Administrative record.

(a) The Commission's administrative record for final determinations

under 11 CFR 9004.9, 9005.1 and 9007.2 may include the following:

(1) Candidate and committee agreements submitted pursuant to 11 CFR

9003.1;

(2) Candidate and committee certifications submitted pursuant to 11

CFR 9003.2;

(3) Statements of Net Outstanding Qualified Campaign Expenses;

(4) Pertinent portions of Interim and Final Audit Reports,

including attachments and supporting evidence;

(5) Pertinent portions of Initial and Final Repayment

Determinations, including attachments and supporting evidence;

(6) All certifications, notifications, and determinations made by

the Commission pursuant to 11 CFR 9004.9 and 9005.1;

(7) Other written correspondence or materials sent to, or received

from, the committee, witnesses, state or federal agencies or other

persons, including committee requests for extensions of time, pertinent

portions of committee responses to the Initial and Final Audit Reports,

and documentary or other evidence produced in response to a subpoena

duces tecum;

(8) The transcript or audio tape of any deposition taken;

(9) The transcript or audio tape of any oral presentation conducted

pursuant to 11 CFR 9007.2;

(10) The certification(s) of the Commission's decision(s) regarding

candidate certifications, eligibility determinations, and repayment

determinations;

(11) All additional documents and evidence identified or filed by

the Commission as part of the administrative record relied on in

reaching its decision(s); and

(12) Statements of Reasons adopted by the Commission.

(b) The Commission's administrative record for determinations under

11 CFR 11 CFR 9004.9, 9005.1 and 9007.2 does not include any materials

not specifically enumerated in paragraph (a) of this section, such as:

(1) Documents and materials in the files of individual

Commissioners or employees of the Commission that do not constitute a

basis for the Commission's decisions because they were not circulated

to the Commission and were not referenced in documents that were

circulated to the Commission;

(2) Transcripts or audio tapes of Commission discussions that are

pre-decisional, but such transcripts or tapes may be made available

under 11 CFR Parts 4 or 5; or

(3) Documents properly subject to privileges such as an attorney-

client privilege, or items constituting attorney work product.

(c) The administrative record identified in paragraph (a) of this

section is the exclusive record for the Commission's determinations

under 11 CFR 9004.9, 9005.1 and 9007.2

PART 9033--ELIGIBILITY FOR PAYMENTS

16. The authority citation for Part 9003 would be revised to read

as follows:

Authority: 26 U.S.C. 9003(e), 9033 and 9039(b).

17. In section 9033.1, the introductory language of paragraph (b)

would be republished, paragraph (b)(5) would be revised, and new

paragraph (b)(12) would be added, to read as follows:

Sec. 9033.1 Candidate and committee agreements.

* * * * *

(b) Conditions. The candidate shall agree that:

* * * * *

(5) The candidate and the candidate's authorized committee(s) will

keep and furnish to the Commission all documentation relating to

disbursements and receipts (including all books and book records for

all accounts), all documentation required by this section (including

those required to be maintained under 11 CFR 9033.11), and other

information that the Commission may request. If the candidate or the

candidate's authorized committee maintains or uses computerized

information containing any of the categories of data listed in 11 CFR

9033.12(a), the committee will provide computerized magnetic media,

such as magnetic tapes or magnetic diskettes, containing the

computerized information at the times specified in 11 CFR 9038.1(b)(1)

that meet the requirements of 11 CFR 9033.12(b). Upon request,

documentation explaining the computer system's software capabilities

shall be provided, and such personnel as are necessary to explain the

operation of the computer system's software and the computerized

information prepared or maintained by the committee shall be made

available.

* * * * *

(12) Agree that any television commercial prepared or distributed

by the candidate will be prepared in a manner which ensures that the

commercial contains or is accompanied by closed captioning of the oral

content of the commercial to be broadcast in line 21 of the vertical

blanking interval, or is capable of being viewed by deaf and hearing

impaired individuals via any comparable successor technology to line 21

of the vertical blanking interval.

Sec. 9033.4 [Amended]

18. In section 9033.4, paragraph (b) would be removed, and

paragraph (c) would be redesignated as paragraph (b).

19. Section 9033.11 would be revised to read as follows:

Sec. 9033.11 Documentation of disbursements.

(a) Burden of proof. Each candidate shall have the burden of

proving that disbursements made by the candidate or his or her

authorized committee(s) or persons authorized to make expenditures on

behalf of the candidate or authorized committee(s) are qualified

campaign expenses as defined in 11 CFR 9032.9. The candidate and his or

her authorized committee(s) shall obtain and furnish to the Commission

on request any evidence regarding qualified campaign expenses made by

the candidate, his or her authorized committees and agents or persons

authorized to make expenditures on behalf of the candidate or

committee(s) as provided in paragraph (b) of this section.

(b) Documentation required.

(1) For disbursements in excess of $200 to a payee, the candidate

shall present a canceled check negotiated by the payee that states the

purpose of the disbursement and either:

(i) A receipted bill from the payee that states the purpose of the

disbursement; or

(ii) If a receipt is not available,

(A) One of the following documents generated by the payee: A bill,

invoice, or voucher that states the purpose of the disbursement; or

(B) Where the documents specified in paragraph (b)(1)(ii)(A) of

this section are not available, a voucher or contemporaneous memorandum

from the candidate or the committee that states the purpose of the

disbursement; or

(iii) Where the supporting documentation required in paragraphs

(b)(1)(i) or (ii) of this section is not available, the candidate or

committee may present collateral evidence to document the qualified

campaign expense. Such collateral evidence may include, but is not

limited to:

(A) Evidence demonstrating that the expenditure is part of an

identifiable program or project which is otherwise sufficiently

documented such as a disbursement which is one of a number of

documented disbursements relating to a campaign mailing or to the

operation of a campaign office;

(B) Evidence that the disbursement is covered by a pre-established

written campaign committee policy, such as a daily travel expense

policy.

(2) For all disbursements of $200 or less, the candidate shall

present:

(i) A record disclosing the full name and mailing address of the

payee, and the amount, date and purpose of the disbursement, if made

from a petty cash fund; or

(ii) A canceled check negotiated by the payee that states the

identification of the payee, and the amount, date and purpose of the

disbursement.

(3) For purposes of this section,

(i) ``Payee'' means the person who provides the goods or services

to the candidate or committee in return for the disbursement; except

that an individual will be considered a payee under this section if he

or she receives $500 or less advanced for travel and/or subsistence and

if he or she is the recipient of the goods or services purchased.

(ii) ``Purpose'' means the full name and mailing address of the

payee, the date and amount of the disbursement, and a description of

the goods or services purchased.

(c) Retention of records. The candidate shall retain records, with

respect to each disbursement and receipt, including bank records,

vouchers, worksheets, receipts, bills and accounts, journals, ledgers,

fundraising solicitation material, accounting systems documentation,

matching fund submissions, and any related materials documenting

campaign receipts and disbursements, for a period of three years

pursuant to 11 CFR 102.9(c), and shall present these records to the

Commission on request.

(d) List of capital and other assets.

(1) Capital assets. The candidate or committee shall maintain a

list of all capital assets whose purchase price exceeded $2000 when

acquired by the campaign. The list shall include a brief description of

each capital asset, the purchase price, the date it was acquired, the

method of disposition and the amount received in disposition. For

purposes of this section, ``capital asset'' shall be defined in

accordance with 11 CFR 9034.5(c)(1).

(2) Other assets. The candidate or committee shall maintain a list

of other assets acquired for use in fundraising or as collateral for

campaign loans, if the aggregate value of such assets exceeds $5000.

The list shall include a brief description of each such asset, the fair

market value of each asset, the method of disposition and the amount

received in disposition. The fair market value of other assets shall be

determined in accordance with 11 CFR 9034.5(c)(2).

PART 9034--ENTITLEMENTS

20. The authority citation for Part 9034 would continue to read as

follows:

Authority: 26 U.S.C. 9034 and 9039(b).

21. In section 9034.4, paragraph (a) would be revised, paragraph

(b)(1) would be republished, paragraph (b)(3) would be revised, and

paragraph (b)(8) would be added, to read as follows:

Sec. 9034.4 Use of contributions and matching payments.

(a) Qualified campaign expenses--

(1) General. Except as provided in paragraph (b)(3) of this

section, all contributions received by an individual from the date he

or she becomes a candidate and all matching payments received by the

candidate shall be used only to defray qualified campaign expenses or

to repay loans or otherwise restore funds (other than contributions

which were received and expended to defray qualified campaign

expenses), which were used to defray qualified campaign expenses.

(2) Testing the waters. Even though incurred prior to the date an

individual becomes a candidate, payments made in accordance with 11 CFR

100.8(b)(1) for the purpose of determining whether an individual should

become a candidate shall be considered qualified campaign expenses if

the individual subsequently becomes a candidate and shall count against

that candidate's limits under 2 U.S.C. 441a(b).

(3) Winding down costs.

(i) Costs associated with the termination of political activity,

such as the costs of complying with the post election requirements of

the Act and other necessary administrative costs associated with

winding down the campaign, including office space rental, staff

salaries, and office supplies shall be considered qualified campaign

expenses. A candidate may receive and use matching funds for these

purposes either after he or she has notified the Commission in writing

of his or her withdrawal from the campaign for nomination or after the

date of the party's nominating convention, if he or she has not

withdrawn before the convention.

(ii) If the candidate has become ineligible due to the operation of

11 CFR 9033.5(b),he or she may only receive matching funds to defray

costs incurred before the candidate's date of ineligibility, for goods

and services to be received before the date of ineligibility and for

which written arrangement or commitment was made on or before the

candidate's date of ineligibility, until the candidate is eligible to

receive winding down costs under paragraph (a)(3)(i) of this section.

(iii) For purposes of the expenditure limitations set forth in 11

CFR 9035.1, 100% of salary, overhead and computer expenses incurred

after a candidate's date of ineligibility may be treated as exempt

legal and accounting compliance expenses beginning with the first full

reporting period after the candidate's date of ineligibility. For

candidates who continue to campaign or re-establish eligibility, this

paragraph shall not apply to expenses incurred during the period

between the date of ineligibility and the date on which the candidate

either re-establishes eligibility or ceases to continue to campaign.

(4) Taxes. Federal income taxes paid by the committee on non-exempt

function income, such as interest, dividends and sale of property,

shall be considered qualified campaign expenses. These expenses shall

not, however, count against the state or overall expenditure limits of

11 CFR 9035.1(a).

(5) Gifts and monetary bonuses. Gifts and monetary bonuses for

committee employees, consultants and volunteers in recognition for

campaign-related activities or services shall be considered qualified

campaign expenses, provided that the gifts do not exceed $150 total per

individual, and provided that the total for all gifts and monetary

bonuses (except bonus arrangements provided for in advance in an

employment or consulting contract) does not exceed $20,000.

(b) Non-qualified campaign expenses--

(1) General. The following are examples of disbursements that are

not qualified campaign expenses.

* * * * *

(3) Post-ineligibility expenditures. Any expenses incurred after a

candidate's date of ineligibility, as determined under 11 CFR 9033.5,

are not qualified campaign expenses except to the extent permitted

under 11 CFR 9034.4(a)(3). Any expenses incurred before the candidate's

date of ineligibility for goods and services to be received after the

candidate's date of ineligibility are not qualified campaign expenses.

In addition, any expenses incurred before the candidate's date of

ineligibility for goods and services to be received after the

candidate's date of ineligibility, or for property, services, or

facilities used to benefit the candidate's general election campaign,

are not qualified campaign expenses. For purposes of this paragraph, it

is presumed that capital assets delivered within 60 days of the first

day of the candidate's party's national nominating convention are

general election assets; and that a local campaign office that remains

open more than 30 days after a state's primary election or the close of

any other nomination process in that state is operating in support of

the general election campaign.

* * * * *

(8) Negligent Handling of Public Funds. The cost of items that are

lost or misplaced due to negligence shall not be considered a qualified

campaign expense. Factors in making this determination shall include,

but not be limited to, whether the committee demonstrates that it made

conscientious efforts to safeguard the missing equipment; the type of

equipment involved; the number of items that were lost; and the value

of the lost equipment as a percentage of the total value of the

equipment leased or owned by the committee.

* * * * *

22. Section 9034.5 would be amended by revising paragraphs (b),

(c)(1), and (f) to read as follows:

Sec. 9034.5 Net outstanding campaign obligations.

* * * * *

(b) Liabilities.

(1) The amount submitted as the total of outstanding campaign

obligations under paragraph (a)(1) of this section shall not include

any accounts payable for nonqualified campaign expenses nor any amounts

determined or anticipated to be required a repayment under 11 CFR part

9038 or any amounts paid to secure a surety bond under 11 CFR 9038.5.

(2) The amount submitted as estimated necessary winding down costs

under paragraph (a)(1) of this section shall be broken down by expenses

category and quarterly or monthly time period. This breakdown shall

include estimated costs for office space rental, staff salaries, office

supplies, equipment rental, telephone expenses, postage and other

mailing costs, printing and storage. The breakdown shall estimate the

costs that will be incurred in each category from the time the

statement is submitted until the expected termination of the

committee's political activity.

(c)(1) Capital assets, For purposes of this section, the term

capital asset means any property used in the operation of the campaign

whose purchase price exceeded $2000 when acquired by the committee.

Property that must be valued as capital assets under this section

includes, but is not limited to, office equipment, furniture, vehicles

and fixtures acquired for use in the operation of the candidate's

campaign, but does not include property defined as ``other assets''

under 11 CFR 9034.5(c)(2). A list of all capital assets shall be

maintained by the Committee in accordance with 11 CFR 9033.11(d). The

fair market value of capital assets may be considered to be the total

original cost of such items when acquired less than 40%, to account for

depreciation, except that items acquired after the date of

ineligibility must be valued at their fair market value on the date

acquired. If the candidate wishes to claim a higher depreciation

percentage for an item, he or she must list that capital asset on the

statement separately and demonstrate, through documentation, the fair

market value of each such asset. The Commission may disallow all or

some portion of the 40% depreciation if the asset was obtained by the

primary committee for use in the general election, or falls within a

presumption stated in 11 CFR 9034.4(b)(3).

* * * * *

(f)(1) The candidate shall submit a revised statement of net

outstanding campaign obligations with each submission for matching fund

payments filed after the candidate's date of ineligibility. the revised

statement shall reflect the financial status of the campaign as of the

close of business on the last business day preceding the date of

submission for matching funds. The revised statement shall also contain

a brief explanation of each change in the committee's assets and

obligations from the previous statement.

(2) A candidate who makes a submission described in paragraph

(f)(1) of this section shall also submit an additional revised

statement of net outstanding campaign obligations. This additional

statement shall be due on a date to be determined and published by the

Commission, which will be before the next regularly scheduled payment

date. This statement shall reflect the financial status of the campaign

as of the close of business three business days before the due date of

the statement. The revised statement shall also contain a brief

explanation of each change in the committee's assets and obligations

from the previous statement.

(3) After a candidate's date of ineligibility, if the candidate

does not receive the entire amount of matching funds on a regularly

scheduled payment date due to a shortfall in the matching payment

account, the candidate shall also submit a revised statement of net

outstanding campaign obligations. The revised statement shall be filed

on a date to be determined and published by the Commission, which will

be before the next regularly scheduled payment date.

23. Section 9034.6 would be revised to read as follows:

Sec. 9034.6 Expenditures for transportation and services made

available to media personnel; Reimbursements.

(a) General.

(1) Expenditures by an authorized committee for transportation,

ground services or facilities (including air travel, ground

transportation, housing, meals, telephone service, typewriters) made

available to media personnel, Secret Service personnel or national

security staff will be considered qualified campaign expenses, and,

except for costs relating to Secret Service personnel or national

security staff, will be subject to the overall expenditure limitation

of 11 CFR 9035.1(a).

(2) Subject to the limitations in paragraphs (b) and (c) of this

section, committees may seek reimbursement for these expenses and may

deduct any amounts received as reimbursements from the amount of

expenditures subject to the overall expenditure limitation of 11 CFR

9035.1(a). Expenses for which the committee receives no reimbursement

will be considered qualified campaign expenses, and, with the exception

of those expenses relating to Secret Service personnel and national

security staff, will be subject to the overall expenditure limitation.

(b) Reimbursement limits.

(1) The committee may seek reimbursement of the expenses described

in paragraph (a)(1) of this section from the media representatives to

whom those services were provided. The amount sought shall not exceed

the media representative's pro rata share, or a reasonable estimate of

the media representative's pro rata share, of the actual cost of the

transportation and services made available by more than 10%. Any

reimbursement received in excess of 110% of the actual pro rata cost of

the transportation and services made available shall be disposed of in

accordance with paragraph (d) of this section. For the purposes of this

section:

(i) A media representative's pro rata share shall be calculated by

dividing the total actual cost of the transportation and services by

the total number of individuals to whom such transportation and

services are made available. For purposes of this calculation, the

total number of individuals shall include committee staff, media

personnel, Secret Service personnel, national security staff and any

other individuals to whom such transportation and services are made

available; and

(ii) ``Administrative costs'' shall include all costs incurred by

the committee for making travel arrangements and for seeking

reimbursement, whether performed by committee staff or independent

contractors.

(c) Deduction of reimbursements from expenditures subject to the

overall expenditure limitation. The committee may deduct from the

amount of expenditures subject to the overall expenditure limitation of

11 CFR 9035.1(a):

(1) The amount of reimbursements received in payment for the

transportation and services described in paragraph (a) of this section,

up to the actual cost of transportation and services provided; and

(2) An amount of reimbursements received representing the

administrative costs incurred by the committee in providing these

services and seeking reimbursement for them, equal to:

(i) Three percent of the actual cost of transportation and services

provided under this section; or

(ii) An amount in excess of 3% representing the administrative

costs actually incurred by the committee, provided that the committee

is able to document that it incurred these higher administrative costs.

(d) Disposal of excess reimbursements. If the committee receives

reimbursements in excess of the amount deductible under paragraph (c)

of this section, it shall dispose of the excess amount in the following

manner:

(1) Any reimbursement received in excess of 110% of the actual pro

rata cost of the transportation and services made available to a media

representative shall be returned to the media representative.

(2) Any amount in excess of the amount deductible under paragraph

(c) of this section that is not required to be returned to the media

representative under paragraph (d)(1) shall be repaid to the Treasury.

(e) Reporting. The total amount paid by an authorized committee for

the cost of transportation or for ground services and facilities shall

be reported as an expenditure in accordance with 11 CFR 104.3(b)(2)(i).

Any reimbursement received by such committee for transportation or

ground services and facilities shall be reported in accordance with 11

CFR 104.3(a)(3)(ix).

24. Section 9034.7 would be revised to read as follows:

Sec. 9034.7 Allocation of Travel Expenditures.

(a) Notwithstanding the provisions of 11 CFR 106.3, expenditures

for travel relating to the office of President by any individual,

including a candidate, shall, pursuant to the provisions of paragraph

(b) of this section, be qualified campaign expenses and be reported by

the candidate's authorized committee(s) as expenditures.

(b) (1) For a trip which is entirely campaign-related, the total

cost of the trip shall be a qualified campaign expense and a reportable

expenditure.

(2) For a trip which includes campaign-related and non-campaign

related stops, that portion of the cost of the trip allocable to

campaign activity shall be a qualified campaign expense and a

reportable expenditure. Such portion shall be determined by calculating

what the trip would have cost from the point of origin of the trip to

the first campaign-related stop and from that stop through each

subsequent campaign-related stop, back to the point of origin. If any

campaign activity, other than incidental contacts, is conducted at a

stop, that stop shall be considered campaign-related. Campaign activity

includes soliciting, making, or accepting contributions, and expressly

advocating the election or defeat of any candidate. Other factors,

including the setting, timing and statements or expressions of the

purpose of an event, the substance of the remarks or speech made, and

the audience, will also be considered in determining whether a stop is

campaign-related.

(3) For each trip, an itinerary shall be prepared and such

itinerary shall be made available for Commission inspection.

(4) For trips by government conveyance or by charter, a list of all

passengers on such trip, along with a designation of which passengers

are and which are not campaign-related, shall be made available for

Commission inspection.

(5) (i) If any individual, including a candidate, uses a government

airplane for campaign-related travel, the candidate's authorized

committee shall pay the appropriate government entity an amount equal

to:

(A) The lowest unrestricted and non-discounted first class

commercial air fare available for the time traveled, in the case of

travel to a city served by a regularly scheduled commercial airline

service; or

(B) The lowest unrestricted and non-discounted coach commercial air

fare available for the time traveled, in the case of travel to a city

served by regularly scheduled coach airline service, but not regularly

scheduled first class airline service; or

(C) The commercial charter rate for a comparable airplane (in terms

of size, model and make), in the case of travel to a city not served by

a regularly scheduled commercial airline service.

(ii) If a government airplane is flown to a campaign-related stop

where it will pick up passengers, or from a campaign-related stop where

it left off passengers, the candidates's authorized committee shall pay

the appropriate government entity an amount equal to the amount

required under paragraph (b)(5)(i) of this section for one passenger

plus costs for fuel and crew.

(iii) If any individual, including a candidate, uses a government

conveyance, other than an airplane, for campaign-related travel, the

candidate's authorized committee shall pay the appropriate government

entity an amount equal to the commercial rental rate for a comparable

conveyance, in terms of size, model and make.

(iv) If any individual, including a candidate, uses accommodations,

including lodging and meeting rooms, during campaign-related travel,

and the accommodations are paid for by a government entity, the

candidate's authorized committee shall pay the appropriate government

entity an amount equal to the usual and normal charge for the

accommodations, and shall maintain documentation supporting the amount

paid.

(v) For travel by airplane, the committee shall maintain

documentation for the lowest unrestricted nondiscounted air fare

available for the time traveled, including the airline or travel

service providing that fare. For travel by other conveyances, the

committee shall maintain documentation of the commercial rental rate

for a comparable conveyance, including the provider of the conveyance

and the size, model and make of the conveyance. For travel under

paragraph (b)(5)(ii) of this section, the committee shall maintain

documentation of fuel and crew costs.

(6) Travel expenses of a candidate's spouse and family when

accompanying the candidate on campaign-related travel may be treated as

qualified campaign expenses and reportable expenditures. If the spouse

or family members conduct campaign-related activities, their travel

expenses will be treated as qualified campaign expenses and reportable

expenditures.

(7) If any individual, including a candidate, incurs expenses for

campaign-related travel, other than by use of government conveyance or

accommodations, an amount equal to that portion of the actual cost of

the conveyance or accommodations which is allocable to all passengers,

including the candidate, who are traveling for campaign purposes will

be a qualified campaign expense and shall be reported by the committee

as an expenditure.

(i) If the trip is by charter, the actual cost for each passenger

shall be determined by dividing the total operating cost for the

charter by the total number of passengers transported. The amount which

is a qualified campaign expense and a reportable expenditure shall be

calculated in accordance with the formula set forth at 11 CFR

9034.7(b)(2) on the basis of the actual cost per passenger multiplied

by the number of passengers traveling for campaign purposes.

(ii) If the trip is by non-charter commercial transportation, the

actual cost shall be calculated in accordance with the formula set

forth at 11 CFR 9034.7(b)(2) on the basis of the commercial fare. Such

actual cost shall be a qualified campaign expense and a reportable

expenditure.

(8) Travel on corporate airplanes and other corporate conveyances

is governed by 11 CFR 114.9(e).

PART 9037--PAYMENTS AND REPORTING

25. The authority citation for Part 9037 would continue to read as

follows:

Authority: 26 U.S.C. 9037 and 9039(b).

Section 9037.4 would be added to read as follows:

Sec. 9037.4 Alphabetized schedules.

If the authorized committee(s) of a candidate file a schedule of

itemized receipts, disbursements or debts and obligations pursuant to

11 CFR 104.3 that was generated directly or indirectly from

computerized files or records, the schedule shall list in alphabetical

order the sources of he receipts, the payees, or the creditors, as

appropriate. Such schedule shall list all individuals, including

contributors, payees and creditors, in alphabetical order by surname.

PART 9038--EXAMINATIONS AND AUDITS

27. The authority citation for part 9038 would continue to read as

follows:

Authority: 26 U.S.C. 9038 and 9039(b).

28. In section 9038.1, new paragraph (f) would be added, to read as

follows:

Sec. 9038.1 Audit.

* * * * *

(f)(1) Sampling. In conducting an audit of contributions pursuant

to this section, the Commission may utilize generally accepted sampling

techniques to quantify, in whole or in part, the dollar value of

related audit findings. A projection of the total amount of violations

based on apparent violations identified in such a sample may become the

basis, in whole or in part, or any audit finding.

(2) A committee in responding to a sample-based finding concerning

excessive or prohibited contributions shall respond only to the

specific sample items used to make the projection. If the committee

demonstrates that any errors found among the sample items were not

excessive or prohibited contributions; were timely refunded,

reattributed or redesignated pursuant to 11 CFR 103.3(b) (1), (2) and

(3); or for some other reason were not errors; the Commission shall

make a new projection based on the reduced number of errors in the

sample.

(3) The committee shall submit a check to the United States

Treasury for the total amount of any contributions not refunded,

reattributed or redesignated in a timely manner in accordance with 11

CFR 103.3(b) (1), (2) or (3).

29. In section 9038.2, the introductory language of paragraph

(b)(2) would be republished, and paragraph (b)(2)(iii) would be

revised, to read as follows:

Sec. 9038.2 Repayments.

* * * * *

(b) Bases for repayment * * *

(2) Use of funds for non-qualified campaign expenses. * * *

(iii) The amount of any repayment sought under this section shall

bear the same ratio to the total amount determined to have been used

for non-qualified campaign expenses as the amount of matching funds

certified to the candidate bears to the candidate's total deposits, as

of 90 days after the candidate's date of ineligibility. For the

purposes of this paragraph--

(A) All matching funds certified in response to matching payment

submissions received by the Commission as of the candidate's date of

ineligibility will be treated as though they were certified as of the

date of ineligibility;

(B) Total deposits is defined in accordance with 11 CFR

9038.3(c)(2); and

(C) In seeking repayment for non-qualified campaign expenses from

committees that have received matching fund payments after the

candidate's date of ineligibility, the Commission will review committee

expenditures to determine at what point committee accounts no longer

contain matching funds. In doing this, the Commission will review

committee expenditures from the date of the last matching fund payment

to the candidate, using the assumption that the last payment has been

expended on a last-in, first-out basis.

* * * * *

30. Section 9038.7 would be added to read as follows:

Sec. 9038.7 Administrative record.

(a) The Commission's administrative record for final determinations

under 11 CFR Part 9033 and Secs. 9034.5, 9036.5 and 9038.2 may include

the following:

(1) Candidate and committee agreements submitted pursuant to 11 CFR

9033.1;

(2) Candidate and committee certifications submitted pursuant to 11

CFR 9033.2;

(3) Threshold submissions and additional submissions for matching

fund payments;

(4) Statements of Net Outstanding Campaign Obligations;

(5) Pertinent portions of Interim and Final Audit Reports,

including attachments and supporting evidence;

(6) Pertinent portions of Initial and Final Repayment

Determinations, including attachments and supporting evidence;

(7) All certifications, notifications, and determinations made by

the Commission pursuant to 11 CFR Part 9033, and sections 9034.5 and

9036.5;

(8) Other written correspondence or materials sent to, or received

from, the committee, witnesses, state or federal agencies or other

persons, including committee requests for extensions of time, pertinent

portions of committee responses to the Initial and Final Audit Reports,

and documentary or other evidence produced in response to a subpoena

duces tecum;

(9) The transcript or audio tape of any deposition taken;

(10) The transcript or audio tape of any oral presentation

conducted pursuant to 11 CFR 9038.2;

(11) The certification(s) of the Commission's decision(s) regarding

candidate certifications, eligibility determinations, and repayment

determinations;

(12) All additional documents and evidence identified or filed by

the Commission as part of the administrative record relied on in

reaching its decision(s); and

(13) Statements of Reasons adopted by the Commission.

(b) The Commission's administrative record for determinations under

11 CFR Part 9033 and Secs. 9034.5, 9036.5 and 9038.2 does not include

any materials not specifically enumerated in paragraph (a) of this

section, such as:

(1) Documents and materials in the files of individual

Commissioners or employees of the Commission that do not constitute a

basis for the Commission's decisions because they were not circulated

to the Commission and were not referenced in documents that were

circulated to the Commission;

(2) Transcripts or audio tapes of Commission discussions that are

pre-decisional, but such transcripts or tapes may be made available

under 11 CFR Parts 4 or 5; or

(3) Documents properly subject to privileges such as an attorney-

client privilege, or items constituting attorney work product.

(c) The administrative record identified in paragraph (a) of this

section is the exclusive record for the Commission's determinations

under 11 CFR Part 9033 and Secs. 9034.5, 9036.5 and 9038.2.

Dated: September 30, 1994.

Trevor Potter,

Chairman.

[FR Doc. 94-24623 Filed 10-5-94; 8:45 am]

BILLING CODE 6715-01-M