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Notice of Proposed Rulemaking on Corporate and Labor Expenditures

On December 27, 2011, the Commission published in the Federal Register a Notice of Proposed Rulemaking (NPRM) seeking comments on proposed changes to its rules regarding corporate and labor organization funding of expenditures, independent expenditures and electioneering communications. These proposed changes are in response to a Petition for Rulemaking filed by the James Madison Center for Free Speech urging the Commission to amend its regulations in response to the Supreme Court’s ruling in Citizens United v. FEC.  In that decision the Supreme Court held that the two provisions of the Federal Election Campaign Act (the Act) that prohibit corporations from making independent expenditures and electioneering communications violate the First Amendment. 559 U.S.___, 130 S. Ct. 876 (2010). The Court upheld the validity of the Act's reporting, disclosure and disclaimer requirements for independent expenditures and electioneering communications.

Proposed Rules

The Commission proposes to change 11 CFR Part 114 by modifying specific language within that section that prohibits corporations and labor organizations from using general treasury funds to finance independent expenditures and electioneering communications, and removing language that may be unnecessary given the permissible uses of treasury funds under Citizens United.

The Commission proposes to modify 11 CFR 114.2(b)(2)(i) in one of two ways: either by narrowing the prohibition to allow all expenditures except those that are coordinated with a candidate or political party committee, including coordinated communications, or by narrowing the prohibition to allow only communications that are not coordinated with a candidate or party committee, while continuing to prohibit expenditures that are not made for communications.

These alternative approaches would also apply to the regulations governing communications by corporations and labor organizations to the restricted class in 11 CFR 114.3 and to those outside the restricted class in 11 CFR 114.4. Concerning the latter regulation, the Commission proposes to remove the prohibition on making express advocacy communications to those outside the restricted class, but would maintain the restrictions on coordinating with candidates and political parties when making communications to those outside the restricted class. Among the proposed changes to both 11 CFR 114.3 and 114.4 are alternatives for changing the current restrictions on how corporations and labor organizations may conduct voter registration and GOTV drives.  For both 11 CFR 114.3 and 114.4, Alternative A would remove all existing requirements and prohibitions regarding voter registration and GOTV drives, with the exception of the prohibition on coordination with candidates or parties, while Alternative B would retain those requirements and prohibitions.  Alternative B for proposed 11 CFR 114.4 would, however, remove the prohibition on express advocacy currently at 11 CFR 114.4(d)(1).

The Commission seeks comment on whether to remove or revise section 114.10, certain provisions of which currently exempt qualified nonprofit corporations (QNC) from the pre-Citizens United ban on corporate independent expenditures and electioneering communications. The Commission proposes to either remove the section or to revise it to expand the existing rules to apply to all corporations and labor organizations that make such independent expenditures or electioneering communications. The Commission proposes a regulation to state affirmatively that a corporation or labor organization may establish a segregated bank account for funds to be used for the making of electioneering communications.

Finally, the Commission proposes to remove 11 CFR 114.14 and 114.15 in their entirety. Together, these sections prohibit corporations and labor organizations from providing general treasury funds to other persons to make electioneering communications that are the functional equivalent of express advocacy. Because of the Court's decision, the regulation at 114.14, designed to prohibit corporations and labor organizations from doing through another person what the corporation or labor organization could not do directly, may have been rendered unnecessary. Likewise, section 114.15, which provides a safe harbor for certain electioneering communications made by corporations and labor organizations, may have also been rendered unnecessary. The Commission seeks comment as to whether the section is still relevant to any remaining regulations.

Comments

The complete text of the NPRM is available at http://sers.fec.gov/fosers/showpdf.htm?docid=99892. Comments are due on or before February 3, 2012. Reply comments must be limited to the issues raised in the initial comments and must be received on or before February 17, 2012. The Commission will hold a hearing on these proposed rules on March 7, 2012. Anyone wishing to testify at the hearing must file written comments by the due date and must include in those comments a request to testify.

All comments must be made in writing. Commenters are encouraged to submit their comments electronically via the FEC website at http://www.fec.gov/fosers/.  Alternatively, comments may be sent on paper to the Federal Election Commission, Attn: Robert M. Knop, Assistant General Counsel, 999 E Street, NW., Washington, DC 20463. All comments must include the full name and postal service address of the commenter (and of each commenter contributing to comments filed jointly) or they will not be considered. Comments will be posted on the FEC website at the end of the comment period.

(Posted 1/5/12; By: Christopher Berg)

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The FEC Record is produced by the Information Division, Office of Communications. Toll free 800-424-9530; Local 202-694-1100; E-mail info@fec.gov. Greg Scott, Director; Amy Kort, Asst. Director; Dorothy Yeager, Editor