Commission hearing on proposed rules for bundled contributions

The Federal Election Commission held a public hearing on September 17, 2008, on proposed rules governing the disclosure of information about lobbyists, registrants and the political action committees (PACs) of lobbyists and registrants that bundle contributions over a threshold amount during a covered period to certain committees.

The Commission published a Notice of Proposed Rulemaking (NPRM) on November 6, 2007, seeking public comment on the proposed regulations, which are in response to provisions of the Honest Leadership and Open Government Act of 2007 (HLOGA). The Commission received six comments from 11 commenters on the NPRM. Six of the commenters testified at the hearing and offered their views on the scope and substance of the proposed rules. The Commission reopened the record for one week after the hearing to receive further comments on issues discussed at the hearing. The Commission received two such comments during that period.

Background

HLOGA amends the Federal Election Campaign Act (the Act) to require candidates’ authorized committees, leadership PACs and political party committees to disclose information about each lobbyist and registrant, and each political committee the lobbyist/registrant establishes or controls, who forwards or is credited with raising two or more bundled contributions totaling more than $15,000(1) during a specific time period. Reporting committees must disclose the name and address of the lobbyist/registrant or lobbyist/registrant PAC, employer (for individual persons) and the aggregate amount of contributions bundled to the committee within the covered period.

The NPRM proposes rules requiring the reporting of, and recordkeeping for, information about lobbyists/registrants and lobbyist/registrant PACs that bundle contributions. For example, HLOGA requires the disclosure of information about a person who forwards, or is credited with raising, contributions if the person is "reasonably known" by the reporting committee to be a lobbyist/registrant or lobbyist/registrant PAC. The NPRM proposes rules to provide guidance about how a reporting committee can determine whether a person qualifies as a lobbyist, a registrant or a political committee established or controlled by a registrant or lobbyist and therefore must be identified on a filing. The Commission sought comments on this proposal and also specifically requested comments on proposed rules to define the terms used in HLOGA, among other issues discussed below. (See https://www.fec.gov/updates/nprm-on-reporting-bundled-contributions/).

Testimony regarding proposed rules

Much of the hearing testimony centered on three broad concerns: how to define the concept of "crediting" a bundled contribution to a lobbyist/registrant or a lobbyist/registrant PAC; how to credit bundled contributions to multiple lobbyists/registrants who co-host an event; and whether the statute applies to contributions bundled by nonlobbyist employees of a registrant organization.

Definition of "credit." Testimony focused on the issue of what "credit" means, in the context of the statutory language. Witnesses discussed whether “crediting” should be defined as mere knowledge on the part of the candidate or committee that the lobbyist/registrant raised a certain amount of money, or whether it should be defined to require something tangible, like a title for lobbyists/registrants who raise funds beyond certain thresholds or tickets to a special event. Don Simon, counsel to Democracy 21, told the Commissioners that if a lobbyist/registrant verbally indicates to a Member of Congress that the lobbyist/registrant raised a certain amount of bundled contributions for that Member, but does not provide that information in writing, the Member should still be held accountable for knowing and designating those contributions as such.

Timothy Jenkins of the Coalition for Tax Equity, told the Commissioners that a Member of Congress could not be held to such a standard. He said there needs to be a written record or other means to quantify the amount raised, otherwise the statute would be difficult to enforce.

Joseph Sandler of Sandler, Reiff & Young, P.C., said the issue of written versus oral designation of credit largely dissolves in practical application because most committees ensure they have a way of tracking who raises funds for them and how much.

Treatment of lobbyist/registrants who co-host events. The Commission requested comments on how the new law should be applied with regard to crediting multiple lobbyist/registrants who co-host a single fundraiser. For example, the Commission asked whether, if three lobbyist/registrants jointly co-host a fundraiser that raised $20,000 in contributions for Senator X, each of the three co-hosts should be deemed to have raised the entire $20,000 for reporting purposes. The Commission asked whether this approach would be misleading or inaccurate from a disclosure perspective and whether the sum total should instead be prorated among the three co-hosts.

Mr. Simon, Mr. Sandler, Paul Ryan of the Campaign Legal Center and Craig Holman of Public Citizen all spoke in favor of crediting each lobbyist/registrant with the entire amount of contributions raised at a multi-host event. They argued that prorating the sum total among the bundlers would, as Mr. Holman suggested, "distort the actual role of each bundler in the fundraising process."

In contrast, Mr. Jenkins told the Commissioners that the only way the Commission could accurately determine whether the bundling threshold of $15,000 is met is to prorate the total amount raised among the event's multiple hosts. This method would also ensure that the funds raised at events with multiple hosts are accurately attributed to the separate hosts, he told the Commissioners.

Marc Elias of Perkins Coie expressed disapproval of both of these options. He told the Commissioners that the candidate or committee receiving the bundled contributions should determine how much credit to give each lobbyist/registrant, thus determining who and what must be disclosed. He pointed out that the recipient candidate or committee is in the best position to determine how much credit to give each fundraiser.

Employees of lobbyists/registrants. Questions were also raised at the hearing concerning whether the statute (and the proposed regulations) would apply to non-lobbyist employees of a registrant organization. The questions centered on how to determine, for reporting purposes, whether an individual bundling contributions is doing so on his or her own behalf or on behalf of his or her employer.

Mr. Jenkins said that disclosure should be required if, for example, a PAC supervisor or coordinator who is not a registered lobbyist bundles contributions on behalf of a registered lobbyist.

Mr. Sandler suggested that the regulations should outline "some objective criteria rather than leaving it to some sort of case-by-case investigation." He suggested, as an example, "Possibly there should be a presumption that senior officers of the company, individuals involved in a government relations division of a company, should be presumed to be acting on behalf of, or acting as agents rather, for their company for purposes of the disclosure."

Additional information

The full text of the NPRM, written comments in response to the NPRM, a transcript of the FEC hearing and the witness' supplemental written comments filed after the hearing are available at http://sers.fec.gov/fosers/showpdf.htm?docid=11868.

(1) This amount is to be indexed for inflation annually, and thus the threshold amount may be different when the regulations take effect in early 2009.