Commission issues interim final rule and ANPRM to address Supreme Court ruling in McCutcheon (2014)

On October 9, 2014, the Commission approved both an interim final rule and an Advance Notice of Proposed Rulemaking (ANPRM) to revise the Commission’s regulations to reflect the Supreme Court’s decision in McCutcheon v. FEC. The interim final rule removes regulations that impose aggregate contribution limits the Court held were unconstitutional, and the ANPRM invites public comment on whether the Commission should undertake a new rulemaking to revise or amend other regulations in light of the Court’s ruling. The Commission intends to hold a hearing on the ANPRM on February 11, 2015, and invites public comment on what revisions, if any, it should consider.

Interim final rule

The Federal Election Campaign Act (the Act) limits the aggregate amount individuals may contribute in connection with federal elections during a two-year period. 52 U.S.C. §30116(a)(3) (formerly 2 U.S.C. § 441a(a)(3)). During the period of January 1, 2013 through December 31, 2014, an individual could contribute up to $48,600 to federal candidates and up to $74,600 to all other federal political committees, of which no more than $48,600 could go to political committees other than national party committees. On April 2, 2014, the Supreme Court issued its decision in McCutcheon v. FEC, holding that the Act’s aggregate contribution limits are unconstitutional. See McCutcheon v. FEC, 572 U.S.___, 134 S. Ct. 1434 (2014).

As a result of the decision, the Commission is removing its regulation at 11 CFR 110.5 that implemented the Act’s aggregate contribution limits. It is also making technical and conforming amendments to several other regulations that make reference to the aggregate limits at 110.5. These revisions take effect immediately and were published in the Federal Register on October 17, 2014.

Advance Notice of Proposed Rulemaking

In addition to the interim final rule, the Commission is also requesting comments from the public on whether to begin a new rulemaking to revise other regulations in light of the Court’s decision in McCutcheon. The ANPRM also appeared in the Federal Register on October 17, 2014.

In the McCutcheon decision, the Court stated that there are “multiple alternatives available to Congress that would serve the Government’s interest in preventing circumvention [of the contribution limits] while avoiding ‘unnecessary abridgment’ of First Amendment rights.” See McCutcheon, 134 S. Ct. at 1458. Mechanisms that could be implemented or amended to prevent circumvention include earmarking regulations, affiliation factors, joint fundraising regulations and disclosure requirements. The Commission seeks comment on whether it should modify its regulations or practices in these areas.

Earmarking. The Act provides that “all contributions made by a person, either directly or indirectly, on behalf of a particular candidate, including contributions which are in any way earmarked or otherwise directed through an intermediary or conduit to such candidate,” are contributions from that person to the candidate. 52 U.S.C. §30116(a)(8) (formerly 2 U.S.C. §441a(a)(8)). See also 11 CFR 110.6(b)(1).

In enforcement actions, however, the Commission has determined that funds are considered to be “earmarked” only when there is “clear documented evidence of acts by donors that resulted in their funds being used” as contributions. See, for example, Factual & Legal Analysis at 6-7, MUR 5732 (Matt Brown for U.S. Senate) (2007). The Commission asks if it should revisit the manner in which it enforces its earmarking regulations to encompass “implicit agreements” to circumvent the contribution limits.

Commission regulations also provide that the amount of a person’s contributions to a candidate and to a political committee supporting the same candidate must be aggregated under certain conditions. 11 CFR 110.1(h). The Commission asks whether it should amend the regulation by, for example, establishing a maximum percentage of a political action committee’s funds that can be directed to a single candidate in order “’to ensure that a substantial portion’ of a donor’s contribution is not rerouted to a certain candidate.” See McCutcheon at 1459.

Affiliation. Commission regulations provide that “[a]ll committees…established, financed, maintained, or controlled, by the same … person, or group of persons … are affiliated,” and thus share a single contribution limit. 11 CFR 100.5(g)(2) and 110.3(a)(1)(ii). The Commission asks if its current regulations are adequate to prevent circumvention of the base limits. The Commission also asks whether it should revisit its affiliation factors and, if so, how.

Joint fundraising. The Act and Commission regulations authorize the creation of joint fundraising committees, which may involve multiple federal candidates, committees, or nonfederal organizations raising funds in a single effort. 52 U.S.C. §30102(e)(3)(A)(ii) (formerly 2 U.S.C. §432(e)(3)(A)(ii)). On this point, the McCutcheon decision noted that the joint fundraising rules could be revised, for instance, to limit the size of joint fundraising committees or require that funds received by participants in a joint fundraising committee could be spent “only by their recipients." See McCutcheon at 1458-59. The Act includes provisions that can affect transfers between committees engaged in joint fundraising. Accordingly, the Commission asks if it can or should revise its joint fundraising rules and, if so, how.

Disclosure. The Court also stated that disclosure provisions may “deter actual corruption and avoid the appearance of corruption by exposing large contributions and expenditures to the light of publicity.” McCutcheon at 1459-60. The Court also noted that, due to developments in technology, “disclosure offers much more robust protections against corruption” because “[r]eports and databases are available on the FEC’s [website] almost immediately after they are filed.” See id. at 1460. The Commission asks what regulatory changes or other steps it should take to further improve its collection and presentation of campaign finance data.

Submission of comments and Commission hearing

The Commission invites comments on both the interim final rule and the ANPRM. All comments must be in writing and may be submitted electronically via the Commission’s website at http://sers.fec.gov/fosers, reference REG 2014-01. Comments may also be submitted in paper form, although the Commission recommends that they be submitted electronically to ensure timely receipt. Paper comments should be sent to:

Federal Election Commission
Attn: Amy L. Rothstein, Assistant General Counsel
999 E Street, NW
Washington, DC 20463

All comments must include the full name and postal service address of a commenter (or each commenter if filed jointly) or they will not be considered. At the conclusion of the comment period, the Commission will post all received comments on its website. Comments on the Interim Final Rule must be received by November 17, 2014, and comments on the ANRPM must be received by January 15, 2015.

The Commission will hold a hearing on the ANPRM on February 11, 2015. Anyone wishing to testify must file written comments by the due date above and must include a request to testify in the written comments.

Resources:

• Federal Register notice: Interim Final Rule [PDF]
• Federal Register notice: Advance Notice of Proposed Rulemaking [PDF]
• Supreme Court decision in McCutcheon v. FEC (April 2, 2014) [PDF]
• Commission discussion of Interim Final Rule and Advance Notice of Proposed Rulemaking