Commission issues interim final rules adjusting civil penalties for inflation (2016)

On June 24, 2016, the Commission published a notice of Interim Final Rules to adjust for inflation the civil monetary penalties established under the federal campaign finance statutes administered by the Commission. The interim final rules, required in order to comply with a 2015 statute affecting federal government agencies, take effect on August 1, 2016.

Statutory requirement

The Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015, Pub. L. No. 114-74, sec. 701, 129 Stat. 584, 599 ("the 2015 Act") amended the Federal Civil Penalties Inflation Adjustment Act of 1990 (the "Inflation Adjustment Act") concerning adjustment of civil penalties for inflation by federal agencies. As a result, federal agencies, including the Commission, must make a one-time "catch-up" adjustment to civil monetary penalties, effective no later than August 1, 2016, and must adjust those penalties annually thereafter using newly prescribed formulas. To calculate the catch-up adjustment for civil monetary penalties, federal agencies must first identify the "baseline" year, which is the later of: the year the penalty was first established, or the year it was last adjusted by law other than under the Inflation Adjustment Act. Agencies then must multiply the cost-of-living ("COLA") [FN1] ratio for the baseline year by the amount of each penalty in effect in the baseline year to determine the increased amount of the penalty; however, a penalty may not be increased by more than 150% of the amount in effect on November 2, 2015.

Adjustments made

There are two types of civil monetary penalties that must be adjusted for inflation under the federal campaign finance laws administered by the Commission:

• Penalties that are either negotiated by the Commission or imposed by a court for violations of the federal laws administered by the Commission. See 11 CFR 111.24.
• Penalties set under the Administrative Fine Program for late filing or non-filing of certain reports required by the Federal Election Campaign Act. See 11 CFR 111.43 and 111.44.

To calculate the amount of each catch-up adjustment, the interim final rules multiply the civil monetary penalty amount in the baseline year by the COLA ratio, and where required, limit the increase to no more than 150% of the amount in effect on November 2, 2015. The Federal Register notice (81 Fed. Reg. 41196 (June 24, 2016)) details each revised penalty and the calculation of its catch-up adjustment.

Interim final rules

As required by the 2015 Act, the Commission is issuing these civil monetary penalty adjustments as interim final rules, with an accompanying explanation and justification (E&J). The interim final rules will take effect on August 1, 2016. [FN2] The Administrative Procedure Act’s notice-and-comment requirement does not apply because Congress specifically directed agencies to make adjustments to civil monetary penalties through an interim final rule. Nonetheless, the public may comment on these interim final rules until July 25, 2016, and the Commission may address any comments received in a later rulemaking document. See the Federal Register notice at 81 Fed. Reg. 41196 (June 24, 2016) for information on the comment procedures. 

¹ The COLA ratio is the percentage that the consumer price index (“CPI”) for October 2015 exceeds the CPI for October of the baseline year.
² The 2015 Act requires that agencies make their catch-up adjustments effective by August 1, 2016.

Resources:

• Federal Register notice (June 24, 2016) [PDF]
• Commission consideration of Interim Final Rules and E&J  [mp3]
• Administrative fine program
• Enforcement matters