Final rules and explanation for electioneering communications (2007)

On December 14, 2007, the Commission voted to modify its regulations governing the funding of "electioneering communications" (ECs) by corporations and labor organizations and to apply the EC reporting and disclaimer requirements to ECs made by corporations and labor organizations. The new rule is in response to the Supreme Court's decision in FEC v. Wisconsin Right to Life, Inc. (WRTL II). The revised rules allow corporations and labor organizations to distribute ECs, provided that they are not the "functional equivalent of express advocacy," and took effect December 26, 2007.

Background

The Bipartisan Campaign Reform Act of 2002 (BCRA) amended the Federal Election Campaign Act (the Act) to add a new type of political communication called "electioneering communications." The BCRA defined an EC as a broadcast, cable or satellite communication that refers to a clearly identified federal candidate, is publicly distributed within 30 days of a primary election or within 60 days of a general election and is targeted to the relevant electorate. 2 U.S.C. §434(f)(3)(A)(i) and 11 CFR 100.29(a). Corporations and labor organizations are prohibited from using their general treasury funds to finance ECs. 2 U.S.C. §441b(b)(2) and 11 CFR 114.2(b)(2)(iii). Those making ECs are subject to several reporting and disclosure requirements. 2 U.S.C. §§434(f)(1)-(2) and 441d(a).

In WRTL II, the Supreme Court reviewed an "as-applied challenge" to the EC funding prohibitions(1) where Wisconsin Right to Life, Inc., a nonprofit corporation, sought to use its own general treasury funds, which included donations it had received from other corporations, to pay for broadcast ads during the EC period that referred to both U.S. Senators from Wisconsin, one of whom was a clearly identified candidate for federal office in that election. The plaintiff argued that these communications were genuine issue ads run as part of a grassroots lobbying campaign on the issue of Senate filibusters of judicial nominations.The Supreme Court held that because the ads in question were not the "functional equivalent of express advocacy," the prohibition on corporate or labor organization funding of ECs was unconstitutional as applied to the plaintiff's ads. The Court further held that a communication is the "functional equivalent of express advocacy" only if it "is susceptible of no reasonable interpretation other than as an appeal to vote for or against a specific candidate." The Court determined that the content of WRTL's advertisements was "consistent with that of a genuine issue ad" and the communications lacked "indicia of express advocacy," because they did not mention an election, candidacy, political party or challenger, and the communications did not take a position on a candidate's character, qualifications or fitness for office.

In response to the Supreme Court's decision, the Commission published a Notice of Proposed Rulemaking (NPRM) on August 31, 2007, proposing changes to the EC regulations and held public hearings on the NPRM on October 17-18, 2007.

Final rule

New section 11 CFR 114.15 provides a general exemption from the prohibition on corporate and labor organization funding of ECs unless the communication is susceptible of no reasonable interpretation other than as an appeal to vote for or against a clearly identified federal candidate. The new rules create an exemption that allows the use of corporate and labor organization funds to finance ECs, but does not exempt such communications from the overall EC definition or the EC reporting and disclaimer requirements. Accordingly, corporations and labor organizations that finance ECs are required to file EC disclosure reports once they spend more than $10,000 in a calendar year on such communications. 11 CFR 104.20. ECs must also carry a disclaimer notice. 11 CFR 110.11.

Safe harbor

The revised rules provide a safe harbor provision intended to give guidance regarding which ECs would qualify for the general exemption. Satisfying the safe harbor provision demonstrates that an EC is susceptible of a reasonable interpretation other than as an appeal to vote for or against a federal candidate, and thus is not the functional equivalent of express advocacy. If a communication satisfies the safe harbor provision, it may be paid for with corporate or labor organization funds. It is important to note, however, that this provision is merely a safe harbor, and an EC that does not qualify for the safe harbor still may come within the general exemption.

The safe harbor provision has three prongs. An EC qualifies for the safe harbor if it 1) does not mention "any election, candidacy, political party, opposing candidate, or voting by the general public"; 2) does not take a position on the candidate's character, qualifications or fitness for office; and 3) either focuses on a legislative, executive or judicial matter or issue, or proposes a commercial transaction. 11 CFR 114.15(b)(1)-(3).

The third prong of the final rule's safe harbor will be satisfied by certain lobbying communications or commercial advertisements. An EC meets this prong if it "focuses on a legislative, executive or judicial matter or issue" and either "urges a candidate to take a particular position or action with respect to the matter or issue" or "urges the public to adopt a particular position and to contact the candidate with respect to the matter or issue." 11 CFR 114.15(b)(3)(i)(A)-(B). Additionally, the last part of the safe harbor's third prong applies to an EC that proposes a commercial transaction such as the purchase of a book, video or other product or service, or such as attendance (for a fee) at a film exhibition or other event. 11 CFR 114.15(b)(3)(ii). This prong of the safe harbor can be satisfied regardless of whether the product or service is provided by a business owned or operated by, or employing, the candidate referred to in the EC. Both ECs advertising a federal candidate's appearance to promote a business or other commercial product or service, and ECs in which the federal candidate is referred to as the subject of a book, video or movie, will be eligible for the safe harbor.

Rules of interpretation

Corporations and labor organizations may still finance certain ECs that do not qualify for the safe harbor. If an EC does not qualify for the safe harbor, the Commission will consider two factors. The first is whether the communication includes any indicia of express advocacy, meaning that it mentions any election, candidacy, political party, opposing candidate or voting by the general public or takes a position on the candidate's character, qualifications or fitness for office. The second is whether the communication has content that would support a determination that it has an interpretation other than as an appeal to vote for or against a clearly identified federal candidate. A communication would meet this factor if it:

• Focused on a public policy issue and either urged a candidate to take a position on the issue or urged the public to contact the candidate about the issue;
• Proposed a commercial transaction, such as purchase of a book, video or other product or service, or such as attendance (for a fee) at a film exhibition or other event; or
• Included a call to action or other appeal that, interpreted in conjunction with the rest of the communication, urged an action other than voting for or against or contributing to a clearly identified federal candidate or political party. 11 CFR 114.15(c)(1)-(2).

The Commission will consider these two factors to determine whether, on balance, the communication has a reasonable interpretation other than as an appeal to vote for or against a federal candidate. If there is any doubt about whether the communication qualifies for the general exemption, the Commission will permit the communication. 11 CFR 114.15(c)(3).

Information permissibly considered

In making its determination the Commission will only consider the communication itself and basic background information necessary to put the communication into context. For example, the Commission may consider whether a named individual is a candidate and whether the communication describes a public policy issue. 11 CFR 114.15(d).

Examples. The Commission will provide a list of examples of permissible and impermissible communications on its website at www.fec.gov. 11 CFR 114.15(e).

Reporting requirements

The new final rule states that corporations and labor organizations that finance permissible ECs aggregating in excess of $10,000 in a calendar year must file reports with the Commission. The Act and current Commission regulations require any person that has made ECs aggregating in excess of $10,000 in a calendar year to file a disclosure statement. 2 U.S.C. §434(f)(1) and 11 CFR 104.20(b). Generally, these statements must disclose the identities of the persons making the EC, the cost of the EC, the clearly identified candidate appearing in the EC and the election in which he or she is a candidate and the disclosure date. 11 CFR 104.2(c)(1)-(6). Persons making ECs must also disclose the names and addresses of each person who donated an amount aggregating $1,000 or more during the period beginning on the first day of the preceding calendar year and ending on the disclosure date. 11 CFR 104.20(c)(8).

The Act and current Commission regulations permit persons making ECs to establish and maintain a segregated bank account for the purpose of funding ECs in order to limit the reporting of donors' identities to only the donors to that segregated account. 2 U.S.C. §434(f)(2) (E) and 11 CFR 104.20(c)(7). If a person does not create a segregated bank account and funds ECs from its general account, that person must disclose all donors of $1,000 or more to the entity during the current and preceding calendar years. 11 CFR 104.20(c)(8).

The Commission revised the EC reporting rules to require corporations and labor organizations making ECs under the new rule to disclose only the identities of those persons who made a donation aggregating $1,000 or more specifically for the purpose of furthering ECs made by that corporation or labor organization. 11 CFR 104.20(c)(9). All of the other reporting requirements that apply to persons making ECs also apply to corporations and labor organizations making ECs under the new regulations.

The Commission also revised the rules regarding segregated bank accounts. Individuals, unincorporated associations and qualified nonprofit corporations may continue to use a segregated bank account containing only funds from individuals to fund ECs that are outside the new exemption in 114.15. 11 CFR 104.20(c)(7)(i) and 114.14(d)(2)(ii). Any person, other than corporations and labor organizations, may also establish a segregated bank account containing donations from corporations or labor organizations to fund ECs and fall within the new exemption in 114.15. 11 CFR 104.20(c)(7)(ii) and 114.14(d)(2)(i). Corporations and labor organizations funding ECs under the new exemption are not permitted to use a segregated bank account, but are instead governed by the new reporting rules in 104.20(c)(9).

The full text of the Final Rule and Explanation and Justification is available in the Federal Register (72 FR 72899) and is also posted on the FEC web site at http://www.fec.gov/law/law_rulemakings.shtml#ec07.

1) In McConnell v. FEC, the Supreme Court held that BCRA's prohibition on corporate or labor organization funding of ECs was not facially overbroad. However, in FEC v. Wisconsin Right to Life I (WRTL I), the Court held that McConnell did not preclude further "as applied" challenges to the corporate and labor organization funding prohibitions.