Final rules on state, district and local party committee payment of certain salaries and wages

On December 1, 2005, the Commission voted to amend its rules to permit state, district and local party committees to pay as administrative expenses the salaries, wages and fringe benefits of employees who spend 25 percent or less of their compensated time in a month on federal election activity (FEA) or activity in connection with a federal election (“covered employees”). The previous regulation that allowed party committees to use nonfederal funds for salaries and wages for covered employees was struck down by the courts in Shays v. FEC.

Background

On July 15, 2005, the U.S. Court of Appeals for the DC Circuit upheld the appealed portion of the U.S. District Court for the District of Columbia’s September 18, 2004 decision. (See the September 2005 Record, page 1.) That decision invalidated several Commission regulations implementing provisions of the Bipartisan Campaign Reform Act of 2002 (BCRA), including the regulations addressing payment of salaries and wages of covered employees. BCRA does not address what type of funds state party committees may use for covered employees and the district court held that the Commission’s interpretation of the statute was not a permissible reading under step two of Chevron review.¹ The appeals court affirmed the district court’s decision, but held that the regulations addressing the salaries and wages of state party employees failed to provide sufficient explanation under the Administrative Procedure Act.²

Final rules

After considering public comments and testimony from a public hearing, the Commission issued final rules that:

• Require state party committees to either pay the salaries and wages of covered employees entirely from a federal account or allocate the salaries and wages between their federal and nonfederal accounts as administrative costs using the allocation ratios at 106.7(d)(2)(i) through (iv);
• Establish that salaries and wages paid to employees who spend none of their compensated time in a given month on FEA or activities in connection with a federal election may be paid entirely with nonfederal funds;
• Allow state party committees to use federal funds raised at a federal/nonfederal fundraiser to pay for FEA provided that the direct costs of the fundraiser are paid entirely with federal funds or are allocated according to the “funds received” method; and
• Make clear that a state party committee that raises only federal funds at a fundraising activity must pay the entire direct costs of the fundraising activity with federal funds.

The revised rules also supersede advisory opinion 2003-11 to the extent that it allowed party committees to pay fringe benefits using only nonfederal funds. The rules now require committees to pay fringe benefits as administrative expenses.

The final rule was published in the December 20, 2005, Federal Register (70 FR 75379) and is available on the FEC website and from the FEC faxline, 202/501-3413.

¹ In Chevron review, the court asks first whether Congress has spoken directly to the precise issue at hand. If so, then the agency’s interpretation of the statute must implement Congress’s unambiguous intent. If, however, Congress has not spoken explicitly to the question at hand, the court must consider whether the agency’s rules are based on a permissible reading of the statute.

² Under the Administrative Procedure Act, regulations that are promulgated without a reasoned analysis may be found “arbitrary and capricious” and may be set aside by a reviewing court. 5 USC §706(2)(A)