Supplemental E&J on political committee status
In response to the district court decision in Shays v. FEC (Shays II),(1) the Commission has published a Supplemental Explanation and Justification (E&J) for its resolution of the 2004 political committee status rulemaking. The E&J provides a more detailed rationale for the agency's decision not to amend the regulatory definition of "political committee," while it revised the definition of "contribution" and adjusted certain federal/nonfederal allocation ratios to capture additional political activity.
Background
During its 2004 political committee status rulemaking, the Commission held two days of public hearings and considered roughly 100,000 written comments, before voting to:
- Revise the definition of "contribution" at 11 CFR 100.57 to clarify that funds resulting from a solicitation that indicates that any portion of the funds received will be used to support or oppose the election of a federal candidate are considered "contributions" and, consequently, may require an organization to register as a political committee; and
- Revise its allocation regulations at 11 CFR 106.6 to require that voter drives and campaign ads that refer to federal candidates be paid for entirely with federal funds, and that a committee's administrative costs be paid for with at least 50% federal funds.
(For more information on the final rules, see the December 2004 Record).
Representative Christopher Shays and others immediately filed suit in the U.S. District Court for the District of Columbia to challenge the Commission's decision not to revise the regulatory definition of "political committee." In its decision in the case (Shays II), the district court found that the Commission "failed to present a reasoned explanation of its decision" not to regulate so-called 527 organizations as "political committees" specifically by virtue of their status under the Internal Revenue Code and remanded the case to the Commission to explain its decision or institute a new rulemaking. (For more information on the district court decision, see the June 2006 Record). The Commission declined to appeal the district court's ruling and instead has issued this Supplemental E&J.
Major purpose and political committee status
The Federal Election Campaign Act (the Act) defines political committee as "any committee, club, association, or other group of persons which receives contributions aggregating in excess of $1,000 during a calendar year or makes expenditures aggregating in excess of $1,000 during a calendar year." 2 U.S.C. 431(4)(A). Supreme Court decisions have effectively added two more requirements for political committee status:
- When applied to communications made independently of a candidate or candidate's committee, the term expenditure includes payments for communications that expressly advocate the election or defeat of a clearly identified federal candidate; and
- Only organizations whose "major purpose" is the nomination or election of a federal candidate can be considered "political committees."
Therefore, determining political committee status under the Act, as interpreted by the Supreme Court, requires an analysis of both an organization's specific conduct (whether it received $1,000 in contribution or made $1,000 in expenditures) as well as overall conduct (whether its major purpose is federal campaign activity).
While the courts have clarified that an organization can satisfy the major purpose doctrine through sufficiently extensive spending on federal campaign activity(2) and through certain public statements,(3) determining an organization's major purpose requires a fact-intensive comparison of its campaign and non-campaign activities. As explained in the Supplemental E&J, the Commission determined that this need for a case-by-case analysis was incompatible with the proposed rules amending the regulatory definition of "political committee" at 11 CFR 100.5.
527 status insufficient evidence
The E&J also explains the Commission's decision not to adopt a rule singling out 527 organizations based on tax status. The Internal Revenue Service (IRS) requirements for an organization to be entitled to the tax exemption as a political organization under 26 U.S.C. 527 are based on a different and broader set of criteria than the Commission's determination of political committee status. In light of that fact, an organization's 527 tax status is not sufficient evidence, in itself, that the organization satisfies the major purpose requirement for political committee status.
The Commission also notes that Congress has not materially amended the definition of "political committee" since 1971, and has specifically rejected every effort to classify organizations as political committees based on section 527 status. Congress also twice amended the Internal Revenue Code to require 527 organizations that are not political committees registered with the Commission to file disclosure reports to the IRS.
Effective enforcement
Finally, the Supplement highlights recent enforcement matters that demonstrate the sufficiency of Commission regulations in determining political committee status for 527 (and 501(c)) organizations. See MURs 5511 and 5525 (Swiftboat Vets); 5753 (League of Conservation Voters); 5754 (MoveOn.org Voter Fund); 5751 (The Leadership Forum); 5492 (Freedom, Inc.). In each of these matters, the Commission conducted a thorough investigation of all aspects of the organization's statements and activities to determine if the organization exceeded the $1,000 threshold for contributions or expenditures and whether the organization's major purpose was federal campaign activity. These matters are significant because they demonstrate that an organization may satisfy the political committee status threshold based on how the organization raises funds. They are also significant because they are the first major cases to consider the reach of the definition of "express advocacy" when evaluating an organization's disbursements for communications made independently of a candidate to determine if the expenditure threshold has been met. Finally, these matters also illustrate well the Commission's application of the major purpose doctrine to the conduct of particular organizations, regardless of tax status.
The Supplemental E&J was published in the Federal Register on February 7, 2007, (72 FR 5595) and is available on the FEC's website at http://www.fec.gov/law/law_rulemakings.shtml.
1) 424 F. Supp. 2d 100 (D.D.C. 2006).
2) See FEC v. Massachusetts Citizens for Life, Inc., 479 U.S. 238, at 262 (1986).
3) See, e.g., FEC v. Malenick, 310 F. Supp. 2d 230, 234-36 (D.D.C. 2004); FEC v. GOPAC, Inc., 917 F. Supp. 851, 859 (D.D.C. 1996).