Wednesday, July 12, 2006

FEC Expands Regulation of Internet Campaign Activities

Thanks to Bill Hall of Warner Norcross & Judd LLP for this excellent bit of info:

FEC Expands Regulation of Internet Campaign Activities

In response to the successful court challenge in Shays v. FEC, the Federal Election Commission ("FEC") recently modified its regulations regarding Internet communications. These changes affect the political activities of national, state, district and local political party organizations, as well as candidate committees and individuals. They have increased the burden of regulation on some activities, while creating clear loopholes to engage in other activities.

To understand these recent changes in this very complex area of the law, you must first understand some of the terminology used in these regulations - the concepts of "Contribution," "Expenditure," "Federal Funds," "Federal Election Activity," "Federal-Related Activity," "Nonfederal Funds," and "Public Communication." I urge you to skip to the end of this bulletin and review the short definitions for these terms before you read the rest of this bulletin, if you are not already comfortable you understand these terms.

Paid Website Advertising Now Qualifies as a Public Communication

The Bipartisan Campaign Reform Act ("BCRA") defines certain communications as a Public Communication. A Public Communication that promotes, supports, attacks or opposes a federal candidate qualifies as Federal Election Activity, and must be paid for entirely with Federal Funds. Prior to the Shays decision, the FEC had interpreted BCRA to exclude all forms of Internet communication from the definition of a Public Communication. The FEC's recently amended regulations now classify all Internet communications placed for a fee on another person's website as a Public Communication. The FEC's decision to qualify certain paid Internet communications as a Public Communication is important to you because if a state or local party pays to produce a banner, pop-up ad or other advertisement that would qualify as Federal Election Activity and pays to post this on another person's website, then the costs of the production and publication must be paid for entirely with Federal Funds.

Unpaid Internet Communications Do Not Qualify as a Public Communication

In making its decision the FEC distinguished between paid and unpaid Internet communications. Unpaid communications include uncompensated blogs and emails, and messages posted on a person's or committee's own website. Unpaid Internet communications do not qualify as a Public Communication. This means that a political party organization can treat the cost of maintaining its own website and purchasing Internet emailing services as administrative expenses, and pay their costs from a mixture of Federal Funds and Nonfederal Funds, even though they may be used to support federal candidates.

Exceptions Created to the Definitions of "Contribution" and "Expenditure" for Internet Activities by Individuals

The FEC has created exceptions to the definitions of Contribution and Expenditure for Internet activities volunteered by individuals or groups of individuals. These exceptions apply to uncompensated Internet activities undertaken in coordination with a candidate or political committee, as well as independent activity. The exceptions apply to the following activities: sending or forwarding emails, providing hyperlinks, engaging in campaign-related blogging, creating and maintaining an election-related Web site, paying a nominal fee for use of a Web site or, any other form of communication over the Internet. These exceptions are important because they clarify that the work product of volunteers engaging in Internet activities does not contribute toward the FEC filing thresholds for a political party organization. In other words these volunteer, but valuable, activities will not be added to the Contributions and Expenditures a political organization receives, for purposes of calculating whether the organization must file with the FEC.

What This Means for You

What does this means for your political party organization's operations?

First, it means you must take care to fund more of your operations only with Federal Funds. Specifically, if you do any paid Internet advertising in connection with a federal election, you may have to pay all, instead of only part, of that cost with Federal Funds. Whether or not your political party organization has met the thresholds requiring it to file with and regularly report to the FEC as a political committee, you are legally required to ensure that it only uses Federal Funds to pay the costs of Federal-Related Activity required to be paid with Federal Funds. You are required to keep records demonstrating that you have complied with the requirements of federal campaign finance law in raising those funds. Theoretically, the FEC may ask to review your records and fine or imprison you if you have not complied with the law. Effectively, this means that you must upgrade the scope of your record-keeping, so you can demonstrate you used Federal Funds when required to do so.

Second, you must invest more time and energy raising Federal Funds, to meet your increased requirements for Federal Funds. Generally speaking, the contribution limits, reporting requirements (if your committee files reports with the FEC) and prohibitions against accepting certain contributions (e.g., corporate contributions) are much stricter for Federal Funds than for Levin Funds and/or Nonfederal Funds. Now, even more than in the past, you must wrestle with those requirements.

Third, the amended regulations give you the opportunity to expand your political organization's Federal-Related Activity over the Internet. You can host the web pages of your federal candidates on your website, and mass email your lists of contacts and supporters, without increasing the Federal Funds that must be devoted to your operations. You can provide the planning and content to mobilize volunteers to actively support Libertarian Party® federal candidates via their Internet activities. Those supporters who have websites can post ads, hyperlinks and content, so long as they are not paid to do so. Other supporters can mass email their contacts and blog in support of federal candidates. All of these activities are now clearly exempted from FEC regulation.

Some Important Definitions

• "Contributions" are monetary or in kind donations for the purpose of influencing any federal election for federal office.

• "Expenditures" are monetary or in kind purchases, payments, loans, deposits, contracts or gifts for the purpose of influencing any election for federal office.

• "Federal Election Activity" means certain activities, other than direct contributions to a candidate for federal office, in connection with a federal election or for the purpose of influencing any election for federal office. Federal Election Activity includes activities such as voter registration within 120 days prior to a federal election, and voter identification activity, generic (e.g., "Vote Libertarian") communications, and get-out-the-vote activity in connection with a federal election, the cost of which must be allocated between Federal Funds and Levin Funds. Federal Election Activity also includes activities such as Public Communications supporting or opposing federal candidates, and the services of committee employees spending more than 25% of their compensated time in connection with Federal-Related Activity, the cost of which must be paid entirely from Federal Funds.

• "Federal Funds," sometimes called "Hard Money," means funds raised and spent in accordance with the contribution limits and prohibitions and solicitation requirements of federal campaign finance laws.

• "Federal-Related Activity" includes both Federal Election Activity, and more traditional activities intended to influence a federal election, such as contributions to federal candidates or expenditures supporting or opposing federal candidates.

• "Nonfederal Funds" means funds raised and spent in accordance with the contribution limits and prohibitions and solicitation requirements of state, and not federal, campaign finance laws. For example, this would include funds raised, spent and reported under state campaign finance laws for the purpose of influencing any election for state office or a state ballot initiative. It would also include funds raised and spent for indirect political purposes that are not required to be reported under state campaign finance laws. The hallmark of Nonfederal Funds is that they are not raised and spent for the purpose of influencing any election for federal office.

• "Public Communication" means a communication by means of any broadcast, cable or satellite communication, newspaper, magazine or outdoor advertising facility, mass mailing or telephone bank to the general public, or any other form of general public political advertising. It includes a banner, pop-up or other advertisement placed for a fee on another person's website.


In a followup email, Bill also noted, "It's a little more complicated than summarized in my bulletin. For example, I never discussed disclaimers. If a private e-mail engages in direct advocacy (e.g., "Vote for Michael Badnarik") to more than 500 recipients, then it must contain a disclaimer as to who sent it, their website or address, and whether or not it was authorized by the candidate. At the same time, it is not a 'contribution' or 'expenditure' that might give rise to an FEC filing responsibility."


Bill Hall is a partner with Warner Norcross & Judd LLP specializing in Federal Election Commission, ballot access and campaign finance law matters. He has served as General Counsel to the Libertarian National Committee for more than 15 years, and has represented many state and local political party, candidate and political action committees. Bill has consulted on numerous briefs in support of ballot access and campaign finance litigation before many state and federal courts and the United States Supreme Court, and represented clients in seeking advisory opinions and commenting on proposed rulemakings before the Federal Election Commission. Bill is listed in Who's Who in American Politics and Who's Who in American Law. Bill may be reached at 616.752.2143.

This message is provided to advise you of recent federal campaign finance law developments. Because each situation is different, this information is intended for general information purposes only and is not intended to provide legal advice on any specific facts and circumstances.

Warner Norcross & Judd LLP is a full service law firm with four offices in Michigan. Our attorneys are experienced in every aspect of election law. They handle all types of election issues, including federal and state campaign finance compliance and regulatory counseling, ballot access litigation support, proceedings before the Federal Election Commission, criminal proceedings for campaign finance law violations, and the formation and organization of political committees. Our attorneys are routinely involved in the incorporation of political committees, counseling them on campaign finance and federal tax compliance issues, and supporting them in the "business" of politics, with timely advice on employment, insurance, technology, trademark, leasing and contract issues.


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