Comments on FEC Notice 1997--20
Submitted by
James Madison Center for Free Speech
Prepared by
James Bopp, Jr.(1)
& Richard E. Coleson
January 20, 1998
_______________
The James Madison Center for Free Speech, Inc. submits these comments in response to FEC Notice 1997--20, inviting comments on proposed rules concerning the definition of "member" of a "membership association" at 11 CFR Parts 100 and 114.(2)
In the 1974 Federal Election Campaign Act, political action committees (PACs) were established as a campaign finance reform to allow persons of moderate means to participate more effectively in the political arena by pooling their resources to promote causes important to them. A membership corporation could create a PAC by establishing a separate segregated fund. The corporation then could communicate freely on political matters to its "members" and solicit contributions to the PAC from its "members."
The definition of "member" is very important because it can either expand or contract the support base of a PAC. The definition of "member" is an interplay of state nonprofit corporation law, federal legislation, court rulings, and FEC rules. The FEC has consistently promoted a very restrictive definition of "member" in order to limit the political activity of nonprofit membership corporations.
Now the FEC is proposing new rules to define who is a "member" for political communication and PAC solicitation purposes. As always, the FEC is promoting as narrow a view of who may be a "member" as possible, given existing statutory law and court decisions (much of which it seems to ignore). Under the FEC's proposed rules, membership corporations would have few members and, consequently, few resources.
I. Governing Statute
Under the Federal Election Campaign Act ("FECA"), corporations and labor unions may not make contributions or expenditures "in connection with any election."(3) Three types of organizations -- stock corporations, labor organizations, and membership organizations or nonstock corporations -- are provided with analogous exemptions from § 441b's restrictions.(4) They may establish a "separate segregated fund" for political expenditures and solicit certain designated individuals, including "members" (if applicable), for contributions to the fund.(5) Neither "member" nor "membership organization" is defined.
II. Regulation History
In 1976 regulations, the FEC defined "member" as:
all persons who are currently satisfying the requirements for membership in a membership organization, trade association, cooperative, or corporation without capital stock. . . . A person is not considered a member under this definition if the only requirement for membership is a contribution to a separate segregated fund.(6)
In subsequent Advisory opinions and court decisions, this definition was construed "to require some financial attachment or a certain level of organizational attachment."(7) Most importantly, in FEC v. National Right to Work Committee, the Supreme Court
observed that Congress meant members of "nonstock corporations" to be defined by analogy to stockholders or union members. It was in that context that the Court said "some relatively enduring and independently significant financial or organizational attachment is required." 549 U.S. at 204.(8)
In 1993 regulations, the FEC defined "membership association"(9) and "member" as follows:
(e)(1) Membership association means a membership organization, trade association, cooperative, corporation without capital stock, or a local, national, or international labor organization that
(i) Expressly provides for "members" in its articles and by-laws;
(ii) Expressly solicits members; and
(iii) Expressly acknowledges the acceptance of membership, such as by sending a membership card or inclusion on a membership newsletter list.
(2) Members means all persons who are currently satisfying the requirements for membership in a membership association, affirmatively accept the membership association's invitation to become a member, and either:
(i) Have some significant financial attachment to the membership association, such as a significant investment or ownership stake (but not merely the payment of dues);
(ii) Are required to pay on a regular basis a specific amount of dues that is predetermined by the association and are entitled to vote directly either for at least one member who has fully participatory and voting rights on the highest governing body of the membership association, or for those who select at least one member of those on the highest governing body of the membership association; or
(iii) Are entitled to vote directly for all of those on the highest governing body of the membership association. . . .(10)
III. Need for Rulemaking
In Chamber of Commerce, the United States Court of Appeals for the District of Columbia held that the FEC's membership regulations (1) had "serious constitutional problems," (2) were "inconsistent with the Supreme Court's reading of the statute in NRWC," and (3) were "arbitrary and capricious" in violation of the Administrative Procedure Act.(11)
In a "government . . . for the People," the People should not need to hire a lawyer to research judicial glosses on regulations to know what is permitted in the critical First-Amendment context of free speech and association in connection with elections. The regulations should plainly state what is permitted and should be kept as current as proper procedure permits. The executive director of a typical nonstock, membership organization should be able to take the FEC's current book of regulations, review it, and exercise her organization's full constitutional rights to free expression and association without a lawyer to tell her that it is okay to ignore certain regulations.
To facilitate this principle, and because the FEC had not yet revised its rules since the Chamber of Commerce decision on November 14, 1995, James Bopp, Jr. filed a Petition for Rulemaking on February 2, 1997. The FEC's proposed new rules governing who is a "member" are now ready for comment.
IV. Proposed New Rules
A. General Considerations
The FEC rules provide a "safe harbor," in which organizations may anchor, assured that their "members" fit the FEC's concept of membership. In the uncertain waters beyond the "safe harbor," the FEC offers its good offices to pilot adventurers through the shoals of FEC interpretation with advisory opinions.
Missing from the nautical motif is the polestar of the First Amendment, which requires that "Congress [and the FEC] shall make no law . . . abridging the freedom of speech . . . ."(12) Steering without reference to this heavenly beacon, the FEC is in danger of foundering once again.
Steering by the First Amendment would require the FEC first to acknowledge the primacy of free political expression and association in our Republic, as reaffirmed by the Supreme Court in numerous cases. Orienteering by that polestar would next require the FEC to burden such expression and association as little as possible and to justify any burden with a clear explication of the compelling interests requiring such burdens.
The FEC seems guided by a different star -- one that consistently leads it to seek to impose the maximum burden on free expression and association that it can read into court opinions. The courts have repeatedly marked the polestar for the FEC, but the FEC returns to its own star.
This pattern is clearly seen in the FEC's interpretation of FEC v. Massachusetts Citizens for Life(13) compared with its interpretation of FEC v. National Right to Work Committee.(14) In MCFL, the Supreme Court held that certain ideological, nonprofit corporations posed no threat to the political system from wealth amassed in the business marketplace, so that the ban on corporate expenditures for express advocacy could not apply to them. In the process, the Court listed three features which characterized MCFL. The FEC's immediate and sustained response was to argue that only organizations with precisely those three features were entitled to the MCFL exemption. The FEC insisted on a wooden application of the three characteristics of MCFL to all other claimants for the exemption, rather than applying underlying constitutional analysis. By contrast, the FEC seeks to ignore the Court's observation in NRWC that NRWC's organic documents created no "members" for the organization, rather than recognizing that fact as the key to the decision.(15) These seemingly inconsistent analyses are in fact consistent because both are oriented toward that star which leads to greater restriction on the People's freedom of political speech and association.
The FEC's analysis of NRWC dismisses the possibility that NRWC's lack of defined members in its organic documents could not be dispositive because
It was not until after the Court noted that the NRWC's asserted "members" had no governance rights or significant other attachments to the organization . . . that it reiterated an earlier statement that the "NRWC's own articles of incorporation and other publicly filed documents explicitly disclaimed the existence of members."(16)
This is curious use of the English language: only after . . . did the Court "reiterate." The effort is to make it seem that the Court only said something after it said other things. But the verb used to say the Court said it after means it was said before, and is now being repeated, something usually done for emphasis or as a way of wrapping up an analysis which began with the prior statement.
Ironically, the Supreme Court noted in NRWC that the FEC had argued to it that NRWC's statement in its articles of incorporation that it had no "members" was "dispositive."(17) That was the anchor point from which the Court could "reiterate." The Supreme Court returned to that theme when it held that it was "entirely permissible for the Commission in this case to look to NRWC's corporate charter under the under the laws of Virginia and the bylaws adopted in accordance with that charter."(18) Then the Supreme Court listed some other reasons why the "members" claimed by NRWC couldn't be members and returned again to that fact that the FEC had said was dispositive, namely, that NRWC said it had no members in its organic documents.(19) In fact, in light of the Court's clear reliance on the "dispositive" lack of defined "members" in NRWC's charter and bylaws, the Supreme Court's other comments might properly be styled "obiter dictum."(20)
The FEC is correct that NRWC said it was "permissible" for the FEC to look to state law to determine who is a member, but the Court also expressly assumed that "Congress intended at least some reference to" state nonprofit corporation law because there is no federal corporate law.(21) If the FEC is looking for a "safe harbor" in which to regulate, reliance on state law and the bylaws of the organization to determine who is a "member" would be both safe and affirming of First Amendment freedoms.
If a person qualifies as a member of his or her organization -- which means more than just contributing to a PAC -- that should be sufficient for FEC purposes. Especially if he or she qualifies as a member under the law of the jurisdiction in which the organization is incorporated. This means something legally significant under state law and has profound psychological significance for the person becoming a member.
Americans are joiners. Their associations are important to them. They define themselves by their associations. They identify themselves as a member of this or that organization. They make a distinction between just contributing to an organization and being a "member" of the organization. In other words, being a "member" according to the rules of that organization is in itself a "significant organizational attachment." They go to meetings, list the organizations they belong to on their resumes, and tell other people to which organizations they belong. In common parlance, one is "member" of an organization if one associates with it in a way that is meaningful to the participant and the organization, under the laws of their state. Being a member of a group, in and of itself, is a "significant organizational attachment" in compliance with NRWC. That should be sufficient for purposes of communication and solicitation concerning political matters.
Yet the FEC seems intent on restricting the freedom to communicate and the freedom to receive information between American joiners and the organizations they join. The FEC seems intent on restricting both the freedom of association between a joiner and the membership group and the freedom of association which allows a PAC to solicit the members of its connected organization to associate with the PAC. It is not the FEC's job to suppress the political workings of our Republic.
What is the great evil that the FEC seeks to eliminate by such repression? What is the danger to the Republic that would justify infringing First Amendment rights? That "evil" is that more people might participate in the political process. They will receive communications of information of interest to them about elections from a group, and they could voluntarily contribute to political activity. But what is evil about that? Those are precisely the purposes for which PACs were created, i.e., to get "the little guy" involved and allow him a bigger voice in politics. To allow "the little guy" to organize around issues dear to his heart and employ persons with the expertise and time he lacks to track how the politicians are dealing with his issues and keep them from shirking in their duty to keep their campaign promises.
One great conceptual flaw with the FEC approach, then, is the notion that state law is insufficient for establishing who is a "member." It should be sufficient. It is not "too loose." But if the FEC wishes to go a bit further, and yet comply with judicial decisions, it could also require that a person affirmatively indicate that he or she wishes to become a member. The FEC could also require that the person expressing a desire to be a member be issued a membership card or placed on a membership newsletter mailing list. These provide tangible evidence of the established relationship. Beyond these general, narrow boundaries lies constitutional conflict and an unjustified burden on the free expression and association rights guaranteed to the People by the First Amendment to the United States Constitution.
The FEC asserts that "[t]he effect of the proposed rules should be to expand the class of persons considered as 'members.'" This expansion, it must be supposed, is from the class permitted under the stricken 1993 FEC regulations. Certainly it is not an expansion of the class from the 1976 regulations, in which the FEC defined "member" as:
all persons who are currently satisfying the requirements for membership in a membership organization, trade association, cooperative, or corporation without capital stock. . . . A person is not considered a member under this definition if the only requirement for membership is a contribution to a separate segregated fund.(22)
Why was the 1976 definition inadequate? Why should the FEC want to restrict the free expression and association rights of the People by going beyond the 1976 definition? The FEC offers no explanation.
B. Overview & Preliminary Requirements
The FEC expresses its intent to keep the three preliminary requirements for an organization to have "members": (1) provision for "members" in organic documents; (2) express solicitation to membership; and (3) express acknowledgment of acceptance of membership.
In light of the above discussion, these requirements, in and of themselves, constitute the "relatively enduring and independently significant . . . organizational attachment" envisioned by the Court in NRWC. The possibilities mentioned by the Court that went beyond these basics were clearly illustrative, not prescriptive. There is no compelling interest for further burdening the freedom of expression and association of persons and organizations who have so identified themselves with each other.
C. Dues
Because the three preliminary requirements are sufficient to establish the "organizational attachment" envisioned by the Supreme Court, there should be no requirement that dues be paid in addition to these requirements to establish a "member." In fact, requiring persons to pay any sort of fee before they can exercise First Amendment rights is akin to Virginia's $1.50 annual poll tax, which the Supreme Court struck down because "wealth or fee paying has . . . no relation to voting qualifications; the right to vote is too precious, too fundamental to be so burdened or conditioned."(23) No rights are more fundamental than the rights to freedom of expression and association. If $1.50 was too heavy a condition for the right to vote, is too heavy a burden to require of a "member."
However, because solicitation and payment of dues is a common way of soliciting and accepting membership in an organization, the payment of dues should, in and of itself, be sufficient to establish a "member" provided for in organic documents. In light of the need to keep the burden on fundamental rights light (and the lack of constitutional warrant for doing otherwise), no set amount should be prescribed by the FEC. Rather, this should be viewed as an option for an organization (not government) to do what could be done for free (i.e., establish "membership" by offering and accepting it). Therefore, the organization should be able to set its own dues amount and membership term.
The notion that there should be looser regulation of who is a "member" for business corporations and tighter restrictions on who is a "member" of an ideological corporation is flatly wrong and ignores the underlying constitutional analysis. It inverts the teaching of MCFL, which said that MCFL-type organizations pose so little threat to the political system that the First Amendment mandates that they must even be exempted from the ban on corporate expenditures for express advocacy. The FEC seems to feel there is something inherently evil about people associating with an organization that has a political purpose. But in MCFL it was the opposite -- it was considered a good.
The idea that a $200 annual dues limit should be required because that is the level at which Congress requires reporting must meet the "so what?" response. There is no logical correlation between the two. One is a disclosure requirement; the other is a prohibition on the exercise of fundamental rights. And requiring individuals to pay $200 a year to exercise their rights to free expression and association is both elitist and an unconstitutional burden on fundamental rights. If $1.50 poll tax is an unconstitutional burden, how can anyone imagine that a $200 requirement will survive. And why would the FEC want to cut out the "little guy" who can't afford $200 membership fees. That elitist notion runs directly counter to the generally recognized societal goal of trying to get more people involved in the political process, not less. Finally, as noted above, being a member of an organization is in itself a "significant organizational attachment" without more. No fee level, especially a $200 one is needed or appropriate.
D. Organizational Attachments
The various relationships between members and membership organizations described are all organizational attachments, to be sure, but they are not the minimum organizational attachments. As described above, just identifying oneself as a member of an organization under its definition and offer of membership should be sufficient to be a "member."
One suggested factor regarding organizational attachment is "whether the member could be subject to disciplinary action." All members in all organizations are subject to disciplinary action because all may expel members. All organizations may do what is (for example) the American Medical Association's ultimate weapon against a member -- disassociate. Thus, this organizational attachment is always present in all membership relationships.
A recurring flaw in the proposed rules is the stated assumption that ideological membership corporations must be treated more harshly than business corporations because they pose a greater risk to the political system. As noted above, this flies in the face of Supreme Court precedent finding that ideological organizations pose less risk to the political system than business corporations and so must be afforded greater latitude.(24) The FEC's bias against nonprofit, ideological organizations is even evident in the language of the commentary. For example, the FEC says that "ideological, social welfare, or political organizations" pose "a far greater risk that 'dues' are nothing more than political support indistinguishable from such support from the general public."(25) Again, the FEC says:
At the same time [the new regulations] would screen out ideological/social welfare/political organizations that are not willing to provide for a dues requirement and minimal governance rights. These organizations must be held to a standard that clearly demonstrates that members have a "relatively enduring and independently significant financial or organizational attachment.(26)
Why? MCFL does not support the FEC's position. The FEC offers no justification for its animus. It simply orients to that other star -- not the polestar of the First Amendment.
V. Conclusion
The proposed organizational attachments for deciding who may be classed as a "member" would make many of the members of membership associations not "members" for FEC purposes. These rules would ignore the psychological attachments we Americans have to the organizations we join, wholly apart from how many members of the board of directors we get to vote for and whether we could give $200 or $3 this year. America is a nation of joiners, and we take seriously our associations. The FEC wants to restrict the benefits of joining others of our ideological persuasion unless we fit the FEC's strained notion of who should rightfully be a "member" of what organization. It should be sufficient if a person is a "member" of a nonprofit organization under a state's nonprofit corporation law, without the FEC trying to restrict the players in the political arena.
"Congress [and the FEC] shall make no law . . . abridging the freedom of speech . . . ." U.S. Const. amend. I. The First Amendment is not a loophole to be closed by FEC regulation. The FEC should promptly issue rules to define "member" which return to the 1976 regulations or require only those "preliminary requirements" found at § 100.8(b)(4)(iv)(A).
1. James Bopp, Jr. hereby makes his request to testify at a hearing on these rules.
2. 62 Fed. Reg. 66832 (Mon., Dec. 22, 1997).
3. 2 U.S.C. § 441b(a).
4. 2 U.S.C. § 441b(b).
5. 2 U.S.C. § 441b(b).
6. 11 CFR § 114.1(e) (1976-93).
7. Chamber of Commerce v. FEC, 69 F.3d 600, 602 (D.C. Cir. 1995), amended on denial of rehearing, 76 F.3d 1234 (D.C. Cir. 1996).
8. Chamber of Commerce, 69 F.3d at 605 (emphasis added).
9. This use of the term "association" is confusing and ought to be changed because in ordinary legal usage an association is an unincorporated entity, while much of the statute's application is to corporations. The underlying statute uses the term "membership organization," which is superior for the reason stated. Ordinary citizens with only a modicum of expertise in legal terminology ought to be able to read laws and understand them on their face. By using the term association, the regulations appear to reach farther than permitted.
10. 11 CFR § 114.1 (defined term italics in original, other emphasis added).
11. 76 F.3d 1235-36.
12. U.S. Const. amend. I.
13. 479 U.S. 238 (1986) ("MCFL").
14. 459 U.S. 197 (1982) ("NRWC").
15. Id. at 558-59.
16. 62 Fed. Reg. at 66833 (emphasis added).
17. 459 U.S. at 557.
18. Id. at 558.
19. Id.
20. It is noteworthy that the FEC attempted to treat the MCFL exception as dictum until required to do otherwise by court decisions. That, of course, would be consistent with the FEC's present position of not treating the NRWC surplusage as dictum, for both lead in the direction of expanding FEC control over the protected rights of the People.
21. 459 U.S. at 558.
22. 11 CFR § 114.1(e) (1976-93).
23. Harper v. Virginia Board of Elections, 383 U.S. 663 (1966).
24. MCFL, 479 U.S. 238.
25. 62 Fed. Reg. at 66835.
26. Id. (emphasis added).