At Thursday’s open meeting, the FEC approved two Audit Division recommendations that had been held over from the previous meeting. The Audit Division found that both the Dallas County Republican Party and the Republican Party of Iowa misstated their financial activity and failed to keep monthly payroll logs for their employees. But the Commission adopted the auditors’ recommendation only after scrutinizing and debating the scope of the party recordkeeping rules. The Commission’s debate shows how, in a world of super PACs and widespread corporate and union spending, the requirements of McCain-Feingold continue to have “teeth” for state and local political parties.

The Commission held over consideration of the audits over the scope of a rule designed to ensure that state and local parties do not spend nonfederal funds in connection with federal elections. A provision of McCain-Feingold requires state parties to pay employees entirely with federal funds, if more than 25 percent of their compensated time during a calendar month is spent on activities in connection with a federal election. A Commission rule, 11 C.F.R. 106.7(d)(1), requires state and local parties to keep a monthly log of the percentage of time each employee spends in connection with a federal election.

Commission Chair Goodman questioned whether the log requirement should be applied when the party employees were paid only with nonfederal funds and worked only on nonfederal campaigns. He argued that these employees should not be subject to the payroll log requirement because the Commission has no jurisdiction over purely state-level activity, and because the requirement placed an unnecessary burden on the committees. Commissioner Weintraub disagreed, and said that the Commission was bound to enforce the legal requirements set forth by Congress and the Commission’s regulations. Commissioner Weintraub argued that the logs are necessary to ensure that all committees adhere to this requirement.

The Commission earlier had considered whether parties were required to keep the logs when the employees were paid entirely with federal funds.  It found that the logs were required, but declined to pursue recordkeeping violations against committees that failed to keep them in this particular circumstance. By a vote of 5 to 1 (Commissioner Walther dissenting) the Commissioners agreed that although “the literal language of the regulation” applies the recordkeeping requirement to employees paid with 100% federal funds, the “soft money concerns underlying the regulations” are absent in that circumstance. But the Commission had made no previous allowance when party workers are paid exclusively with nonfederal funds, as was the case in the Dallas County and Iowa Republican audits.

In the end, the Commission acceded to the auditors’ recommendations. But Commissioner Goodman called on the two major national party committees to inform state and local parties of the recordkeeping requirement. Commission rules do not say exactly how employee time logs must be kept. But the Commission has indicated that the requirement can be met by a properly detailed Excel spreadsheet or by compliance software provided by a payroll vendor.

The time logs are only one example of how McCain-Feingold continues significantly to impact state and local party committees, even while other provisions of the law have been struck down or curbed in their application. State and local parties face especially complex allocation, while the allocation rules that apply to other types of committees have been struck down. State and local parties also face strict limits on using nonfederal funds for certain types of activities affecting federal elections, even when they do not involve federal candidates, while Speech Now v. FEC and related cases allow other types of committees to finance these activities on an almost wholly unrestricted basis when done independently.

Two advisory opinion requests are pending at this time. No FEC rulemakings are currently open for comment. The next open meeting of the FEC is scheduled for February 6th.