Starting this July, Maryland’s “pay-to-play” law, which requires public contractors to file campaign contribution disclosure reports with the State Board of Elections, will require for the first time that local government contractors disclose their beneficial owners while streamlining such reporting for state contractors. The law hands authority to the state election board to impose penalties on contractors who fail to disclose their beneficial owners and will likely increase public scrutiny of ties between political contributions and the award of public contracts.

Under current law, all organizations that have a single contract with the state, county, or other political subdivision of the state with a total value of at least $200,000 must register with the State Board of Elections and, for as long as they hold government contracts, file semi-annual reports disclosing certain political contributions made by the contractor, its principals, and, if it has one, its affiliated political action committee. Separately, under Maryland procurement law, contractors with state agencies must file reports with the Secretary of State identifying each person who has “beneficial ownership” of the contracting entity, defined as:

Continue Reading Changes to Maryland Pay-to-Play Law Will Expand Reporting Obligations, Boost Public Scrutiny of State Public Contractors

As summer draws near, the tempo of the planning and fundraising for the DNC and RNC national party presidential nominating conventions is increasing. After the challenges and disruptions of the COVID-19 pandemic in 2020, both parties are eager for a return to robust in-person attendance. For corporations, trade associations, and other nonprofit organizations seeking to host events or to provide support for the conventions, understanding the legal guardrails is essential.

House and Senate Gift Rules Apply to the Conventions

There is no special gift rule exception for convention events. All events to which federal legislators and congressional staff are invited must comply with House and Senate gift rules. Convention event planners and sponsors should be particularly mindful of the following events and items that the gift rules expressly allow:

Continue Reading A Guide to Supporting the 2024 Presidential Nominating Conventions: From Hosting Events to Writing a Check

The Federal Election Commission has issued an advisory opinion making it much easier for federal candidates to offload their paid canvassing programs onto state PACs, nonprofits, and super PACs. While the campaign will need to pay for access to data collected, outside groups can now coordinate their canvassing activities—including the content of messages that expressly advocate for the election or defeat of federal candidates—with the candidates themselves.

In the request, a state political committee proposed hiring vendors to canvass potential voters before the election and distribute literature that would expressly advocate for the election or defeat of both state and federal candidates. The committee planned to “coordinate” its canvass by collaborating with federal candidates on aspects like strategy and messaging. Was this, requestors asked, an in-kind contribution to the federal candidates that a state committee like this one is prohibited from making? To this, the Commission answered no.

Continue Reading FEC Allows Nonfederal Committee to Coordinate Paid Canvassing Efforts with Federal Candidates

As campaigns explore new ways to harness artificial intelligence, regulators are rushing to keep pace ahead of the 2024 elections. The explosion in generative AI has put pressure on lawmakers and advertising platforms alike to stay ahead of deepfakes, voice clones, and other political advertising that may deceive voters or spread misinformation, all while balancing the promise of “friendly” applications that increase efficiency and affordability in campaign tools.

But regulating AI in political communications poses unique challenges. What qualifies as deceptive advertising? Can deceptive uses of AI be banned, given the First Amendment’s special protections for political expression? Who is regulating AI-generated political ads, and who is responsible for enforcing any controls? Do advertising platforms have a role in policing the content?

Venable’s Political Law Practice Group is monitoring ongoing efforts to regulate AI in political advertising at the federal, state, and industry levels. The following highlights some of these efforts and the emerging trends.

Continue Reading Synthetic Content, Real Regulations: Regulation of Artificial Intelligence in Political Advertising

Is a phone call that uses artificial intelligence to imitate a real person “an artificial or prerecorded voice,” subject to the restrictions of the Telephone Consumer Protection Act? The Federal Communications Commission unanimously answered yes in a recent declaratory ruling, foreclosing creative arguments that a “voice clone” is a live call and not an artificial voice subject to the nearly 35-year-old law. The decision, which comes just weeks after thousands of New Hampshire voters reportedly received robocalls impersonating President Biden’s voice urging them not to vote in the state’s primary, has important implications for use of the burgeoning technology in the 2024 elections.

As campaigns and their supporters experiment with new uses for AI technology, the FCC’s declaratory ruling immediately extends existing protections of the TCPA to AI-generated calls, such as those pretending to be a candidate, surrogate, or other voice trusted by the recipients. The ruling will immediately require callers that use AI technologies to simulate human voices to obtain the express consent or express written consent of recipients before calls are placed to residential or wireless numbers, unless an emergency purpose or TCPA exemption applies. AI-generated calls will also need to provide certain identifying information about the party responsible for placing the calls and offer certain opt-out rights.

Continue Reading Citing Upcoming Elections, FCC Extends TCPA to Cover AI-Generated Content

Eyeing the prospect of candidate “deepfakes” in the 2024 elections, the Federal Election Commission has joined the debate on artificial intelligence (AI), voting unanimously at its August 10 meeting to move forward with a rulemaking on deceptive campaign ads.

The rapid acceleration of generative AI has raised questions about how the technology could be deployed to mislead voters, for example, by creating video or audio of a candidate saying something damaging they never in fact uttered. With these questions in mind, the Commission voted to ask the public for comment on whether the agency should initiate a formal rulemaking to ban “deliberately deceptive Artificial Intelligence campaign ads,” often referred to as “deepfakes.”

Continue Reading Federal Election Commission Seeks Comments on AI in Campaign Ads

New Jersey has overhauled its pay-to-play and campaign finance laws, dramatically changing the rules for government contractors, nonprofits, and individual donors. The passage of the Elections Transparency Act has been accompanied by considerable controversy, including litigation and the resignation of all four members of the New Jersey Election Law Enforcement Commission (ELEC). In the meantime, some provisions have already taken effect. Others are slated to take effect after the June 2023 primary and apply to the 2023 general election and future elections.

Here are the most important things to know.

Pay-to-Play

Since 2006, New Jersey’s complex state pay-to-play law has barred contributions over $300 by companies and nonprofits bidding for, or under contract with, state agencies, including colleges and universities. The contribution ban applies not only to bidding and contracting entities, but also to their principal owners, officers and directors, and even their spouses.

Over the years, New Jersey’s pay-to-play law has ensnared dozens of government contractors, resulting in disqualified bids and voided contracts. Adding to the compliance burden, the prior state law permitted local governments to enact their own pay-to-play laws provided they were at least as stringent as the state law. Dozens of localities adopted such ordinances. This patchwork of pay-to-play laws has drawn criticism from government contractors as well as ELEC’s executive director who has called the state pay-to-play regime “convoluted and complicated,” and cited its “stunning inconsistency.”

Continue Reading New Jersey Overhauls Pay-to-Play and Other Campaign Finance Laws

The Federal Election Commission (FEC) has announced new contribution limits for the 2023-2024 election cycle. The FEC indexes certain contribution limits for inflation every two years. In recent cycles, limits have increased by $100 each cycle, but following high rates of inflation over the past two years, the FEC substantially increased several contribution limits this cycle.

Individuals may now give each federal candidate $3,300 per election, up from the previous limit of $2,900. The primary and general elections are considered separate elections, so an individual may now give a total of $6,600 per candidate, per cycle. Per-election limits are in effect for the two-year cycle beginning the day after the general election and ending the day of the next general election (November 9, 2022 to November 5, 2024).

Continue Reading Federal Election Commission Announces Significant Increases to Contribution Limits Adjusted for Inflation for 2023-2024 Cycle

The Federal Election Commission last week approved a final rule establishing requirements for sponsorship disclaimers on political ads. The Commission’s internet disclaimer rule has been unchanged since 2006, at times leaving advertisers and platforms for political ads uncertain about how the rule applies to evolving technologies. The FEC’s review is ongoing, and the public is invited to comment on whether additional rules are necessary to regulate social media influencers, boosted ads, and other forms of digital advertising.

What’s New?

Technological Modernization. The rule approved this week incorporates proposed changes we first wrote about in 2018. To start with, the new rule makes clear that the current disclaimer requirements for ads placed for a fee on websites also apply to paid advertising through other digital platforms, such as social media, mobile apps, and streaming sites. This modernizes the rule to accommodate emerging technologies and is consistent with what has become common practice on major social media platforms and online advertising networks.

Continue Reading FEC Adopts New Disclosure Rule for Digital Political Ads

California recently expanded its pay-to-play law to prohibit a company seeking a license, permit, or non-competitively bid contract, along with certain of the company’s affiliates, agents, and employees, from contributing more than $250 to a local elected official of the agency in question. This will include city councils and county boards of supervisors, and their committees. The new law extends the contribution ban from three to 12 months after a final award is made and requires broader disclosure from a company and its agents. The new law goes into effect January 1, 2023.

What is the current state of the law?

Under current law, a party or participant in an agency proceeding involving a license, permit, or non-competitively bid contract is prohibited from contributing more than $250 to an officer of that agency during the proceeding and for three months after a final decision is rendered. Additionally, an officer of that agency is prohibited from participating in a decision if he or she received a contribution exceeding $250 from a party or participant in the proceeding. However, because an “agency” is defined to exclude the legislature, state constitutional officers, city councils, and county boards of supervisors, the law has a narrow effect and tends to apply only when an elected official is appointed to serve on a local board or planning commission. The law also requires parties to disclose contributions made in the preceding 12 months to an officer of that agency.

How has the law changed?

There are three important changes.

First, the law repeals the exemption for local agencies whose members are directly elected by the voters. This change alone captures a broad swath of local proceedings before city councils and county boards, ranging from zoning variances and development permits to cable television franchises and professional license revocations.

Second, contributions will be prohibited for a longer period after a decision is rendered. Parties and participants to an agency proceeding will be prohibited from contributing more than $250 to an officer of that agency—and agency officers will be prohibited from accepting, soliciting, or directing such contributions—during the proceeding and for 12 months after a decision is rendered.

Third, the new law requires parties involved in a covered proceeding to disclose contributions of more than $250 made in the preceding 12 months in all federal, state, and local elections held in California —not just contributions made to agency officers.

Who does the law apply to?

Unchanged from existing law, the pay-to-play law applies to proceedings for a “license, permit, or other entitlement for use,” which means all business, professional trade, and land use licenses, permits, and other entitlements for use, including entitlements for land use, franchises, and certain contracts. Competitively bid, labor, and personal employment contracts are not covered.

A covered “party” includes the entity that files an application for, or is the subject of, a proceeding involving a license, permit, or non-competitively bid contract. A covered “participant” is a person who actively supports or opposes a particular decision in a proceeding and who has a financial interest in the decision. When a privately held corporation is a party or participant in a proceeding, the majority shareholder of the corporation is also subject to the above prohibition and disclosure requirements.

In addition, a party’s or principal’s contributions are aggregated with those made by their “agents,” meaning individuals or firms that represent a party or participant in a proceeding. If an individual agent is an employee or member of a law, architectural, engineering, or consulting firm, both the entity and the individual are considered agents.

What are the implications for a company’s compliance program?

Violators are subject to fines and reputational harm. Accordingly, companies that seek to do or currently do business in California should track contributions made by the company and those made by covered individuals. Compliance protocols should be modified to account for changes in the new law. Covered employees and agents should be informed of the potential implications of making a prohibited personal contribution.

In addition to this state law covering local elected officials, many California cities and counties have adopted their own pay-to-play laws that may impose additional contribution restrictions and disclosure requirements. For example, earlier this year Los Angeles moved to ban contributions by developers and property owners. Pay-to-play laws are often a trap for the unwary, with serious consequences ranging from fines to disqualified bids, voided contracts, and reputational damage.

If you need help in determining your obligations under pay-to-play laws or developing a compliance program, please contact Venable’s Political Law Practice.