The Senate today confirmed James E. “Trey” Trainor III as a member of the Federal Election Commission, reestablishing a quorum just months ahead of the 2020 general election. Since August 2019, when one of the commissioners resigned, the Commission has lacked a quorum, and as a result has been unable to investigate complaints, collect fines, issue advisory opinions, or promulgate new rules.

With Trainor’s appointment, the FEC will have four commissioners—the minimum number required to take official action. This means that any vote must be unanimous, which history suggests may be hard to come by, particularly on major issues. Even when there might be broad agreement, if one Commissioner is recused from a matter due to an actual conflict or the appearance of one, the Commission would be prevented from acting on that matter.

At full strength, the Commission is a six-member body, where no more than three can be from the same political party. This structure ensures there is bipartisan support for every official action. The current Commission consists of two Republicans, one Democrat, and an independent who generally sides with the Democrats. Despite calls to fill the remaining vacancies, no further appointments appear to be imminent.

Commissioner Trainor will be greeted with a full plate. The backlog on the Commission’s enforcement docket has grown to an estimated 300 matters, some of which will need prompt action to avoid an expiring statute of limitations. Several advisory opinion requests have been pending since last summer, including questions about an online fundraising platform and the use of campaign funds to pay a candidate’s health insurance premiums. The FEC also will have to reengage in pending litigation, including one case where a default judgment was entered against the agency due to its inability to defend itself.

Venable’s Political Law group represents clients before the Federal Election Commission and helps clients comply with FEC rules and regulations.

As federal and state governments grapple with the health and economic implications of the coronavirus pandemic, business leaders are at the center of the discussion. The White House holds frequent roundtables with CEOs and business owners. State governors have formed task forces comprised of business leaders to advise on strategies for reopening businesses in their states. Public-private sector partnerships have been formed to expand coronavirus testing and conduct contact tracing. Daily phone calls occur between business leaders and government officials.

Given the stakes and pace of government action, it can be easy to overlook that these activities can trigger registration and reporting obligations under applicable lobbying laws. While lobbying laws vary considerably, many are quite broad and often cover efforts to influence legislation, executive action, public policy, and even grants and contracts. Failing to comply with lobbying laws can expose a company to civil and criminal penalties. In addition, if lobbying activities are not carefully and accurately described, lobbying reports can result in damaged relationships with shareholders and customers, and harm a company’s brand.

How do you discuss lobbying laws with company executives?

Here are some questions and answers:

1. Do I have to register as a lobbyist?

No senior executive relishes the idea of registering as a lobbyist. Fortunately, in many jurisdictions, there are thresholds for registering that executives will not meet. For instance, under the federal Lobbying Disclosure Act, a corporate executive who spends less than 20 percent of his or her total work hours over three months on “lobbying activities” (i.e., direct communications with covered legislative or executive branch officials plus supporting research, preparation, and planning) is not considered a “lobbyist.”

On the other hand, in some states and municipalities, one email or call can trigger registration, and registration may have to occur before any communications aimed at influencing a public official. As we discussed on our blog, former Obama Administration official, David Plouffe, learned this lesson the hard way when he sent a single email to the Mayor of Chicago requesting help with regulatory issues for his then-employer. The email, which was sent to the mayor’s personal email account, was revealed by an open records lawsuit. The Chicago Board of Ethics fined Plouffe $90,000 for failing to register as a lobbyist.

2. Will information be disclosed about my meetings and compensation?

Even if a senior executive does not qualify as a lobbyist, lobbying reports filed by a company or its registered lobbyists will likely have to disclose information about meetings the executive has with government officials. Under the federal lobbying law, a corporation employing one or more lobbyists must file quarterly reports disclosing the government agencies they have lobbied, as well as whether they lobbied the U.S. House or Senate, but filers do not have to include specific meeting dates or the names of the officials being lobbied. The reports must, however, include the amount spent on lobbying in the calendar quarter, including the amount of compensation correlating to the time spent by non-lobbyist employees on lobbying activities. This amount may be derived by using any good-faith method, such as applying an hourly rate of pay to the approximate number of hours the executive engaged in lobbying activity. The reported expenses must also include payments for hotels, meals, and airfare relating to the lobbying activity. Note that some cities and states require salaries and other expenses to be itemized.

3. Who gets to look at lobbying reports?

The focus of lobbying laws is on making the process of government decision-making more transparent. Lobbying reports are publicly available online and can be read by the press, watchdog groups, competitors, and shareholders. As such, lobbying reports not only fulfill legal obligations but also serve an important public relations function. They should be treated as part of a consistent narrative about the company’s priorities and objectives. In addition, many jurisdictions post information about fines and other sanctions for violating lobbying laws.

4. What about grants and contracts?

Lobbying laws typically do not cover communications made in the context of a formal bidding process. Many states, however, have “procurement lobbying” laws that require registration and reporting for communications outside of the formal bidding process, such as efforts to “talk up” a product or service, open doors for line salespeople, or encourage a state official to issue a request for bids. Violations can result in fines and even disqualification from the procurement at issue, as well as future procurements. The federal lobbying law also applies to efforts outside of formal processes to influence the award of a contract, grant, or loan.

5. Does lobbying registration affect gift rules or political contributions?

Yes, in many jurisdictions it will. For instance, political appointees of the Trump Administration are prohibited from accepting any “gift,” with limited exceptions, from individual lobbyists and the organizations that employ them. In California, lobbyists are prohibited from giving gifts valued at more than $10 a month to government officials. The gift limit on Virginia lobbyists is $100 annually, which applies to companies that have or are seeking contracts with state and local agencies, along with their officers, directors, and owners. In Maryland, lobbyist-employers must file periodic reports disclosing corporate political contributions as well as personal political contributions by officers, directors, and others. An increasing number of states also bar lobbyists and their employers from making or soliciting political contributions during legislative sessions.

6. What if I am only responding to a request for information?

Not every communication with government officials constitutes lobbying. For example, there are 19 types of communications that are not considered “lobbying contacts” under the federal Lobbying Disclosure Act. These include testimony before a committee or subcommittee of Congress, administrative requests, such as a request for a meeting or the status of a matter (so long as the request does not include an attempt to influence a covered official), and communications made to an agency official regarding a civil, criminal, or administrative proceeding. There is also an exception for information provided in response to a request by a covered executive or legislative branch official, but this exception applies only when the response is communicated in writing. This nuance illustrates how these exceptions can be quite specific and are not always intuitive. State and local lobbying laws also contain exceptions, but these vary widely and should be carefully reviewed.

7. Can’t we leave compliance to our registered lobbyists?

What lobbyists do best is lobby. While some individual lobbyists prepare and file their own lobbying reports, reports filed on behalf of a company, particularly reports disclosing activities by business owners and executives, should be handled like any other compliance function. The determination as to whether a company official is a “lobbyist” under applicable law can involve subtle interpretations, both factual and legal. In addition, most reporting regimes require tracking of time and expenses by non-lobbyist employees who work behind-the-scenes to support the registered lobbyists or speak directly with government officials. Finally, lobbying reports are subject to random audits in many jurisdictions and expose the company to fines and reputational risks. When the stakes for companies are high, as they are with the response to the COVID-19 crisis, it is important that they are complete and accurate, and describe activities in a careful manner.

Venable advises companies, trade associations, and other organizations on lobbying law compliance. If you need assistance in complying with these laws, please reach out to Venable’s Political Law Practice.

Federal and state regulators continue to modify their lobbying and campaign finance reporting and enforcement practices and requirements in response to the ongoing upheaval caused by the COVID-19 pandemic.

As states postpone primaries to prevent the spread of coronavirus, agencies have revised reporting deadlines for election-sensitive campaign finance reports. The Federal Election Commission (FEC) announced revised reporting deadlines for reports relating to certain federal primary elections, and states like Ohio, New York, Pennsylvania, and Maryland have done the same for state elections.

The pandemic may also impact enforcement actions. New York announced the suspension of its lobbying audit program, indicating that no new audits will be initiated and complying with ongoing audits is voluntary until the audit program resumes.

Finally, as more states implement stay-at-home orders, regulatory agencies have begun to relax notarization and paper submission requirements. New Jersey has established a special temporary system for uploading or faxing paper campaign finance reports, and the FEC is now accepting electronically filed complaints for the first time. North Carolina has not eliminated its notarization requirement for lobbying filings, but the state has indicated that late penalties will not be levied if the filer certifies that their late submission was due to being unable to obtain a notary because of the coronavirus.

We continue to monitor these fast-moving changes. If you need assistance in determining your reporting obligations as regulators continue to adjust their reporting requirements, please reach out to Venable’s Political Law Practice.

As the impact of the coronavirus (COVID-19) is felt around the country, states and cities are welcoming help from the private sector, including donations of medical supplies and equipment, professional services, and the use of real property. To facilitate this support, some jurisdictions have loosened or clarified their ethics laws to facilitate these “gifts” to government agencies.

In New York, for example, Governor Andrew Cuomo signed an executive order lifting the state’s gift ban for contributions and donations that assist the state in its emergency response effort. The state’s anti-bribery statute will not be applied to executive officials who seek such donations.

Anticipating a need for additional facilities, Connecticut Governor Ned Lamont issued an executive order empowering agencies to expedite real property transactions to address the emergency, including by modifying certain rules governing the disclosure of gifts and campaign contributions by state contractors and prospective contractors, competitive bids, and confidentiality requirements.

Other jurisdictions have reminded potential donors of applicable gift rules. The City of Chicago recently issued an advisory opinion directed to medical supply and pharmaceutical companies concerning requirements that agencies promptly disclose gifts to the city, along with the value and source.

As businesses and other organizations heed the call for help, it is important to remember that even under the current circumstances, gifts to government agencies must be handled in a manner that complies with applicable gift rules, anti-bribery laws, and disclosure requirements.

Venable continues to monitor these developments in real time. Please reach out to Venable’s Political Law Practice for assistance with any compliance challenges your business or organization is facing.

In response to the coronavirus pandemic, some state agencies are pushing back filing deadlines for lobbying and pay-to-play reports, while others are suspending their legislative sessions, which has the effect of extending in-session reporting requirements and contribution bans.

New Jersey has announced a grace period for government contractors to file annual reports (Form BE) disclosing reportable political contributions made by covered donors in 2019. This grace period is available only upon request and is intended to be for the benefit of businesses whose functions have been hampered by mandated closures. Similarly, Illinois’ secretary of state has closed its public-facing operations through April 7 and automatically extended filing deadlines for 30 days after the governor declares that the statewide disaster has ended. New York’s Joint Commission on Public Ethics has extended its January-February bi-monthly reporting deadline until March 31 and requested that filers suspend hand delivery of paper filings until that date. Several other states, including California, Connecticut, and Hawaii, have either amended their deadlines or announced modifications of their filing practices.

Some state legislatures have temporarily shuttered, modifying restrictions and deadlines that are tied to the legislative session. Georgia has suspended its legislative session without adjourning, meaning that the heightened in-session reporting requirements and contribution restrictions will be in effect for longer than they normally would be. Mississippi has temporarily adjourned its legislative session, pushing back its end-of-session reporting deadline, which is tied to the legislature’s final adjournment date.

Though the list of accommodations is growing, most states have not postponed filing deadlines or instituted grace periods. In those states and others, it is important that filers exercise care in describing lobbying activities relating to COVID-19, and avoid unnecessarily creating public relations or shareholder concerns.

Venable’s Political Law team will continue to monitor these developments.

The coronavirus (COVID-19) presents many new challenges for political campaigns, committees, and related actors. These challenges include the possibility that treasurers and staff will be unavailable to timely prepare and submit campaign finance reports. Today, the Federal Election Commission (FEC) provided an update on Commission operations, including on the upcoming deadlines for filing campaign finance reports.

The FEC has confirmed that filers should continue to file their reports on time because the Commission does not believe it has the statutory authority to extend these filing deadlines. The Commission has, however, advised that it may exercise its discretion “not to pursue administrative fines against filers prevented from filing by reasonably unforeseen circumstances beyond their control.”

Continue Reading FEC Unable to Extend Filing Deadlines During Coronavirus Pandemic

We may still be a year out from the next general election, but until the polls close on Tuesday, November 3, 2020, politics will be inescapably in the air—and in the workplace. Employees will be talking, sometimes arguing, and sometimes participating in one campaign or another. Prudent nonprofits should take note of what they may be required to do or are prohibited from doing about their employees’ desire to participate in the electoral process.

The Workplace Is Not a “Free Country.” Let’s start with the basics: the First Amendment does not apply to the private workplace. The Constitution does not prevent private employers from restricting their employees’ political speech. Nonprofits generally can restrict employees’ speech during work time and on work equipment, especially if the organization has a legitimate, business-related reason to do so.

Your Tax-Exempt Status. Nonprofits that are tax-exempt under Section 501(c)(3) may not themselves engage in any political campaign activity (i.e., activity to support or oppose candidates for elective office). The IRS has said that individuals who work for 501(c)(3)s generally maintain their right to engage in political campaign activity, but they have to do so in a way that does not implicate their employer. For example, employees—particularly senior employees—must be careful when endorsing candidates or making other political statements so that it does not appear the organization is endorsing the candidate. The IRS has said that communications should include a clear disclaimer that “titles and affiliations of each individual are provided for identification purposes only” when a nonprofit leader’s name and position are included. Employees also should not make endorsements during nonprofit meetings and events.

For 501(c)(4), (5), and (6) organizations, which are allowed to engage in some political campaign activity, what an employee does or says on his or her own time is not likely to threaten your tax-exempt status.

Continue Reading Election-Year Tips for Nonprofits: Employee Participation in the Political Process

On October 2, 2019, a federal judge blocked the State of New Jersey from implementing and enforcing new campaign finance reporting and donor disclosure rules for 501(c)(4) and 527 organizations, which were enacted earlier this year as part of a sweeping and controversial campaign finance bill, S. 150. In its ruling, the Court found that the plaintiffs likely would succeed on their claim that these provisions of S. 150 violate the First Amendment. The case will now proceed to trial for a final decision. The decision follows that of another federal judge who earlier this week struck down on First Amendment grounds two provisions of New York’s lobbying law that would have required nonprofits to disclose their donors.

The controversial legislation expanded New Jersey’s campaign finance law to require 501(c)(4) and 527 organizations that engage in issue advocacy to register and report as “independent expenditure committees.” The law would have required groups that raise or spend $3,000 or more either (1) to “influence or attempt to influence” any New Jersey election, public question, legislation, or regulation, or (2) that provide “political information” on any New Jersey candidate, public question, legislation, or regulation to publicly disclose on campaign finance reports all expenditures of more than $3,000 for such purposes. It would also require such groups to disclose all donors who contribute more than $10,000 for any purpose. The new law was set to go in effect on October 15, 2019.

Several groups directly affected by the new law have challenged its constitutionality in federal court. In this case, the Court agreed that the plain language of the statute would likely not pass constitutional muster, emphasizing that the provisions would improperly subject organizations engaged in issue advocacy to the same disclosure obligations for organizations attempting to influence an election. A separate, simultaneous challenge to the definition of “independent expenditure committee” is still pending before the Court.

The case will now continue to trial. Although the implementation of the donor disclosure and other reporting provisions are currently on hold pending trial, the Court noted that the New Jersey Legislature and the Election Law Enforcement Commission may take legislative action in the meantime to amend or clarify the law’s constitutional deficiencies.

The opinion and order were issued in Americans for Prosperity v. Grewal, No. 3:19-cv-14228-BRM-LHG (D.N.J. Oct. 2, 2019).

A federal judge this week struck down on First Amendment grounds two provisions of New York’s lobbying law that would have required nonprofits to disclose their donors.

In 2016, New York state legislators passed legislation changing the state’s lobbying and campaign finance laws. Two important provisions dramatically expanded donor disclosure requirements for 501(c)(3) and 501(c)(4) organizations engaged in issue advocacy and lobbying in New York:

501(c)(4) Rules: The law required 501(c)(4) organizations to disclose all of their donors in public filings with the state when they spend over $10,000 in a calendar year on communications to at least 500 members of the public concerning the position of any elected official on potential or pending legislation.

501(c)(3) Rules: The law also required 501(c)(3) charitable organizations to disclose donors of $2,500 or more if the charitable organization made an in-kind donation of more than $2,500 to a Section 501(c)(4) organization engaged in lobbying in New York.

Continue Reading New York Nonprofit Donor Disclosure Rules Struck Down

Companies that do business with state and local governments are subject to a wide array of laws restricting their political contributions, as well as the personal political contributions of their owners, officers, and some employees. These laws are known as pay-to-play laws because they are aimed at severing the relationship — or the appearance of a relationship — between a contribution (the “pay”) and the award of a government contract (the “play”).

Violations of pay-to-play laws — even a single, inadvertent political contribution — can result in costly bid disqualifications, voided contracts, and damaging publicity.

In approaching compliance, government contractors should do a risk assessment that takes into account where the company does business with government agencies, whether its contracts are covered by relevant laws, and where its employees live. For many companies, pre-clearing contributions and political fundraising (which some laws also cover) and training affected personnel are essential elements of an effective compliance plan. Also, companies should adopt protocols for registration and reporting to state election boards, as there are some pay-to-play laws that impose such requirements instead of, or on top of, contribution restrictions.

Pay-to-play laws vary across jurisdictions; we have outlined the broad requirements and highlighted certain relevant updates but encourage consultation with our political law attorneys to customize a compliance plan for your particular needs.

Continue Reading Pay-to-Play Laws Remain in the Spotlight: Government Contract Eligibility Hinges on Awareness and Compliance