As we have discussed, Maryland amended its pay-to-play rules to impose new reporting requirements on entities that do business with state or local governments. The first report under the new system is due on February 5, and if the roundtable hosted yesterday by the State Board of Elections is any indication, confusion abounds regarding the law’s core requirements.
This post highlights a few of the issues discussed at that roundtable.
The new law states that contracts held by subsidiaries are attributed to the parent if the parent owns more than a 30 percent equity interest in the subsidiary. At the roundtable, staff explained that filing is done at the parent level. Thus, the parent must register and file reports even if the parent itself does not hold any contracts. The report by the parent will disclose contributions by the parent, the contracting subsidiary, and also by covered executives at all of the other subsidiaries of that parent, even if that subsidiary has no contracts itself and has nothing to do with the contract at issue.
In this diagram, if the Parent owns more than 30 percent of Sub 1, Sub 2, and Sub 3, and Sub 1 holds a covered contract, then Parent must register the contract. In addition, it will have to disclose contributions made by officers, directors, and partners of Parent, Sub 1, Sub 2, and Sub 3.
Existing Contractors: Entities with existing contracts must first register to create an account with the State Board of Elections. Entities with ongoing contracts do not have to file initial disclosures of contributions. The company can then file the February 5 report, which will disclose contributions made between August 1, 2014 and January 31, 2015.
New Contractors: Companies that do not have current contracts will have to register when they are awarded a contract worth $200,000 or more. They will have to disclose all contributions made in the prior 24 months. Then they will be required to file periodic reports on February 5 and August 5.
OF note, contractors can edit their registrations even after they are filed, if they see changes that need to be made.
Once an entity has registered, it must add new contracts within 24 hours of the award. At the roundtable, staff emphasized their view that the award occurs prior to the contract being finalized. The contracting officer will check to see if a contract has been registered before the contract is finalized. If the contract has not been registered with the Board of Elections before this “finalization,” then the contracting officer will notify the Board to assess late fines. Fines are $10/day, up to $500. Stay tuned to see how the Board fleshes this timing requirement out.
Typically the registration process for a new contract will be fairly simple: add the contract and that is all. But, if the contract is with a different level of government than has been previously reported, the entity will have to disclose contributions for the prior 24 months with that level of government. For example, if the company is registered for state-level contracts, and then receives a county contract, it will have to register the county contract and disclose covered contributions made to officials in that county.
Record Keeping and Reporting of Contributions
Contributions aggregating $500 or more from any one source (e.g., a particular officer) during the reporting period must be disclosed. Although it is fairly obvious from a compliance standpoint, staff at the roundtable emphasized that companies cannot simply ask officers, directors, and partners to disclose to the company contributions of $500 or more because multiple contributions by the same individual would escape capture and reporting The State Board also emphasized the record-keeping requirements of the statute. Records must be maintained for four years after the contract is completed or 10 years after the record is created, whichever is earlier.
The law allows filers to request waivers from filing details about each and every contract. Staff has indicated that these will be sparingly granted. In fact, the only example of a waiver likely to be granted that they gave was a utility company, where it is obvious that the state purchases utilities.
This new system looks like it will be complex and requires careful planning to be able to disclose contributions in a timely fashion.