Earlier this month, Virginia Governor Terry McAuliffe signed into law a new bill making significant changes to Virginia’s lobbying and gift laws. The critical changes made by this bill, Senate Bill No. 1424, will become effective on January 1, 2016. Many of the revisions focus on gift reform, but the bill also contains important changes affecting lobbying as well as pay-to-play compliance. 

Influencing Procurement Transactions as Lobbying

Importantly, the bill expands the definition of lobbying in Virginia to cover procurement and contracting efforts. Starting in 2016, the definition of “executive action” in the Virginia lobbying law will include all procurement transactions. Procurement transactions are all actions related to obtaining goods, services, or construction on behalf of a state agency, including describing contract requirements, selecting and soliciting sources, preparing and awarding a contract, and all phases of contract administration. A person who contacts executive branch officials in an attempt to influence any of these types of actions will be lobbying under Virginia law.

The bill does not affect the exceptions to lobbyist registration, though. Registration as a lobbyist will still not be required if a person receives $500 or less in compensation in a calendar year or spends $500 or less in a calendar year for lobbying. Another exception does not require lobbyist registration if the person’s job duties do not regularly involve lobbying.

The scope of this new procurement lobbying provision is broad. Although some state lobbying laws apply to influencing only certain types of contracts (for instance, no-bid contracts or contracts above set monetary thresholds), Virginia’s definition of a procurement transaction sweeps in essentially all actions relating to all types of executive agency contracts, including the request, selection, and contract administration processes. Unlike other states, the new law also does not add any exceptions to the definition of lobbying that are specific to the procurement process, like an exception for merely attending a bid conference.

This breadth will be significant for companies contracting with Virginia state agencies, especially since securing contracts often involves contingent compensation for sales employees. The new law does not change the current prohibition on contingency fees, which does not allow lobbyists to receive compensation contingent on the outcome of an executive action. Beginning in January, that will include compensation contingent on procurement process decisions. Employees who qualify as lobbyists due to their efforts to influence procurement transactions will be subject to this ban, as the bill does not make any exceptions for those involved in only procurement lobbying.

Lower Gift Limits Coupled with New Exceptions

In addition, the bill contains an overhaul of Virginia’s gift rules. In the aftermath of the gift scandal involving former Governor Bob McDonnell, those gift rules and how to fix them were a major focus for both the legislature and Governor McAuliffe this year and the subject of much debate.

The bill changes existing Virginia law by lowering the gift limit to $100 annually for gifts from lobbyists and lobbyist principals. Virginia legislators, legislative employees, candidates, executive officials, certain executive branch employees, and certain local officials and employees will all be subject to the new limit. Further, gifts from entities with contracts or seeking contracts with state or local agencies to officials and employees at those agencies will be subject to the new limit. For entities involved in contracts with state or local agencies, the gift limit applies to their officers, directors, owners, and those with a controlling interest in the business too.

The $100 limit applies to a series of gifts, as well, closing a loophole in the original bill that did not address aggregate gifts in a year. However, gifts of under $20 do not count toward the limit.

While lowering the gift limit, the bill also introduces new exceptions. For example, none of the following will be considered gifts:

• Food and beverages at an event where the official or employee is performing official duties
• Food, beverage, and registration fees when the official or employee attends an event as a featured speaker or presenter
• Attendance, entertainment, food, and beverage at a widely attended event (an event to which at least 25 people are invited or are reasonably expected to attend and where those invitees share a common interest or represent an interest in a particular issue).

In an effort to increase disclosure of gifts, the bill additionally requires that financial disclosure forms filed by legislators, judges, legislative employees, candidates, and some executive branch and local officials and employees be filed electronically and made available to the public within six weeks of filing.

Adding to Existing Pay-to-Play Regulation

Finally, the bill makes one addition to Virginia’s existing pay-to-play laws. As of January 2016, contributions of more than $100 to the Governor, his campaign committee, or a PAC established on behalf of the Governor will be prohibited where the contributing entity has submitted an application for a grant or loan from the Development Opportunity Fund. This restriction applies during the period in which the application is pending and for a one-year period after receiving the grant or loan.

Notably, the restriction applies to not just entities with applications pending before the Development Opportunity Fund but also their officers, directors, owners, and others with controlling ownership interest in the entity. Organizations and companies that commonly work with the Development Opportunity Fund should consider reviewing their compliance processes and monitoring for these individuals’ personal contributions, in preparing for these 2016 changes. Although the Development Opportunity Fund has a relatively limited audience, it is a reminder that a number of states have very targeted pay-to-play laws tied to specific industries like the lottery vendors, casinos, and insurance companies.