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
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.
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.
Every two years, after an election, the FEC indexes certain contribution limits to inflation. After returning from the shutdown, the FEC issued the revised limits for this year, a few days later than usual. As has been the case the past few cycles, the individual limit has gone up by $100. For candidates up for election in 2020, individuals may now give $2,800 per election or $5,600 per candidate per election cycle (with the primary and general considered separate elections). This means that individual contributors who had previously maxed out to candidates for 2020 primary and general elections at $2,700 per election can now give those candidates another $100 per election.
The FEC also raised the limits on individual contributions to party committees and non-multicandidate PACs:
The U.S. Supreme Court this week left in place a lower court ruling that expands donor disclosure for advocacy groups that fund independent expenditures. While the full effect of the ruling may not be known for some time, groups in the throes of an election season suddenly have to reconsider their electoral spending plans and fundraising practices, and donors to politically active 501(c)(4) social welfare organizations or 501(c)(6) business leagues have to account for an increased risk that their donations will be publicly disclosed.
What Does the Ruling Do?
Groups that are not registered with the Federal Election Commission (FEC) as campaign committees, party committees, or PACs are nonetheless required to file reports if they make an expenditure of more than $250 that expressly supports or opposes a federal candidate. These “independent expenditure” reports must itemize disbursements to each vendor involved in the creation and distribution of an ad (or other public communication), and identify the election involved and whether the organization supports or opposes the featured candidate.
In addition, a long-standing FEC rule requires that these reports identify donors who gave more than $200 to the organization in the calendar year for the purpose of funding the particular ad that is being reported. As a practical matter, donors seldom know that their funds will be used to pay for a specific ad, and thus donors have rarely been disclosed.
The district court struck down the FEC donor-disclosure rule, concluding that it applied the statutory disclosure requirement too narrowly. The court concluded that independent expenditure reports filed by groups that are not registered political committees must identify all donors who (1) give to the organization for the purpose of influencing a federal election, or (2) give for the purpose of funding the group’s independent expenditures, whether tied to a specific ad or not. The court stressed, however, that contributors to an organization’s “general programs” need not be identified.
The court deferred the effective date of the ruling for 45 days, giving the FEC time to adopt a new donor disclosure rule. That period came and went with no new rule or interpretive guidance. Crossroads GPS, which intervened in the case, has appealed the ruling to the D.C. Circuit.
Interested in what it takes to set up a federal Super PAC? Take a look at Venable’s recently released white paper summarizing the key rules of the road, including:
- Steps for creating a federal Super PAC
- Avoiding illegal coordination with candidates
- FEC and IRS reporting obligations
- Advertising disclaimers
For those interested in Maryland elections, please…
January is always a busy month for filing lobbying and campaign finance reports. It is also a good time to think about changes for the upcoming year that might simplify filing obligations.
• State Lobbying Reports. Most states require year-end reports to be filed at some point in January. Many also require re-registration or renewal of registration for the next year. Pay attention to deadlines, and think about where you are likely to be active in 2016. Perhaps it is time to de-register or let your registration lapse if you will not be active in a particular state. Different states have different thresholds for when registration and reporting are required, so be sure to consider how what you are doing matches what is required.…
Continue Reading PAC and Lobbying Deadlines Loom Large in January—and a Chance to Get Organized
A leaked email written by a senior Congressional aide became fodder for the politics section of the Washington Post last week, painting a picture of secret industry collusion with candidate campaigns on independent expenditures. The aide’s email, reportedly written to several of his boss’s campaign officials, explained that a prominent industry trade association was committed …
In the closing hours of its session last week, the Maryland General Assembly passed the Campaign Finance Reform Act of 2013 and Governor O’Malley is expected to sign it soon. Even so, the changes do not take effect until after the 2014 state elections.
The final version of the bill is largely unchanged from the …
On April 16, Ron Jacobs, Larry Norton, and Janice Ryan will host a program for nonprofits covering campaign finance, lobbying disclosure, and gift rule issues for trade associations, social welfare organizations, and charities. Perfect for those who have already seen our Political Law 101 session and want to learn answers to more advanced …