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
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…
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…
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.”
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.
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.
A federal judge on July 30, 2019 overturned an IRS ruling, issued almost exactly a year ago, that allowed many nonprofits to stop disclosing their donors on their annual tax returns.
In Revenue Procedure 2018-38 (July 16, 2018), the IRS allowed social welfare organizations under section 501(c)(4), professional and trade associations under section 501(c)(6), and many other types of organizations required to file a Form 990 series return, to cease disclosing their large donors ($5,000 or more) on Schedule B of the Form 990. The major exceptions were section 501(c)(3) organizations and section 527 political organizations, both of which are subject to statutory requirements for donor disclosure that the IRS could not waive. Those IRS rules are described in more detail here.
Even though the names of donors disclosed on Schedule B of the Form 990 were not made available to the public, only to the IRS, many commentators viewed the new rules as facilitating “dark money” in politics. The state of Montana, joined by the state of New Jersey, brought a lawsuit alleging that the IRS could not simply waive the donor disclosure requirements, which were established by IRS regulation, without providing an opportunity for public comment in accordance with the Administrative Procedure Act.
The District of Columbia has adopted a “pay-to-play” law that bans political contributions from city contractors, as well as personal political contributions from their senior officers. Violators may forfeit contracts, face disqualification on bidding for up to four years, and pay civil penalties. The law takes effect on November 4, 2020.
Other major municipalities, such as Chicago, New York City, and Philadelphia have similar laws that either restrict political contributions from contractors and their principals, require the contractor to file reports with the relevant election board, or both. A number of states also have pay-to-play laws, including Maryland, New Jersey, and Illinois.