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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.…

Continue Reading U.S. Supreme Court Allows Expanded Donor Disclosure Rules to Take Effect

On January 28, 2017, President Trump signed an Executive Order that imposes an extra layer of ethics obligations on presidentially appointed members of the White House and Executive Branch.

Overall, President Trump’s Executive Order takes a somewhat different approach than the “Ethics Pledge” issued by the Obama administration, expanding some restrictions and loosening others. In…

The Department of Justice Inspector General’s (IG) office recently released a highly critical audit of DOJ’s Foreign Agents Registration Act of 1938 (FARA) enforcement program. The audit, combined with recent news stories potentially involving FARA, may foreshadow an increased awareness of this sometimes overlooked registration requirement. But increased attention likely does not mean an increase…

The question of when a politically-active, nonprofit 501(c)(4) group must publicly disclose its donors has been on the front burner in various states—most, like New York and California, have called for greater regulation, while others like Arizona have loosened the reins. At the federal level, silence has been the norm because the statute is generally read as only requiring disclosure by a 501(c)(4) (or other nonprofit such as a 501(c)(6)) if a donor contributes for the purposes of funding a particular ad. The FEC has consistently deadlocked on complaints alleging either that a donor gave for the purpose of supporting an ad or that a 501(c)(4) should be treated as a political committee and disclose all of its donors.

Last week, however, details were released from an FEC enforcement matter that met this stringent test and, as a result, the Commission levied fines totaling $233,000 against three nonprofit groups for failing to identify donors behind specific advertisements. These three settlement agreements, released as a group, provide significant guidance to nonprofit 501(c)(4)s and other actors as to what type of conduct will trigger donor disclosure at the federal level.…

Continue Reading The FEC Levels Fines on Nonprofits over Donor Disclosure

The Lobbying Disclosure Act Guidance (Guidance) issued by the Clerk of the House of Representatives and the Secretary of the Senate was updated on June 15. The updates clarify currently existing provisions of the LDA, add additional examples, replace references to the LDA with hyperlinked citations to the U.S. Code, and remove references to Line numbers (the online reporting platform does not have Line numbers for drafting reports, but the final version of the reports available on the House and Senate websites still have Line numbers).  The Guidance is available here. A brief discussion of the changes to the Guidance is below:…
Continue Reading Revisions to the Lobbying Disclosure Act Guidance: What These Changes Mean for You

Long before Citizens United allowed corporations to fund independent expenditures to support candidates, the Supreme Court allowed corporations to contribute to ballot measure committees. Until recently, disclosure was a fairly straightforward matter: give to the official committees supporting or opposing the measure and the contribution would be disclosed; give to other entities (like a nonprofit) that give to the official committees, and the corporation’s contribution would not be disclosed. After Citizens United, however, states’ fear of corporate involvement in candidate races led many states to require disclosure of “upstream” contributions. Those changes often applied not only to contributions for candidate independent expenditures, but also to contributions for ballot measures.

We have written about California before. Recently, Washington State has focused on the intermediary issue of when a nonprofit must disclose its donors. A trial court in Washington State ruled that a trade association should have registered itself as a ballot measure committee based on a special project it undertook to challenge state initiatives about food labeling. The result of this decision is that member companies had to disclose their contributions to the association for the special project.
Continue Reading Ballot Initiative Disclosure

Following a major rewrite last year of its “pay-to-play” disclosure rules, Maryland has made further changes that expand the obligations of state and local government contractors to report their political contributions, and those of their subsidiaries, officers, directors, partners, and PACs. Now, in addition to reporting direct contributions to candidates, contractors will also have to…

The Maryland legislature overhauled the state’s campaign finance law almost two years ago, but many of the key provisions did not take effect until January 1, 2015. These changes significantly affect state government contractors by introducing a new electronic registration system overseen by the State Board of Elections, and requiring electronic reporting of contributions made…

The LD-203 obviously includes a number of different disclosures. In practice, many reports show very little activity because the categories to be disclosed are fairly narrow. However, the report is filed under penalties of making false statements, so organizations have to know that they did not make any covered payments.

The Whole Company

ChartAs our previous posts have explained, many of the contributions that must be disclosed are not necessarily in the purview of the government affairs department. For example, a corporate philanthropy department might make a contribution to a charity that focuses on hunger relief. But, if a Member of Congress established that charity, it has to be disclosed on the LD-203. Similarly, an executive might ask the company to contribute to a charity active in a community where the company is located. But, again, if the executive were responding to a request from the Congressman’s district director, and that DD serves on the board of the charity, it is a contribution “designated” by a covered official.
Continue Reading LD-203 Compliance Tips

Yesterday, we focused on the honoring and recognizing categories of expenses that have to be reported. There are also three other categories that have to be disclosed on the LD-203 report.

  • Political Contributions: Contributions made by registered lobbyists, the connected PAC of a registrant, or a PAC controlled by a lobbyist must be disclosed

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