Electioneering Communications

executive orderAt the National Prayer Breakfast earlier this year, President Trump vowed: “I will get rid of and totally destroy the Johnson Amendment.” The Johnson Amendment, named after former President Lyndon Johnson, refers to language in the Internal Revenue Code Section 501(c)(3) that prohibits charities, including religious organizations, from participating in campaigns on behalf of or in opposition to a candidate for public office.

The president took official action on May 4 through an Executive Order, titled “Promoting Free Speech and Religious Liberty,” that exhorts federal agencies to respect and protect “religious and political speech.” However, notwithstanding the controversy surrounding the announcement, including one organization’s threat to file a lawsuit the same day, the Order will have little practical effect, and the threat of a lawsuit was withdrawn.

Continue Reading Trump Asks IRS to Keep Hands Off Religious Nonprofits: Will It Have Any Effect?

Please Join Venable LLP for a Complimentary Webinar (CLE Available*)

Wednesday, June 8, 2016
12:00 p.m. – 1:30 p.m. ET – Webinar

The 2016 election cycle is in full swing, and major changes to the financial services regulatory landscape, including the Dodd-Frank Act and the Consumer Financial Protection Bureau (CFPB), could turn on the outcome of the election. Whether your company wants to play a role in the election or your executives are personally supporting candidates, it’s important to understand the rules.

Continue Reading Election-Year Political Activity: A Primer for Financial Services Providers

We recently hosted a webinar on political compliance in the new election cycle. With the first criminal prosecution of a coordination case, changes in state ethics laws, and new disclosure requirements, we provided information you need to engage in political activities while staying compliant.

The slides are also available, and the following publications may be of help as well:

Florida Governor Rick Scott signed two bills yesterday that make sweeping changes in the state’s campaign finance and ethics laws. The campaign finance bill eliminates controversial accounts that some alleged were used by candidates as political slush funds, expands gift restrictions on state vendors, and gives expanded investigative powers to the state ethics commission. The changes will take effect on November 1, 2013. Highlights of the campaign finance bill include:

  • Contribution Limits to Candidates Increase. The new law boosts contribution limits from $500 per candidate per election to $3,000 per candidate per election for statewide candidates (e.g., Governor, Attorney General, and Supreme Court Justice) and $1,000 per candidate per election to legislative and local candidates.
  • Eliminates Committees of Continuous Existence (CCE). Florida officeholders will no longer be able to raise unlimited sums through controversial accounts known as Committees of Continuous Existence, or CCE’s. By September 30, 2013, each CCE must spend all of its remaining funds and have a zero balance, at which time they will be decertified.
  • Authorizing Limit-Free Super PACs. Just last month, the Division of Elections issued an opinion concluding that contributions to independent-expenditure only committees(Super PACs) were limited to $500. This legislation would bring Florida law in line with much of the rest of the country and eliminate the $500 contribution limit to Super PACs.
  • Additional Reporting Requirements. The law imposes new disclosure requirements on candidates and electioneering communication organizations, which will have to file monthly disclosure reports until 60 days before a primary. After that, committees will be required to file weekly disclosure reports until the last 10 days before the general election when reports must be filed every 24 hours. The state political parties are not subject to these enhanced reporting requirements and will continue to file disclosure reports in an election year just four times before the general election.
  • Public Records System.The Division of Elections must prepare recommendations to the legislature by December 1, 2013, on how to create a mandatory statewide electronic filing system for all state and local campaign filings.

The ethics bill expands the existing gift ban to vendors doing business with certain public officials and procurement employees, and gives the Florida Commission on Ethics more power to investigate and levy fines against lobbyists and principals. These provisions could well lead to stepped up enforcement. Highlights of the ethics legislation include:

  • Gift ban. Effective immediately, vendors are barred from giving gifts of over $100 to certain public officials and procurement employees. This will include any executive or
    legislative branch employee who has participated in a procurement matter in the preceding 12 months, if the contract is worth more than $10,000.
  • Increased Fines. Executive branch lobbyists and principals may be fined up to $5,000 if they knowingly fail to disclose material facts or knowingly provide false information. 
  • Increase Investigatory Authority.The legislation gives new authority to the Florida Commission on Ethics to investigate whether a lobbyist has made a prohibited expenditure, and to investigate lobbyists and their principals based on sworn complaints or random audits. The Commission was previously authorized to investigate sworn complaints alleging violations of Florida ethics laws, but the new law now allows the Commission to receive and investigate complaints from other sources. Members of the public may now file complaints with the Governor, the Florida Department of Law Enforcement, a Florida state attorney, or a United States attorney, and these entities can refer such complaints to the Commission.

Significant campaign finance reform legislation cleared the Maryland House of Delegates Thursday, and is now under consideration by a committee of the Maryland Senate. The Campaign Finance Reform Act of 2013 (HB 1499 and SB 1039) responds to recommendations of the recently convened Maryland Commission to Study Campaign Finance Law. The bill addresses many of the recommendations set forth in the Commission’s final report, issued in December 2012. If enacted, the changes will become effective January 1, 2015.  Highlights of the bill include:

  • Contribution and Transfer Limits. Per recipient, per election cycle contribution limits will increase from $4,000 to $6,000 per recipient, and the limit on per cycle aggregate contributions will increase from $10,000 to $24,000. Contribution and “transfer” limits will be indexed for inflation, with adjustments made at the start of every election cycle.
  • Business Entity Contributions. Two or more business entities (i.e., corporations, sole proprietorships, partnerships, LLCs, etc.) that are under common ownership or control will be treated as a single contributor for purposes of the contribution limits, closing a loophole in the current attribution rule, which applies only to corporate entities.
  • Out-of-state PACs.  Nonfederal out-of-state PACs will be subject to Maryland registration and reporting requirements.
  • Independent Expenditures and Electioneering Communications. New 48-hour registration and reporting requirements will be triggered when individuals or groups make independent expenditures (i.e., communications expressly advocating election or defeat of a candidate or ballot measure) or disbursements for electioneering communications. Donor disclosure will be expanded to require identification of any person making cumulative donations to the filer of $10,000 or more during the reporting period, regardless of whether the donations were made for the purpose of furthering independent expenditures or electioneering communications. The types of communications subject to independent expenditure and electioneering communication reporting are also broadened to include, for example, certain mass email and text blasts.
  • Pay-to-play.  The law governing disclosure of political contributions by government contractors will be refined to narrow the scope of reportable contributions and the “doing public business” threshold. Reporting will be done electronically, and reports will be made available to the public online. Contractors will be required to certify their compliance with the reporting requirements to the agencies with which they do business, and will be subject to new detailed record-keeping requirements.
  • Enforcement. The bill gives the State Board of Elections additional tools to enforce the campaign finance laws, including expanded audit authority and the authority to issue civil penalties for certain violations. The statute of limitations for prosecuting criminal violations is also extended from 2 to 3 years.

We will be tracking the bill and will supplement this post as the bill makes its way through the legislative process.

On December 11, New York’s attorney general revealed new regulations that would, if adopted, require nonprofit groups doing business in New York to disclose the percentage of total spending devoted to political activities in New York. The rules also would require groups that spend more than $10,000 to identify any donor giving $100 or more.

Under the proposed rules, tax-exempt organizations registered—or required to be registered—under New York’s charitable registration law must include in their annual financial report the amount and percentage of total expenses during the reporting period that are New York “election related expenditures.” “Election related expenditures” include communications calling for the nomination, election or defeat of a clearly identified candidate, political party, or proposition in a New York election. They also include communications made within 180 days of a New York election that refer to one or more clearly identified candidate in that election or depict the image, name, or likeness of a candidate. The term “communication” covers paid broadcast advertisements, placement of content on the internet, print ads, telephone contacts, mailings and other print materials.

Of particular concern to nonprofits, especially 501(c)(4) groups, is the prospect of having to disclose their individual donors. The proposed rules state that a group that has made over $10,000 in New York election related expenditures must disclose the following information about each “covered donation” received within the applicable reporting period:  (1) the name and address of each donor who made donations of $100 or more (in the aggregate) during the reporting period, (2) the donor’s employer, and (3) the date and amount of each donation. A “covered donation” is any contribution or thing of value made to a non-501(c)(3) tax-exempt group doing business in New York that is available to be used for a New York election related expenditure. In other words, the donation does not actually have to be used or intended for New York election related expenditures in order to be subject to disclosure.

The proposed rules would, however, exempt from disclosure donations that are restricted in a way that prevents them from being used for electioneering. The proposal also includes a process by which a group can seek a waiver if it can show that public disclosure of a contribution or donor’s identify could cause undue harm, threats, harassment or reprisals.

Written comments on the proposed rules may be submitted until March 6, 2013, with final rules expected to be in place in time for the 2013 local elections.

Today a D.C. federal appeals court temporarily reinstated a Federal Election Commission rule concerning when advocacy groups and others must disclose their donors, but has directed the FEC to clarify the rule or return to the courts for more litigation. The effect of the ruling is to put in limbo a key disclosure rule less than 50 days before the November election.

A lower federal court concluded in March (Van Hollen v. FEC, Civ. No. 11-0766 (ABJ)) that the FEC’s “electioneering communications” rule was drawn too narrowly by requiring groups airing pre-election ads to disclose only those donors who contribute for the purpose of “furthering” so-called “electioneering communications” – that is, ads that air in the 30 days before a primary or 60 days before a general election and refer to a federal candidate.  The appeals court determined that the FEC rule does not conflict with the plain language of the McCain-Feingold law, which requires that groups funding such electioneering communications file reports within 24 hours, listing the names and addresses of the group’s contributors.

The court refused, however, to resolve the dispute entirely, noting that through a strange quirk of procedure the FEC did not participate in the appeal, making it impossible to resolve issues such as the intended reach of the FEC rule and the effect of recent Supreme Court rulings.

Instead, under the appeals court ruling, the FEC must “promptly” tell the court whether it intends to clarify its disclosure rule or defend the rule in court.  While the FEC must decide “promptly” what to do, the court gives no indication as to whether it expects a rulemaking to be completed before the November election – a daunting task for any federal agency.  If more litigation is the chosen route, then the rules could well change again before the November election, with another appeal likely — and potentially more changes.

For the moment, the FEC rule is again in effect – disclosure of only those donors who contribute for the purpose of furthering electioneering communications.  We will be monitoring the situation closely over the coming days and weeks.

With elections quickly approaching, last week the FEC finally issued a statement of how it will implement a federal court ruling striking down the Commission’s current regulation of electioneering communications. In late April, the D.C. District Court decided Van Hollen v. FEC, in which it vacated the FEC’s regulation requiring disclosure of donors to electioneering communications only if the donations were “made for the purpose of furthering electioneering communications.” According to the court, the addition of donor-intent to the regulation limited disclosure in a way that Congress did not intend. The FEC’s policy, issued on July 27 and effective during appeal, is somehow retroactive to March 30.

Trade associations or other groups needn’t worry about how to segregate member funds for disclosure purposes. Van Hollen states that “dues paid in return for the benefits of membership” are not “donations.” Thus, trade associations that wish to make electioneering communications do not have disclose members’ dues.

But if organizations like associations solicit donations from members (e.g., as part of a government affairs effort), and the organization makes electioneering communications, the group will have to disclose donors who contribute an aggregate of $1,000 or more during the calendar year. To avoid having to disclose donors who did not give to the electioneering communications efforts, organizations should be able to solicit donations into an electioneering communications segregated fund.

Organizations should also be conscious of the 24-hour notice report disclosing electioneering communications during the nominating conventions. The 24-hour notice period for the Republican convention began on July 28 and runs through August 30; the notice period for the Democratic convention begins August 4 and runs through September 6.