Pay-to-Play

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Starting this July, Maryland’s “pay-to-play” law, which requires public contractors to file campaign contribution disclosure reports with the State Board of Elections, will require for the first time that local government contractors disclose their beneficial owners while streamlining such reporting for state contractors. The law hands authority to the state election board to impose penalties on contractors who fail to disclose their beneficial owners and will likely increase public scrutiny of ties between political contributions and the award of public contracts.

Under current law, all organizations that have a single contract with the state, county, or other political subdivision of the state with a total value of at least $200,000 must register with the State Board of Elections and, for as long as they hold government contracts, file semi-annual reports disclosing certain political contributions made by the contractor, its principals, and, if it has one, its affiliated political action committee. Separately, under Maryland procurement law, contractors with state agencies must file reports with the Secretary of State identifying each person who has “beneficial ownership” of the contracting entity, defined as:Continue Reading Changes to Maryland Pay-to-Play Law Will Expand Reporting Obligations, Boost Public Scrutiny of State Public Contractors

New Jersey has overhauled its pay-to-play and campaign finance laws, dramatically changing the rules for government contractors, nonprofits, and individual donors. The passage of the Elections Transparency Act has been accompanied by considerable controversy, including litigation and the resignation of all four members of the New Jersey Election Law Enforcement Commission (ELEC). In the meantime, some provisions have already taken effect. Others are slated to take effect after the June 2023 primary and apply to the 2023 general election and future elections.

Here are the most important things to know.

Pay-to-Play

Since 2006, New Jersey’s complex state pay-to-play law has barred contributions over $300 by companies and nonprofits bidding for, or under contract with, state agencies, including colleges and universities. The contribution ban applies not only to bidding and contracting entities, but also to their principal owners, officers and directors, and even their spouses.

Over the years, New Jersey’s pay-to-play law has ensnared dozens of government contractors, resulting in disqualified bids and voided contracts. Adding to the compliance burden, the prior state law permitted local governments to enact their own pay-to-play laws provided they were at least as stringent as the state law. Dozens of localities adopted such ordinances. This patchwork of pay-to-play laws has drawn criticism from government contractors as well as ELEC’s executive director who has called the state pay-to-play regime “convoluted and complicated,” and cited its “stunning inconsistency.”Continue Reading New Jersey Overhauls Pay-to-Play and Other Campaign Finance Laws

California recently expanded its pay-to-play law to prohibit a company seeking a license, permit, or non-competitively bid contract, along with certain of the company’s affiliates, agents, and employees, from contributing more than $250 to a local elected official of the agency in question. This will include city councils and county boards of supervisors, and their…

Pay-to-play laws present a minefield for compliance because they can be found not only at the state level, but also the local level. As one of the most recent examples, beginning on April 1, 2022, Delaware County Pennsylvania, just outside of Philadelphia, will require disclosure of certain political contributions by county contractors and subcontractors anticipating receiving $50,000 or more under a covered contract required to be approved by the county council. Contributions made by the contractor’s and subcontractor’s corporate affiliates, officers, directors, partners, and their spouses are also subject to disclosure. Violations may result in the loss of contracts and a contract ban.

What contributions must be disclosed

Contributions of any amount made in the 24 months prior to the date the county council will consider the contract:Continue Reading Remember Local Pay-to-Play Laws: Delaware County, Pennsylvania Imposes New Disclosure Requirements

The District of Columbia’s pay-to-play law will go into effect on November 9, 2022. The law was originally scheduled to take effect on November 4, 2020, but was postponed because of a lack of funding.

The law prohibits businesses seeking or holding contracts with the District government valued at $250,000 or more, and the business’s senior officers (e.g., president, executive director, chief executive officer, chief operating officer, or chief financial officer), from contributing to “covered officials.” Who is a covered official depends on who oversees the contract in question. For example, if a contractor is seeking or holding a contract overseen by a District agency that reports to the mayor, the prohibited recipients would be:

  • The mayor
  • Candidates for mayor
  • Political committees affiliated with the mayor and candidates
  • Constituent services fund of the mayor

Continue Reading DC Pay-to-Play Law Back on Track

A federal government contractor has agreed to pay a civil penalty of $125,000 for making prohibited contributions to super PACs. The penalty is the largest the Federal Election Commission has obtained for violating the ban on federal contractor contributions.

According to settlement documents made public earlier this month, a Florida-based disaster response firm made contributions…

In 2018, the District of Columbia Council adopted a “pay-to-play” law banning political contributions from contractors and their senior officers that was scheduled to take effect on November 4, 2020. But like many other things in 2020, the rollout of the law did not go as planned. Because of funding shortfalls, the effective date of the new law has been postponed indefinitely, and contractors and their officers may continue making political contributions to District officials.

In the original version of the Campaign Finance Reform Amendment Act, contracts valued at $250,000 or more that are sought, entered into, or executed on or after November 4, 2020 would trigger the contribution restrictions. The law had passed the DC Council unanimously, so all seemed to be in order.Continue Reading DC Pay-to-Play Law on Pause

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…

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.Continue Reading Pay-to-Play Laws Remain in the Spotlight: Government Contract Eligibility Hinges on Awareness and Compliance