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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 general, under the Trump Pledge, the restrictions imposed on the revolving door out of the government are stricter, while the restrictions on the way in are more flexible and not as rigorous.

On the way in, President Trump’s Ethics Pledge permits lobbyists to seek and accept jobs at an agency that they have lobbied within the last two years, subject to certain recusal obligations. Other front-end changes include:

  • Waivers of the Ethics Pledge are not public, as they were in the Obama administration; and
  • Waivers are granted by President Trump himself (or his designee), not by the Director of the Office of Management and Budget, as was the case under President Obama.

On the post-employment side, President Trump’s Pledge seeks to plug a loophole in the Obama Pledge that had been widely criticized — that only “lobbying” as defined under the Lobbying Disclosure Act, was prohibited, while behind-the-scenes activity known as “shadow lobbying” was permitted. Other post-employment restrictions include:

  • The post-employment revolving door ban applies to more than just lobbying contacts; it also applies to lobbying activities, which includes research, planning, and other behind-the-scenes activities that support lobbying contacts;
  • The post-employment revolving door ban has been expanded to prohibit former officials from representing a foreign government or political party, as those terms are used in the Foreign Agents Registration Act of 1938 (this ban was also in place under President Bill Clinton);
  • Former officials are banned for a period of five years from engaging in lobbying activities related to the former official’s agency; and
  • Former officials may not engage in lobbying activities with respect to any covered executive branch official (or non-career Senior Executive Service) in the entire executive branch for the remainder of the administration.

One thing that both Obama’s and Trump’s Ethics Pledges contain is a prohibition on gifts from lobbyists — the Executive Order bars appointees from accepting gifts from registered lobbyists and organizations that employ them.

For a full comparison of both ethics pledges, please click here.

Practical Effects

What are the practical effects for individuals going into the Administration, and for their former and future employers?

Understand what Happens if a Lobbyist from your Company or Organization goes into the Administration: If a former government relations professional for your organization, or even a hired lobbyist, is appointed to a position in the Trump administration, your company or organization may be affected. For example, if your lobbyist on environmental issues receives an appointment to an EPA post, he or she may be barred from reviewing matters in which you were represented (or even entire issues that he or she lobbied on). Under the Obama administration, this was not an issue because lobbyist were banned from serving in certain capacities. But now, you may need to develop alternate strategies to accommodate the presence of former lobbyists in the administration.

Understand the Scope of the Ban in the Future: Because the five-year post-employment ban applies to behind-the-scenes activities in support of lobbying, the employment prospects for administration officials will be significantly more limited than in the past. The Pledge appears to prevent hiring a former Trump political appointee to serve as a strategic advisor for government affairs, even if that person operates in a manner that does not require registering as a lobbyist. The five-year post-employment ban also appears to bar other types of behind-the-scenes work in support of lobbying, such as research, drafting leave-behind documents, and creating issue scorecards.

Whether your organization has a seasoned government affairs program or is newly considering the opportunities presented by a change in administration, Venable’s Political Law Practice Group can help you navigate gift rules and other ethics issues that arise along the way.

From now until the polls close on Tuesday, November 8, 2016, politics will be inescapably in the air – and in the workplace. Employees will be talking, and sometimes arguing, and sometimes participating in one campaign or another. Prudent employers should take note of what they may be required to do or prohibited from doing about their employees’ desire to participate in the electoral process. Continue Reading Election Year Tips for Employers

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 disclose contributions made to independent expenditure groups and political parties that are “for the benefit” of covered candidates. The new law also changes reporting deadlines, and clarifies that companies holding state or local contracts awarded prior to January 1 must file disclosure reports until performance is complete.

The contribution disclosure requirements for lobbyist-employers will also change so that the two disclosure regimes mirror one another.

These new changes take effect on June 1, 2015, just five months after the last round of changes and the rollout of a new online reporting system.

Key features of the new law include…

mynameisThe Washington Examiner recently wrote about the art of naming a PAC, pointing out that the name must “balance patriotic with practical considerations.” The Examiner talked about making sure the name is not too long if the PAC will have to include “paid for by” statements on its ads. But there are some other legal considerations as well. Let’s look at some of the FEC’s naming rules.

If the PAC is a connected PAC, meaning it is supported by a company, union, nonprofit, or trade or professional association, then it must include the full name of the connected organization. We have seen registrations rejected by the FEC for failing to include “Inc.” or “Company” if that full legal name of the entity includes those signifiers. Thus, Widget Manufacturing Company of Our Town, Inc. must include all of those words in the name of the PAC. That name must appear in all legal disclaimers.

Continue Reading Naming Your PAC

On November 26, the Department of Treasury released proposed regulations billed as “more definitive rules” for when the IRS will treat certain activities by section 501(c)(4) organization as political activity. It is hard to argue that the proposal provides some clarity, but only by classifying a wide variety of activities as candidate-related and therefore not qualifying 501(c)(4) “social welfare” activity. The proposal is thus likely to present tax-exempt status concerns for many organizations. Moreover, nothing is offered to guide 501(c)(4) managers and advisors on what types of activities that relate to candidates or officeholders would qualify as promoting the social welfare.

Background

Organizations that are exempt under section 501(c)(4) of the Internal Revenue Code are required to engage primarily in activities that promote social welfare. This requirement has often been interpreted to allow an organization to engage in political activities as long as those activities are not the primary activities of a 501(c)(4). In recent years, many 501(c)(4) organizations have engaged in a substantial amount of political advocacy, while taking care not to appear to be engaging primarily in such activity. 

The IRS scandal that broke earlier this year centered on the agency’s handling of (for the most part) 501(c)(4) tax-exemption applications that suggested the possibility of extensive political activities. Many commentators have noted that the growth in 501(c)(4) political activity has presented a difficult problem for the IRS because it has such few rules in place to enforce the “primary” standard. 

Proposed Regulations

It is amid this backdrop that Treasury released its proposed regulations (which would amend portions of Treas. Regs. § 1.501(c)(4)-1). In substance, the proposal would create an “unsafe harbor”—a category of activity, specifically focused on 501(c)(4) organizations, that is termed “candidate-related political activity.” This category of activity would be included among other types of activities that are not consistent with the promotion of social welfare and, as such, that are not permitted to be a primary activity of a 501(c)(4) organization. The definition of candidate-related activity is quite broad and goes beyond what is commonly understood to be campaign activity. Among the more types of activities that are alarmingly included among the list of candidate-related political activity:

  • Conduct of a voter registration or “get-out-the-vote” drive, even if nonpartisan;
  • Hosting an event within 30 days of a primary election or 60 days of a general election where one or more candidates appear as part of the program; and
  • The payment of money to any organization described in section 501(c) that itself engages in campaign-related activity (and the presumption here appears to be that such recipient organization does engage in campaign-related activity unless a written representation is obtained from the recipient and a written restriction on the contribution is given by the 501(c)(4)).

There are many more aspects of this proposed rule and many more categories of activities that would fit into the “campaign-related” category. Interestingly, the proposal borrows from existing federal election law concepts like electioneering communications and express advocacy. Also, it should be noted that the Treasury Department has identified a number of specific areas where it is requesting comments—including whether any rules on this topic should also apply to 501(c)(5) and 501(c)(6) organizations, whether to adopt a similar approach to define impermissible campaign intervention under section 501(c)(3), and whether the rules should address how one determines whether an activity is at such a level that it becomes a “primary” activity of the organization.

Comments will be due in late February. Judging from the initial response, there are sure to be plenty of submissions.

New York State’s ethics and lobbying watchdog, the Joint Commission on Public Ethics (“JCOPE”), released revised draft amendments to its gift and honoraria rules and source of funding (“SOF”) regulations. JCOPE will seek formal public comment on all of these proposed rules. Copies of the new draft rules can be found here.

In January, JCOPE began accepting public comments on its revised SOF rule, which requires organizations that devote substantial resources to lobbying activity in NYS to disclose their sources of funding over $5,000. The revised rules included an exemption if there was a “substantial likelihood” that disclosure would cause harm (to the filer or the filer’s donors). In response to concerns that the substantial likelihood standard was unconstitutionally high, JCOPE lowered the standard. Under the new proposal, a filer only has to show that disclosure would cause a “reasonable probability of harm.” The new standard, if ultimately adopted, likely will increase the number of filers seeking exemption to the disclosure requirement.

New amendments to the gift and honorarium rules also were made public at the end of April. Initial draft regulations were released for informal public comment in February. The new versions, which will be submitted for another round of public comment, incorporate suggestions made by the regulated community. Highlights of these changes include:

(1) clarification that a gift from an “interested source” (i.e., lobbyists or state contractors) is presumptively impermissible,

(2) new requirements to meet the widely attended events exception, and

(3) the inclusion of a bright line dollar amount for determining what is “nominal” ($10).

JCOPE will announce the opening of the public comment periods for these draft regulations through its e-blast service and on its website.

The New York State Joint Commission on Public Ethics (“JCOPE”), which oversees and regulates ethics and lobbying in New York, hosted the first in a series of roundtable discussions with the regulated community on March 8 (in Albany) and March 15 (in NYC).

The March roundtable discussions focused on the new Reportable Business Relationship (“RBR”) and Source of Funding (“SOF”) disclosure requirements, which were enacted as part of the Public Integrity Reform Act of 2011. The RBR rule requires lobbyists and entities that hire or retain lobbyists to report certain business relationships they have with NYS employees. The SOF rule requires organizations that devote substantial resources to lobbying activity in NYS to disclose their sources of funding over $5,000. The rules went into effect in August 2011 and were first incorporated in the lobbying reports that were due this past January.

During the roundtables, JCOPE elaborated on the guidance it has provided to the public to date here and here. It also agreed to post additional guidance on its website.

With respect to the RBR rule, JCOPE continued to emphasize (as it has in prior webinars and trainings) that a business arrangement or transaction only needs to be reported if a lobbyist or lobbyist employer (including the lobbyist employer’s board members and executives) knows or has a reason to know that it/he/she is transacting with a NYS employee. It is important to note that this rule also applies to business relationships with entities in which a NYS employee has a certain ownership or managerial interest.

To satisfy their obligation under the RBR rule, organizations that file lobbying reports in NYS should survey their board members and senior executives to determine if these individuals have any RBRs to report.  The organizations can then rely on these representations when filing their report. JCOPE agreed to provide more specific guidance on how organizations—particularly organizations with large boards and complex management structures—can comply with this requirement.

The SOF disclosure applies to organizations that have spent at least $50,000 in lobbying in NYS during the six or twelve months preceding the lobbying report deadline, but only if those expenditures constitute at least 3% of the organization’s total expenditures during that same time period. During the roundtable discussion, attendees provided feedback on how to make the reporting process more efficient and meaningful.

Although JCOPE has not announced any dates or topics for future roundtables, it plans to cover a host of issues within its jurisdiction, including its draft regulations on gifts and honoraria. Information about future JCOPE roundtables and how to register is available on JCOPE’s website.

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.

Outside groups have become a potent political force in the 2012 election campaign. Unleashed by the Supreme Court ruling in the Citizens United case and subsequent lower court rulings, such groups can raise unlimited sums from individuals and corporations for ads and other spending that is not “coordinated” with a candidate. The most dramatic example: more than $500 million dollars has been spent on radio and television ads relating to the 2012 Presidential race, with almost half coming from Super PACs, 501(c)(4)’s, and other outside groups.

With limits on political spending off the table, the battle over campaign finance regulation is now being waged over disclosure. This debate is being driven in part by election-year views about which party will be more affected in the short term by enhanced disclosure rules. The debate has also sparked concerns that some of the more aggressive proposals are designed to curb corporate speech that legislatures may no longer restrict directly.

At the federal level, efforts to pass new laws and regulations have stalled. The DISCLOSE Act, blocked last month by Senate filibuster, would require outside groups funding political ads to disclose all of their donors, list top donors in their ads and include a statement from the group’s highest ranking official that the group approved the ad, and provide shareholders or members with information about political spending. Likewise, the Federal Election Commission has declined to issue new disclosure rules for organizations funding ads that expressly advocate the election or defeat of a federal candidate. And the IRS has pledged to study the need for new rules for 501(c)(4)’s, although any action is likely to come well after the 2012 election.

The picture is quite different at the state level. Many states have adopted or are considering new disclosure rules that affect groups running political ads in state elections. Here are some examples:

  • Alaska requires that an independent expenditure group list its top three donors for an ad by name and address;
  • California requires ads paid for by independent expenditures to disclose the two highest contributors who have given at least $50,000;
  • Colorado requires that political ads disclose the entity paying for it, and if the entity is a business, a natural person who could be contacted;
  • Connecticut requires chief executives to make a statement stating they are responsible for the ad when business entities pay for ads;
  • Maryland requires corporations to disclose independent expenditures and electioneering communications to its shareholders and members either on its website or in a mailing.
  • New York proposed rules earlier this year requiring groups running ads that expressly advocate for the election or defeat of a candidate to register and file reports, and submit copies of scripts, Internet and print ads, and other materials.

While it remains to be seen whether new federal rules are in the offing, states and localities are certain to continue demanding more transparency from politically active organizations, and the individuals and companies that donate to them. Before making a contribution, it is essential that donors and outside groups understand exactly what information will have to be publicly disclosed, and how and when such disclosure is required.