A flurry of recent advisory opinions from the Department of Justice’s FARA unit raise new questions about how the Foreign Agents Registration Act (FARA) might apply to the nonprofit community. Adding to the uncertainty, these opinions arrive just as momentum is increasing for DOJ to adopt new regulations to clarify and update the pre-World War II law that has seen aggressive enforcement in the last decade.

FARA generally requires agents of foreign principals engaged in certain activities within the United States to influence domestic and foreign policy to register and publicly disclose the relationship and their activities to DOJ. In the last few years, enforcement has ramped up, with multiple indictments in the wake of investigations into foreign interference in the 2016 elections. As a result, organizations with international connections have called for greater guidance on the reach of what is a notoriously vague law. To this end, DOJ began releasing heavily redacted advisory opinions interpreting FARA and its regulations.

A common theme among opinions released in February 2022 is the scope of the so-called academic exemption, one of several exemptions to the law’s registration and reporting requirements. Under this exemption, an agent working on behalf of any kind of foreign principal need not register under FARA if the activity performed on behalf of the principal promotes bona fide religious, scholastic, academic, or scientific pursuits or the fine arts. Nonprofits, including universities and other educational organizations, religious groups, and other charitable organizations, have long relied on this exemption when engaging in activities that may cause them to be considered an “agent” of a foreign entity.

Continue Reading New FARA Advisory Opinions Put Nonprofits on Notice

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

The Federal Election Commission (FEC) recently announced a $16,000 civil penalty against a political campaign, to settle allegations that the campaign had inappropriately used FEC contributor data in an algorithm used to aid its fundraising. The settlement is the latest in a series of decisions this year cracking down on the practice of using the FEC’s public contribution data to facilitate fundraising operations.

Contributor Data Disclosure

Federal campaign finance laws require all federal political committees to disclose the name, address, occupation, employer, and contribution amounts from donors who have given more than $200 per cycle. When the law was first written in the mid-1970s, there was no internet, so access to the records was very limited. Moreover, $200 then was worth nearly $1,000 in current dollars (so in fact it was a much larger contribution than it may first appear). Today, the FEC makes these disclosures public in a searchable online database, a tempting trove in an age when data has become integral to improving the efficiency of organizations’ public outreach.

Continue Reading FEC Cracks Down on Use of Contributor Data

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 totaling $525,000 to two super PACs. The firm made a $500,000 contribution to a pro-Trump super PAC, which was refunded in 2021, after the FEC began its investigation. The firm also made a $25,000 contribution to a super PAC that supported the Senate candidacy of former Congressman Patrick Murphy (that entity had terminated with no funds remaining, and so no refund was issued). While corporations are permitted to make contributions to federal super PACs, the FEC’s view is that federal contractors and companies negotiating federal contracts may not. In the settlement agreement, the firm acknowledged that it was a federal contractor at the time the contributions were made, but claimed the contributions were made from an account holding the CEO’s personal funds. The penalty was paid by the firm’s CEO.

The settlement underscores the importance of effective political law and pay-to-play compliance policies for government contractors. Indeed, as a condition of the settlement, the contractor agreed to take steps to ensure that the violations do not recur, including having outside legal counsel vet future contributions.

In addition to prohibitions against federal contractors making contributions to super PACs, many states and localities restrict or prohibit contributions by government contractors and their key personnel or require public reporting of such contributions. Violations can result in the loss of contracts, voiding of bids, and civil or criminal penalties. Government contractors should understand the risks associated with political activity and implement appropriate compliance programs to manage and mitigate the risks.

On July 1, the U.S. Supreme Court decided the consolidated case Americans for Prosperity Foundation v. Bonta in favor of the nonprofit organizations that brought the suits, holding California’s donor disclosure law to be unconstitutional because it violates the First Amendment protection of freedom of association. The immediate effect of the Court’s ruling is that the Court invalidated California’s rule requiring charities registered to fundraise in the state to file with the state Attorney General an unredacted copy of IRS Form 990 Schedule B, which discloses the names and addresses of their major donors.

As we previously wrote when the Court decided to hear the case and later heard oral arguments, the case focused on two main issues: (1) the standard of review that must be applied to laws involving compelled disclosure that are challenged on First Amendment grounds, and (2) whether the law should be held unconstitutional only as applied to the two nonprofits that brought the cases, or if the law should be struck down on its face.

Continue Reading U.S. Supreme Court Finds California Donor Disclosure Law Unconstitutional

On April 26, 2021, the Supreme Court heard oral arguments in the consolidated case Americans for Prosperity Foundation v. Bonta,1 which argues that California’s donor disclosure law is unconstitutional under the First Amendment because it will discourage donors from contributing due to the fear that their names and addresses will be publicly disclosed. As we previously wrote, California requires nonprofit organizations registered to fundraise in the state to annually disclose to the California Attorney General’s Office their Schedule B donor information, which is typically filed on a confidential basis with the IRS as part of the otherwise public Form 990.

This is one of the rare cases where the Supreme Court has reviewed a case about charitable speech or charitable association. In the cases of Buckley v. Valeo and Doe v. Reed, the Supreme Court found that the standard of exacting scrutiny applies when assessing compelled disclosure in the electoral context. The Court’s questions to the parties during oral arguments probed whether California’s disclosure law would be properly reviewed under exacting scrutiny, how the standard of review should be applied, and whether the law can withstand such scrutiny facially (that is, as applied to everyone) or at least as applied to the two nonprofits that brought the cases. The case is considered by many to be vitally important, not only as it relates to disclosure of charitable donors, but as a potential “back door” into challenging rules requiring disclosure of donors under campaign finance laws.

Continue Reading U.S. Supreme Court Hears Oral Arguments on California Donor Disclosure Cases

Charitable and social welfare organizations that file annual financial reports with the New York Attorney General’s Charities Bureau now must file those reports—and potentially two other reports—with the New York Department of State. These requirements are a result of changes to the New York Executive Law, effective January 1, 2021. The following are key deadlines:

  • May 15: Annual financial reports (the CHAR 500) are due to the Charities Bureau and the Department of State by the fifteenth day of the fifth month after the close of the filing organization’s fiscal year. For organizations operating on a calendar year fiscal year, this means the CHAR 500 is due on May 15. Extensions are available for up to 180 days (mirroring the filing schedule for the IRS Form 990).
  • July 31 and January 31: New reports for 501(c)(3) and 501(c)(4) organizations related to certain advocacy activities in New York, if applicable, will be due to the Department of State before July 31 and January 31.

Continue Reading New Nonprofit Filing Requirements in New York

The U.S. Supreme Court has agreed to review two similar constitutional challenges to California’s law requiring that charitable organizations registered to fundraise in the state disclose the names and addresses of their major donors: Americans for Prosperity Foundation v. Becerra (No. 19-251) and Thomas More Law Center v. Becerra (No. 19-255).

Dozens of nonprofits nationwide have filed briefs opposing the California law, emphasizing concerns about the privacy of their donors and the risk of public disclosure of the organizations’ Schedule B donor information, which is typically filed on a confidential basis with the IRS as part of the otherwise public Form 990. The briefs represent diverse sectors of the nonprofit industry, such as public policy, research, and educational foundations; professional membership associations; and social welfare organizations.

The key issue in the case is whether California’s law has a chilling effect on First Amendment association rights, as donors to controversial causes may fear the fallout if their identity were to be made public. The petitioners argue that California has not shown a sufficient state interest to justify these First Amendment implications.

Continue Reading Nonprofits Weigh in on California Donor Disclosure Cases Before U.S. Supreme Court

Every two years, the FEC indexes certain contribution limits to inflation. New contribution limits for the 2021-2022 election cycle were announced on Tuesday.

Individuals may now give $2,900 per candidate, per election (with the primary and general elections considered separate elections), up from the previous limit of $2,800. Between primary and general election giving, an individual may now give a total of $5,800 per candidate, per election cycle. The new limits are in effect for the two-year election cycle beginning the day after the most recent general election and ending on the date of the next general election (November 4, 2020 to November 8, 2022).

The FEC also raised the limits on individual contributions to national party committees. Individuals may now give up to $36,500 per recipient, per year to the main account of the national party committees, up from the previous limit of $35,500. Individuals may also give up to $109,500 per account, per year, to each of the additional national party committee accounts maintained for presidential nominating conventions; election recounts, contests, and other legal proceedings; and national party headquarters buildings (up from the previous limit of $106,500). These new limits are in effect for the two-calendar-year period beginning January 1, 2021 and ending December 31, 2022.

Continue Reading Federal Election Commission Announces New Contribution Limits for 2021-2022 Cycle

The ethics rules that apply to presidential appointees have undergone significant changes this month, with wide-ranging implications for incoming Biden appointees and their former employers, as well as for outgoing Trump officials and their prospective employers.

President Biden issued an executive order just hours after being sworn in as president, requiring certain members of his administration to sign an ethics pledge outlining incoming and outgoing employment, gift, and lobbying restrictions. The pledge requires presidential appointees throughout the federal government to commit to the following:

Continue Reading Biden Requires Ethics Pledge from Executive Branch Appointees, While Trump Appointees Are Released from Theirs