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new-york-1590175_640New York Governor Andrew Cuomo finally signed his administration’s signature political law reform bill last week, on August 24, 2016. The bill passed out of the New York legislature earlier this year and will have a significant impact on state-level Super PACs, nonprofit organizations involved in lobbying efforts in New York, and political consultants, in particular.

The bill’s provisions affecting Super PACs will be effective 30 days after the signature date, meaning that the new law will now be in place for the November general elections and many of the new lobbying-related disclosures will take effect before the next legislative session. It remains to be seen, though, how quickly the New York state agencies tasked with enforcing and implementing the new law will develop the forms for the registrations and reporting now required under the law for New York Super PACs, political consultants, and nonprofit organizations.

Interestingly, before it was signed, the bill drew criticism over the donor disclosure requirements that it imposes on nonprofit organizations such as 501(c)(4) social welfare organizations and 501(c)(3) charities that are engaged in lobbying and other issue advocacy in New York. These provisions could be the subject of a lawsuit on constitutional grounds, which would further delay their impact.

For more details on the major changes under the new law, please see our earlier coverage of the bill.

Many issues important to public charities are addressed in the platforms adopted by the political parties. As Republican, Democratic, and Libertarian parties wrap up their conventions and the Green Party meets this week, charities are asking how they can talk about the issues raised in the platforms. Charities can advance their position on the issues that they had been advocating before the platforms were adopted; however, they should consider carefully whether to opine specifically on the positions of candidates and the political parties.

Section 501(c)(3) of the federal tax code strictly prohibits all charities from engaging in activities to support or oppose candidates for public office. However, public charities, in particular, can advance public policy goals—many involving specific legislative solutions that are in the platforms.

The Internal Revenue Service (IRS) and, ultimately, the courts evaluate whether a charity improperly engages in candidate campaigns by considering the context. Could the charity’s statements about policy and candidates or political parties reasonably lead an audience to believe the organization has an opinion on the candidate or party? Facts and circumstances are considered in the context of the statement and the issue.

In considering the statement:

  • Does it identify one or more candidates or parties or express approval or disapproval for positions of a political party platform or candidate?
  • Is it delivered close in time to the election or make reference to voting or the election?
  • Is the timing of the statement instead linked to a specific legislative action by an officeholder who happens to be a candidate?

In considering the issue addressed in the statement:

  • Has the position on the issue been raised to distinguish between parties or candidates?
  • Is the issue part of an ongoing series of communications by the charity on the same issue without regard to the election?

There is a safe zone for a charity that has previously advocated for a policy position that later becomes a political party platform issue or the subject of a candidate’s position.

A charity can:

  • Use earned and paid media to advocate for the charity’s position on an issue;
  • Call for all candidates and parties to support the charity’s position without calling out particular parties or candidates or mentioning the positions they’ve already taken;
  • Send materials to all candidates and party leaders to educate them about the charity’s issues;
  • Invite all candidates in a race to meet with charity leaders to discuss the issue and visit the charity’s facilities or work projects; and
  • Ask its members or the public to educate all candidates on the charity’s issues.

Charities should take care when:

  • Inviting a current officeholder who is also a candidate to a public event of the charity;
  • Naming an officeholder in paid advertising who is up for election, because of federal and state election laws that regulate campaign speech and may be triggered, requiring disclosure and other requirements close in time to the election;
  • Holding panel discussions or debates with candidates; or
  • Providing an “open forum” on social media about issues without careful monitoring or control of comments posted.

Charities should avoid:

  • Publicizing the positions of political parties and candidates on issues on which the charity has taken a position; and
  • Holding debates or developing voter guides limited to a small set of issues, such as environmental topics, on which the charity has taken a position.

Planning and Executing Activities Involving the Candidates, Parties, and Their Positions

Many activities—such as debates, voter guides, and voter registration—can also be considered by a charity on a broad range of issues of interest to the public. The key is to remember that these activities must be nonpartisan, and not favor one candidate over another. In addition, charities should consider their underlying mission and determine whether activities like general voter education are reasonably part of the chartered purpose of the charity.

Unfortunately, the line between prohibited and permissible activities for a 501(c)(3) organization is murky and can easily be crossed if not properly managed. Careful planning, clear communication about the limitations of all involved, and control in executing the activity are critical. Now might be a good time to review the rules that will help your charity stay on the right side of the line while involved in the process.

If done correctly, 501(c)(3) organizations can:

  • Help register voters;
  • Conduct get-out-the-vote activities;
  • Publish voter guides on a broad range of issues of interest to the public;
  • Create candidate questionnaires on a broad range of issues of interest to the public;
  • Host candidate appearances that are not debates;
  • Host debates on a broad range of issues of interest to the public;
  • Conduct issue advocacy;
  • Allow leadership and staff (on their own time) to be politically active; and
  • Create an affiliated organization to engage in political activities that they cannot.

Continue reading for more information on prohibited intervention and permissible activities.

dollar signIt was the best of times, it was the worst of times. For investment advisers and others subject to the pay-to-play rules, that is. Although both vice presidential picks have gubernatorial experience, because Mike Pence is a sitting governor and Tim Kaine is a former governor, there are certain pay-to-play rules that apply to contributions to Trump/Pence that do not apply to Clinton/Kaine. Thus, the Pence pick has important implications for many companies and firms engaged in the financial services industry.

As reported by various news outlets, Governor Pence’s role with the Indiana Public Retirement System subjects contributions to the Trump/Pence ticket to the SEC’s and other pay-to-play rules. Violations of these rules can carry significant penalties. And the shadow of the pay-to-play fundraising restrictions has even caused some to speculate that Pence should resign as governor.

Continue Reading A Tale of Two Vice Presidents: Pay-to-Play and the Running Mates

No CopyrightsWhat do the campaigns of Sarah Palin, John McCain, Ted Cruz, Donald Trump, Newt Gingrich, Rand Paul, Ralph Nader, Ronald Reagan, Mike Huckabee, Barack Obama, and Mitt Romney all have in common? They have all faced claims of copyright infringement for their use of music or other works of art.

Candidates—and outside groups supporting or opposing them—often do not pay much attention to the copyright laws that apply to their activities, and sometimes use other people’s copyrighted works without obtaining the necessary licenses. For example, candidates use popular songs at rallies and campaign events and in YouTube videos and other online advertisements, without getting the required consent or license from the musician, songwriter, or performing rights societies. And sometimes they will use photographs or artwork and incorporate them into TV ads, digital ads, mailers, and emails, without obtaining, or making sure their contractors have obtained, the necessary permissions, consents, or licenses from the artists whose work they are using.

Continue Reading Copyright Tips for Political Campaigns and Their Consultants

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

tax forms and notesA substantial number of organizations exempt under Internal Revenue Code (Code) § 501(c)(4), and their individual officers and directors, may be subject to financial penalties if they do not file a Form 8976, Notice of Intent to Operate Under Section 501(c)(4), with the Internal Revenue Service (Service or IRS) on or before September 6, 2016.

On July 8, 2016 the IRS released a revenue procedure for implementing new statutory requirements for certain organizations that operate under section 501(c)(4) of the Internal Revenue Code. This requirement comes on the heels of the December 2015 enactment of the Protecting Americans from Tax Hikes (PATH) Act of 2015.

The recently released Revenue Procedure 2016-41 contains temporary regulations implementing the 501(c)(4) provisions of the PATH Act and describes the new Form 8976 and the related rules for filing it.

Continue Reading New Mandatory IRS Notification Process for 501(c)(4) Nonprofit Organizations Finally Announced

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

Last month, New York Governor Andrew Cuomo announced that he and legislators in the New York State Assembly had agreed on a “5 Point Ethics Reform Plan,” a sweeping proposal to create substantial changes in New York campaign finance law. The reform bill passed out of the legislature in mid-June and is expected to be signed by the governor any day.

Most of the significant changes will become effective 30 days after the governor signs the bill into law, meaning those preparing to get involved in New York state elections this fall will need to become familiar with the new requirements quickly. The changes are particularly important for entities considering making independent expenditures in those elections, as the bill creates a new definition for an “independent expenditure committee” and adds more detail to New York’s definition of “coordination.” Nonprofit organizations exempt from federal income tax under Internal Revenue Code section 501(c)(4) are also targets for further disclosure obligations under this new law. Finally, the bill includes specific registration and reporting requirements for “political consultants” – the first-ever provision of its kind in New York law – which may impact many consultants and other service providers active in the political arena.

Continue Reading New York Imposes New Rules on Super PACs, Advocacy Groups, and Political Consultants

CyberWith political campaigns increasingly subject to cybersecurity breaches this year, the Department of Homeland Security and the FBI are racing to educate campaign staffers against potential threats. According to reports, foreign governments and others have stepped up efforts to hack into Democratic and Republican campaigns to access sensitive information, including address and credit card information of campaign supporters. Ari Schwartz, the former Senior Director for Cybersecurity at the White House and current Managing Director  for Cybersecurity Services at Venable, talked with The Campaign Workshop to discuss these threats and the measures campaigns can take to prevent them in an interview that can be found here.  In the interview article, Ari shares some helpful tips that all campaigns, consultants, and fundraisers should consider.

About Venable’s Cybersecurity Risk Management Practice:

Venable’s Cybersecurity Risk Management Practice assists businesses and organizations with the cybersecurity risk management practices that are essential in today’s world. Our cybersecurity team leverages legal services, proven organization governance models, technological tools and expertise, insurance, and public relations to aid organizations with their risk management. Using the voluntary federal Cybersecurity Framework as a guide, we help entities set baselines and reduce risk without the fear of increasing their liability from regulatory enforcement, private litigation, or class action litigation that can lead to significant financial and reputational harm.

By U.S. Government [Public domain], via Wikimedia Commons
For the rest of the 2016 election season, nonprofits in Arizona can be politically active without registering as a political committee. As long as they meet basic qualifications, nonprofits can run candidate ads, support ballot measures, and even make contributions, all without the burdens of registration, ongoing reports, and disclosure of donors.

Arizona concluded its 2016 legislative session in May with the passage of an important campaign finance law, House Bill 2296. This bill mirrors one passed earlier in the session, Senate Bill 1516. Both bills exempt certain nonprofit organizations from Arizona’s definition of a political committee, but SB 1516 would have only taken effect starting in 2017. HB 2296, on the other hand, makes these rules effective in time for the 2016 election. As of June 1, 2016, nonprofits active in Arizona elections will not have to register as a political committee and will be free from the regulatory obligations that come with being a political committee.

Continue Reading 2016 Election: New Rules for Nonprofits in Arizona