nomoneyThe Federal Election Commission recently concluded an investigation into contributions from a Canadian citizen to a candidate for governor. Why would the FEC investigate a state contribution? Because the ban on contributions from foreign nationals applies not just to federal candidates, but to state and local candidates as well.

The FEC dismissed the case because the state candidate did not know the contributions were illegal. In fact, he had checked with state election officials, who told him there was no issue under state law. There wasn’t, but there was an issue under federal law.

Foreign nationals are individuals who are not U.S. citizens or non-citizens who do not have permanent resident (i.e., green card) status, as well as any companies incorporated, organized, or located abroad. U.S. citizens living in other countries are permitted to contribute.

Continue Reading Don’t Forget: Recent FEC Case Is a Reminder That Federal Law Prohibits Contributions at the State and Local Levels Too

As we get closer and closer to the elections, candidates will be working harder and harder to raise money. One tried and true method is the fundraiser: an individual agrees to put together an event where his or her closest friends will make substantial contributions to the candidate, attend a breakfast, lunch, cocktails, or dinner, meet the candidate, and, if they contribute enough, get a picture with the candidate. While this may seem simple and straightforward, companies often get into trouble when they use their corporate resources to help put on fundraisers.

The largest fine in FEC history ($3.8 million) came as a result of corporate facilitation back in 2006. Others have followed. The FEC just unveiled an enforcement case involving a Nevada architectural firm that paid a substantial fine for using corporate resources to hold a fundraiser. The settlement provides a good example of how not to fundraise for federal candidates.  Continue Reading Hosting Fundraisers: One Company’s Example of How Not to Do it

cleanslateFor those who have placed lobbying registration at the top of their New Year’s resolution list, New York State and New York City have made it easier to take the plunge. Starting on January 1, lobbyists and organizations that employ or retain lobbyists that have failed to register with either the state and/or city may register and file back reports without facing penalty.

New York State: This amnesty program, conducted by New York’s Joint Commission on Public Ethics (JCOPE), runs from January 1 to June 30, 2016. Entities or individuals that have previously been contacted by regulators for failure to comply with New York’s lobbying laws do not qualify. The amnesty program permits those who have never submitted required filings to apply. The amnesty covers any unregistered lobbying that has taken place since December 10, 2006.

To participate in the program, applicants must submit a form found on the JCOPE website. They must also submit (1) all registration statements and periodic reports for lobbying activity occurring between January 1, 2013 and the date of application for amnesty, and (2) applicable fees for those “old” filings. In addition, applicants must comply with a training component.

New York City: The New York City Clerk’s office has established a similar program for lobbyists and companies that should have filed a statement of registration or client annual report under NYC’s lobbying rules. NYC’s program also runs from January 1 to June 30, 2016 and covers unreported lobbying conducted from December 10, 2006 to the present.

presentThe Office of Government Ethics (OGE) has proposed revisions to the gift rules for executive branch employees. Although some of the proposed changes are meant to bring clarity without changing the rules’ substance, several changes will result in new restrictions on the “gifts” that flow from day-to-day interactions companies and associations have with officials. Overall, the changes do little to bring further clarity, and do a lot to cloud the waters of when certain gifts are permissible.

It is important to remember that a gift is broadly defined to include anything of value. Most entities with any business or policy issue before an agency are considered prohibited sources, and may not give any gifts unless an exemption applies. Thus, attendance at events, food and drink, attendance at receptions, and commemorative plaques are all considered to be gifts subject to restrictions on whether executive branch employees may accept them.  Continue Reading The Office of Government Ethics Proposes Changes to the Gift Rules: How the Changes Could Limit Interaction With Government Officials

year-end-reportsJanuary is always a busy month for filing lobbying and campaign finance reports. It is also a good time to think about changes for the upcoming year that might simplify filing obligations.

•  State Lobbying Reports. Most states require year-end reports to be filed at some point in January. Many also require re-registration or renewal of registration for the next year. Pay attention to deadlines, and think about where you are likely to be active in 2016. Perhaps it is time to de-register or let your registration lapse if you will not be active in a particular state. Different states have different thresholds for when registration and reporting are required, so be sure to consider how what you are doing matches what is required. Continue Reading PAC and Lobbying Deadlines Loom Large in January—and a Chance to Get Organized

By EFF (Own work) [CC BY 3.0], via Wikimedia Commons
This week, the U.S. Court of Appeals for the D.C. Circuit upheld the Federal Election Campaign Act’s long-standing ban on contributions from federal government contractors to federal candidates and parties. We have followed the case since the District Court’s decision in 2012.

The ban has been in a place since 1940. Pointing to a history of federal and state corruption scandals involving government contracts, the court ruled that the ban continues to further the government’s interest in preventing quid pro quo corruption and removes political pressure on government employees. Some of the most important things about the ruling for government contractors are:  Continue Reading Federal Appeals Court Upholds Contribution Ban on Government Contractors

MeeTtheCandidatesAlthough it appears that rules governing the political activities of 501(c)(4) organizations will be some time in coming, the IRS recently provided some new insights into how 501(c)(3) organizations can – and cannot – interact with the political world.  In an adverse determination publicly released earlier this month, the IRS looked closely at how a 501(c)(3) organization can engage in educational activities, like conventions and conferences, that involve candidates who may identify with a particular political party.

In general, organizations recognized as exempt from federal income tax under Section 501(c)(3) of the Internal Revenue Code cannot engage in what is called “political campaign intervention.”  This requirement is absolute:  as a condition of getting (c)(3) status, organizations essentially cannot be too politically partisan in nature.  For tax purposes, political campaign intervention includes any communications or activities that support or oppose one or more candidates for public office.  This includes the more clear-cut activities, like running an ad opposing a candidate or making endorsements in a particular race.  But it also can include other activities where the organization uses its resources to give one candidate an advantage over another.

In this determination, the IRS addressed one of these less obvious situations.  Here, the organization applying for recognition as a 501(c)(3) told the IRS it planned to hold symposiums of “thinkers, statesmen and opinion leaders” as its primary activity.  The organization anticipated that elected politicians, as well as candidates in the 2012 presidential race about to compete in a key primary, would be in attendance and would be speakers.  An agenda for the symposium submitted by the organization to the IRS showed that all political speakers invited were affiliated with one particular party; it also included a “Meet the Candidates” event, for attendees paying an additional fee.

In planning its symposium, the organization also internally discussed using contacts within the political party to get speakers and to increase attendance, targeting county party groups for attendees, coordinating with local college and high school groups associated with the party for events, and keeping the state party chair up to date and involved in decisions.  Continue Reading Too Close for Comfort? The IRS Gives New Guidance on 501(c)(3)s and Working with Candidates

Some candidates have a cozy relationship with super PACs that support them (as close as they can, given rules about coordination). Others are surprised and excited when a super PAC shows up to help out. But sometimes a super PAC raises money using a candidate’s name or picture, but doesn’t do much to help the candidate. In those cases, the candidate may be concerned the super PAC is taking donations that might otherwise go directly to the campaign or to super PACs that are actively supporting the candidate. 2013 Virginia gubernatorial candidate Ken Cuccinelli faced such a situation and decided to sue over it.

The lawsuit, which was filed in federal court, was not based on any campaign finance laws, but on the federal Lanham Act, which is a false advertising statute, and state law claims of false advertising, breach of contract, and unauthorized use of Mr. Cuccinelli’s name and picture. Mr. Cuccinelli sued not only the super PAC, but also all of the individuals associated with the super PAC. The case settled on interesting terms.

First, the Super PAC and its principals agreed to pay Mr. Cuccinelli $85,000. They also agreed to turn over their solicitation lists to Mr. Cuccinelli so he can use them either to raise money for future campaigns or to rent the lists to others. The Super PAC and the company that ran it will also undertake certain “best practices” in future campaigns. These include honoring a request from a candidate to stop using the candidate’s name or picture and maintaining contact information on their website. These terms make clear they apply to other PACs that are clients of the defendant’s company.  In this respect, Mr. Cuccinelli may have helped future candidates that find themselves in his spot.  Continue Reading Super PAC or Super Fraud: What to do when a super PAC raises money off a candidate’s name but doesn’t actually do anything to support the candidate

Earlier this month, Virginia Governor Terry McAuliffe signed into law a new bill making significant changes to Virginia’s lobbying and gift laws. The critical changes made by this bill, Senate Bill No. 1424, will become effective on January 1, 2016. Many of the revisions focus on gift reform, but the bill also contains important changes affecting lobbying as well as pay-to-play compliance.  Continue Reading Virginia Tightens the Reins: Major Lobbying and Gift Law Changes to Take Effect in 2016

Last week the U.S. Ninth Circuit Court of Appeals upheld key provisions of Hawaii’s campaign finance laws requiring a for-profit company making campaign contributions and expenditures to register as a political committee, and prohibiting government contractors from contributing to state legislators and candidates.

Broad Implications for Companies and Nonprofits Participating in Hawaii Elections

Hawaii requires entities to register and report as noncandidate committees when they have “the purpose of making or receiving contributions, making expenditures, or incurring financial obligations to influence [elections] over $1,000 in the aggregate for an election cycle.”  A-1 A-lectrician, a for-profit corporation that in 2010 contributed over $50,000 to Hawaii candidates and party committees, and spent more than $6,000 on political advertisements, challenged these requirements.  It argued that registration and reporting should only be required of entities with “the primary purpose” of political activity rather than an organization that has “the purpose” to engage in political activity.

The Ninth Circuit rejected A-1’s argument, reasoning that the $1,000 threshold ensures that the reporting and disclosure requirements will not apply to organizations engaged in only “incidental” political activity.  Large organizations, the court noted, may spend only 1% of their funds on political activity and have many other important purposes – but this small percentage may amount to tens or hundreds of thousands of dollars. As the court glosses over, however, there is a big difference between making hundreds of thousands of dollars in contributions and contributing just over $1,000, which is the threshold for registration.

This ruling has broad implications for any company or nonprofit making contributions or expenditures in Hawaii. Although the court left open the possibility that the law may be unconstitutional as applied to an organization engaged in less political activity than A-1, many companies and nonprofits face burdensome state disclosure requirements for relatively modest amounts of political spending. In addition to registering, such companies or nonprofits must file reports disclosing contributions received, contributions made to candidates, political expenditures made, and other financial information.

Hawaii’s Pay-to-Play Law Also Upheld

A-1 also challenged Hawaii’s pay-to-play law on the basis that it prohibits a contractor from contributing to legislators or candidates who will neither award nor oversee state contracts. The court rejected this argument, reasoning that the legislature as a whole deals with procurement matters and that it would be very difficult for a contractor to determine whether a particular officeholder or candidate will become involved in a contract award or oversight process.

This is the second Federal appeals court to uphold contribution restrictions on government contractors, commonly known as pay-to-play laws.  While judicial rulings after Citizens United have tended to loosen restrictions on campaign finance laws, legal challenges to state pay-to-play laws have not fared well.  As such, pay-to-play laws continue to pose compliance challenges for companies that do business with government agencies and for their politically-active officers, directors, and other principals who may also be subject to these laws.