Campaign Finance

Oregon: “The City’s Public Campaign Financing Program Allowed Candidates with Little Support to Snag Taxpayer Dollars” by Sophie Peel for Willamette Week

Ethics

California: “Assessor Reports $1M Behested Payment, Biggest Charitable Donation Made at a Local Elected Official’s Request” by Jeff McDonald (San Diego Union-Tribune) for MSN

National: “Trump Transition Team Ethics Pledge Appears to Exclude President-Elect” by Betsy Klein, Steve Contorno, and Arlette Saenz (CNN) for MSN

Florida: “Tickets to Master’s Tournament Trigger Feud in Hillsborough County Politics” by Jack Evans and Justin Garcia (Tampa Bay Times) for MSN

Indiana: “Nonprofit Braun Transition Group Follows Former Governors’ Model” by Leslie Bonilla Muñiz (Indiana Capital Chronicle) for Yahoo News

Legislative Issues

National: “Supreme Court to Examine Power of Congress to Delegate Authority” by Justin Jouvenal (Washington Post) for MSN

Lobbying

National: “As His Power Grows, D.C. Wonders: How do you lobby a man like Elon Musk?” by Cat Zakrzewski, Faiz Siddiqui, and Pranshu Verma (Washington Post) for MSN

New York: “N.Y. Ethics Commission Faces New Constitutional Challenge” by Brendan Lyons for Albany Times Union

The Indiana Supreme Court concluded state law bans corporate contributions to independent expenditure committees or to any PAC earmarked for independent expenditures in Indiana Right to Life Victory Fund and Sarkes Tarzian, Inc. v. Diego Morales, et al.

Indiana Right To Life’s super PAC wanted to accept a $10,000 contribution from a local media company, Sarkes Tarzian, Inc. and though the state never would have stopped the transaction, the PAC sued in federal court.

The 7th Circuit Court of Appeals said it wanted the Indiana Supreme Court to declare whether state law bans unlimited contributions to super PACs.

The state Supreme Court ruled the law explicitly notes which groups corporations can give to and because PACs that only make independent expenditures are not mentioned, corporations cannot give anything to them.

The court’s opinion acknowledged both sides expect the federal court to stop the state from enforcing the ban because the U.S. Supreme Court ruled in Citizens United v. FEC that limiting corporate contributions to super PACs is unconstitutional.

The state Supreme Court decision leaves the General Assembly with the task of updating the statute to permit corporate contributions for the purpose of independent expenditures.

Q: As a registered lobbyist, I am often contacted by elected officials to make a corporate contribution to the officials’ charity of choice, foundation, or scholarship fund.  Is this legal?  Am I required to disclose these contributions on my lobbying reports?

A: This scenario is happening more and more every day.  Even though the official does not derive direct, political contributions for his or her campaign, such charitable contributions nonetheless result in positive exposure for the official, goodwill by the lobbyist, and beneficiaries that include the underprivileged, the sick, and the elderly.  Furthermore, the monetary amount of corporate charitable donations can surpass the amount of permissible political contributions under campaign finance law.

Most states allow a lobbyist’s employer to make charitable contributions at the behest of an elected official and there are no reporting obligations.  Some of the other jurisdictional requirements include:

FEDERAL:  Pursuant to House and Senate Rules, charitable contributions made by a registered lobbyist at the behest or designation of a legislative member or employee are prohibited, unless the member or employee has designated the contribution to a charitable organization in lieu of an honorarium.

Please note, however, a charitable organization established by a person before that person became a covered official and where that covered official has no relationship to the organization after becoming a covered official, is not considered to be established by a covered official.

CALIFORNIA:  Payments may be made at the behest of a state elected officer for a charitable, legislative, or governmental purpose.  The state official must report the payment.

CONNECTICUT:  If a client lobbyist makes a charitable contribution at the behest of a public official, the contribution generally will be deemed to have been made to foster goodwill with the public official and hence to constitute an expenditure in furtherance of lobbying. If deemed in furtherance of lobbying, the expenditure must be reported on the client lobbyist’s ETH-2D report as lump sum under “Other Expenses.”

DELAWARE:  Charitable contributions made at the behest of an official are required to be disclosed on lobbying reports. A charitable contribution made at the behest of a legislator must be reported as a gift. If the amount is over $50, it must be itemized and the specific legislator must be named. A notation may be made if it was a donation to a charity.

NEW YORK:  A state official may not designate or recommend a third party to receive a gift, and no prohibited gift may be offered to, or received by, a third party under circumstances in which it would be reasonable to infer the gift was intended to influence a public official. In other words, an interested source is presumptively prohibited from giving a gift to a third party, even a charity, at the behest of a public official.

A gift offered on behalf of or at the designation or recommendation of a public official is only permissible if, under the circumstances, all of the following criteria are met:

It is not reasonable to infer the gift was intended to influence such public official;

The gift could not reasonably be expected to influence the public official in the performance of his or her official duties; and

It is not reasonable to infer the gift was intended as a reward for any official action on the public official’s part.

NEVADA:  Charitable contributions are reportable if made in the legislator’s name. A registered lobbyist is required to report the total expenditures made to any other person on behalf and for the benefit of a legislator.

On Monday, the Supreme Court of the United States announced it would decline to hear a challenge to a Massachusetts law.

The law in question bans corporate contributions to campaigns, parties and candidate-focused political action committees.

The Massachusetts Supreme Judicial Court unanimously rejected the challenge, brought by 1A Auto Inc. and 126 Self Storage Inc., in September.

The suit claimed disparate treatment by banning for-profit corporate contributions while allowing significant contributions by unions and nonprofits.

After the Supreme Court ruling in Citizens United, state law was updated to allow corporate spending for independent expenditures but not political contributions.

Massachusetts Attorney General Maura Healey applauded Monday’s decision not to hear the case for the integrity of state elections.

Opponents of the law are hopeful the Supreme Court will take up the issue in another case.

The Massachusetts Supreme Judicial Court ruled unanimously to uphold the state’s prohibition on corporate contributions this week.

Rick Green, the republican nominee for the state’s 3rd Congressional District seat, owns 1A Auto Inc., one of the companies asserting the ban discriminated against businesses’ right to free speech.

In upholding the ban, the Court stated allowing corporate contributions would create “a serious threat of quid pro quo corruption.”

The Massachusetts contribution ban applies to corporations and business entities but does not extend to unions or nonprofits.

Attorneys for Green and 1A have stated their intention to petition the US Supreme Court to hear the case.

On September 15, the Federal Election Commission (FEC) was unable to agree on a policy to clarify when and if a U.S. domestic subsidiary corporation of a foreign national is illegally involved in political activity.

Federal law prohibits foreign nationals from directly or indirectly making contributions, donations, expenditures, independent expenditures, and disbursements in connection with federal, state, or local elections. FEC regulations also prohibit foreign nationals from directing, controlling, or participating in the decision-making process of any person, such as a corporation, with regards to decisions concerning the making of contributions, donations, expenditures, or disbursements in connection with elections in the U.S.

Additionally, the FEC was unable to reach an agreement on the creation of a safe harbor for political committees to accept corporate contributions deemed not to have come from foreign national sources.

The South Dakota panel assembled by Secretary of State Shantel Krebs to review campaign finance laws showed support of a proposal to allow direct contributions from individual organizations like businesses and labor unions.

The panel met Tuesday, September 6 and will meet two more times before finalizing proposals that will be requested from the Legislature in January. The panel is also expected to propose new campaign finance reporting requirements.

On May 17, a bill to amend the Election Finances Act was introduced in the Legislative Assembly of Ontario.

Bill 201, the Election Finances Statute Law Amendment Act, 2016, which also includes amendments to the Taxation Act, 2007, bans corporate and union donations to political parties. The legislation will also limit contributions from individuals, limit spending for third-party advertising, and tighten political party spending and fundraising rules for by-elections.

If passed, the changes are hoped to be in place or significantly underway before the June 2018 election, with initial changes legislated for January 1, 2017.

The Elections Committee approved a bill to reduce the corporate contribution limit from $5,000 to $1,000 per year and to close a loophole permitting political contributions from limited liability companies. Senate Bill 60, introduced by Sen. Daniel Squadron in 2015, passed the committee this week, while a parallel bill was being passed in the Assembly.

In response to recent political scandals across the state, those supporting the bill are calling for an up-or-down Senate vote by the end of the legislative session.

The Kentucky Registry of Election Finance (KREF) cannot enforce the state’s constitutional prohibition on corporate contributions, according to a federal judge. U.S. District Judge Gregory F. Van Tatenhove concluded the rule to be a violation of the Equal Protection Clause because it prohibits corporate contributions while allowing other organizations, such as labor unions, to make contributions.

The case, Protect My Check, Inc. v. Dilger, grew out of right-to-work legislation. Labor unions who opposed the bill were allowed to make political contributions while a non-profit corporation, in favor of the measure, were not. The judge, however, rejected a First Amendment, free speech argument for allowing political contributions.

KREF stated it is still reviewing the opinion and is weighing its options.

Q. Are there any rules that pertain to making contributions in the weeks leading up to an election?

A. With local elections in 2015 and the upcoming 2016 elections, it is wise to know what the rules are when making contributions in the days and weeks leading up to an election.  Usually, there is a monetary threshold that must be exceeded, and typically there is a short turnaround time to disclose the contribution, usually within 24 hours. In some instances, there is an outright ban on contributions.

In California, contributions of $1,000 or more per candidate made by a major donor during the 90-day period before an election must be disclosed within 24 hours of making the contribution.  Contributions to ballot measure committees and political party committees are also included within this reporting requirement.  The candidate and the ballot measure committee must be on the ballot at the election for which the 90-day period applies.  California’s 90-day pre-election period is the longest in the country.  If numerous special elections are being held, the 90-day periods may overlap.

In Washington, a contribution of $1,000 or more per candidate made by a registered lobbyist during the 21 days before an election must be disclosed within 24 hours of making the contribution.  This includes contributions to candidates and ballot measures appearing on the ballot at the election for which the 21-day period applies, as well as contributions to political party committees and PACs.  The Washington Public Disclosure Commission has a link on its home page that allows for the electronic filing of this report.

In Florida, opposed candidates must return contributions received less than five days prior to an election.

In Tennessee, a PAC is prohibited from making a contribution to a candidate for state office after the 10th day before an election until the day of the election.

These are just a few examples.  As we always advise, verify the rules in your state before making political contributions.

You can directly submit questions for this feature, and we will select those most appropriate and answer them here. Send your questions to: experts@stateandfed.com.

(We are always available to answer questions from clients that are specific to your needs, and we encourage you to continue to call or e-mail us with questions about your particular company or organization. As always, we will confidentially and directly provide answers or information you need.) Our replies to your questions are not legal advice. Instead, these replies represent our analysis of laws, rules, and regulations.

State Sen. John Schickel filed a federal lawsuit against the Kentucky Registry of Election Finance and the Legislative Ethics Board aimed at eliminating the state’s campaign contribution limits. The suit claims the $1,000 limit to individual candidates and the ban on corporate contributions are violations of free speech.

The suit also asks the court to strike down ethics rules prohibiting lobbyists from making contributions, prohibiting employers of lobbyists from making contributions while the Legislature is in session, and banning gifts from lobbyists to legislators.

Kentucky House candidate David Watson and Pendleton County judge candidate Ken Moellman Jr. have joined the suit. The state agencies have until October 6 to respond.

A ban on contributions from lobbyists and PACs will be lifted for the 2016 Democratic National Convention. The ban was imposed by the party in 2008.

According to the New York Times, the Democratic National Committee (DNC) will accept these once banned contributions for both the convention and for joint fundraising with presidential campaigns. Holly Shulman, a DNC spokeswoman, said the party will “not [be] accepting donations from political action committees and lobbyists for its general fundraising operations.”

Photo of the Philadelphia skyline by Massimo Catarinella on Wikimedia.

The Brennan Center for Justice, on behalf of several New York lawmakers, filed suit against the New York State Board of Elections, challenging a 1996 board ruling that treats limited liability companies (LLCs) as individuals. The ruling has the result of creating a loophole allowing LLCs to circumvent stricter contribution limits imposed upon other business entities, namely partnerships and corporations.

The board had an opportunity to overturn its 1996 ruling at its April 2015 board meeting, but board members split along party lines to uphold the ruling, thus prompting the Brennan Center for Justice to file suit.

Plaintiffs allege the LLC loophole allows special interest groups to funnel tens of millions of dollars into political campaigns without transparency. Corporate contributions are limited to $5,000 per calendar year; partnerships are limited to $2,500 per calendar year at the partnership entity level. Under the 1996 board ruling, LLCs can contribute substantially more than other business entities because they are treated as individuals.

The lawsuit was filed in the Supreme Court of New York, County of Albany.