On July 22, 2014, Gov. Jack Markell signed several bills amending Delaware’s campaign finance and lobbying laws. Senate Bill 187 allows political committees to donate prohibited contributions to certain charitable organizations. House Bill 300 protects whistleblowers from employer retaliation for reporting campaign finance violations or participating in the investigation of such violations.

Both Senate Bill 187 and House Bill 300 became effective upon the governor’s signature. House Bill 301 requires contributions given from a joint account, whether by check, debit card, or credit card, to be attributed to the signator of the contribution. Senate Bill 186 requires entities making contributions of more than $100 to disclose the name and address of one responsible party. A responsible party, as defined by the bill, is an individual who exercises control over the entity.

House Bill 301 and Senate Bill 186 are effective January 1, 2015. Also effective January 1, 2015, is House Bill 306, which imposes late filing fees on lobbyists who file late reports. A fee of $25 will be assessed for the first day and $10 for each subsequent day a lobbyist report is delinquent. The maximum late fee allowable is $100. The Public Integrity Commission may waive such late filing fees if it determines circumstances make imposition of the fee inappropriate.

Of the newly minted legislation, Gov. Markell said, “We must always look to improve our laws to strengthen the public’s confidence in the political process.”

Photo of Governor Jack Markell by John D. (Jay) Rockefeller IV on Wikimedia Commons.

Today, in McCutcheon v. Federal Election Commission (docket 12-536), the United States Supreme Court ruled aggregate limits on federal campaign contributions are an unconstitutional violation of the First Amendment’s guarantee of political expression and association.

Background:

Federal law imposes two types of limits on individual political contributions.

Base limits restrict the amount an individual may contribute to:

• A candidate committee;
• A national party committee;
• A state, local, and district party committee; and
• A political action committee.

Biennial limits restrict the aggregate amount an individual may contribute biennially to:

• Candidate committees; and
• All other committees.

Shaun McCutcheon is an Alabama businessman who regularly makes political contributions to Republican candidates and the Republican National Committee. McCutcheon wanted to contribute $26,200 more to candidates and committees than the aggregate ceiling would allow. The Republican National Committee was also a plaintiff in the suit.

McCutcheon did not challenge the base limits on contributions to individual candidates and entities, but, wanting to give to more candidates and political entities than allowed by law, he challenged the aggregate limits.

Decision:

In a 5-4 decision, with the majority joined by Justice Thomas in a separate concurring opinion, the Court found aggregate limits do not further the permissible government interest in preventing quid pro quo corruption or the appearance of such corruption.

The majority opinion, written by Chief Justice Roberts and joined by Justices Scalia, Kennedy, and Alito, found the aggregate contribution limits do not further the only governmental interest accepted as legitimate in Buckley v Valeo. The 1976 decision by the U.S. Supreme Court found aggregate limits to be a permissible government regulation to curtail corruption or the appearance of corruption.

In McCutcheon, the Court stated, “Congress may not regulate contributions simply to reduce the amount of money in politics.”

The Court equated political contributions with “political campaign speech,” writing, “Money in politics may at times seem repugnant to some, but so too does much of what the First Amendment vigorously protects. If the First Amendment protects flag burning, funeral protests, and Nazi parades—despite the profound offense such spectacles cause—it surely protects political campaign speech despite popular opposition.”

Effect on other jurisdictions: (updated June 16, 2014)

The McCutcheon decision’s effects extend beyond the federal campaign finance laws.

At its May 14, 2014 meeting, the Connecticut State Elections Enforcement Commission announced it would no longer enforce the state’s aggregate contribution limit absent further direction from the General Assembly or a court of competent jurisdiction. The commission stressed, however, the base contribution limits would remain in full force and effect.

In a policy statement dated June 4, 2014, the Maine Commission on Government Ethics and Practices stated it would no longer enforce the yearly $25,000 aggregate contribution limit applicable to individuals and entities contained in Maine Revised Statutes section 1015(3), barring guidance from the legislature or a court. The policy statement noted the commission’s intention to study the issues and perhaps propose legislation during the next legislative session.

The Maryland State Board of Elections issued a guidance memo stating the board would no longer enforce a $10,000 aggregate limit on donors’ contributions to state candidates during a four-year election cycle, while stressing the $4,000 limit on personal contributions to any one candidate was still in place.

The Massachusetts Office of Campaign and Political Finance (OCPF) announced it will no longer enforce the state’s $12,500 aggregate limit on the amount an individual may contribute to all candidates, but will continue to enforce the $5,000 aggregate limit on contributions by individuals to party committees.

A provision in Minnesota’s campaign finance law known as the “special sources limit” will no longer be enforced as applied to individual large donors. U.S. District Judge Donovan Frank issued a preliminary injunction barring enforcement of the law with respect to individual large donors in response to a challenge by the Institute for Justice on First Amendment grounds. Under section 10A.27(11) of the Minnesota Statutes, the special sources limit prohibits a campaign from raising more than 20 percent of its total contributions from lobbyists, political committees, and large donors contributing more than one half of the individual contribution limit. Donovan issued the injunction in light of the precedent set by McCutcheon. The defendants have the opportunity to appeal to the 8th U.S. Circuit Court of Appeals. If they choose not to appeal, the case will proceed to a final ruling at the district court level.

The U.S. District Court for the Southern District of New York struck down a campaign finance law limiting contributions to super PACs. Sections 14-114(8) and 14-126 of the New York Election Law imposed an annual aggregate contribution limit of $150,000 per contributor. Plaintiff New York Progress and Protection PAC challenged the aggregate contribution limits on First Amendment grounds. Citing the precedent established in Citizens United and McCutcheon, the judge enjoined New York’s aggregate contribution limit as an unconstitutional ban on free speech. In its May 2014 meeting, the State Board of Elections determined the $150,000 yearly aggregate limit on political contributions from individuals can no longer be enforced in light of recent federal court decisions. New York campaign finance law imposes a similar aggregate limit of $5,000 on a corporation’s yearly contributions. The board made no ruling with regard to the corporate limit; however that limit is being challenged in federal court.

On April 3, 2014, the Puerto Rico Office of the Electoral Comptroller issued an informational newsletter in light of the U.S. Supreme Court ruling. While the Court referenced similar aggregate limits in other states and jurisdictions, it did not go so far as to declare them unconstitutional. Therefore, the office is not taking any immediate action with regard to the Puerto Rico aggregate campaign finance limits established in 2011. It will request an opinion from the Puerto Rico Secretary of Justice to determine how the Court’s decision relates to Puerto Rico law. The office will issue new informational bulletins as further developments arise.

On April 16, 2014, the Rhode Island Board of Elections voted to support the creation of legislation eliminating aggregate political contribution limits. The vote was in reaction to the McCutcheon decision. State law currently prohibits an individual from making contributions of more than $10,000 in the aggregate to more than one candidate, political action committee (PAC), or political party committee or to a combination of candidates, PACs, and political party committees within a calendar year.

In Vermont, Senate Bill 82 added an aggregate contribution limit of $40,000 per election cycle, which was to take effect January 1, 2015. However, the implementation of the aggregate contribution limit was contingent on the Supreme Court ruling in favor of aggregate limits in McCutcheon. Because the Supreme Court in fact ruled against aggregate limits, Vermont’s aggregate limit will not go into effect.

Wisconsin’s aggregate limits had already been challenged in Young v. Government Accountability Board. The parties in that case agreed to put the case on hold until the McCutcheon decision was issued. Following the ruling, the Government Accountability Board reached a settlement in which it agreed the aggregate contribution limits for individuals and PACs contributing to state candidates were no longer enforceable.

The Wyoming Joint Corporations, Appropriations, and Political Subdivisions Interim Committee ordered a draft bill to repeal the state’s aggregate contribution limits, which conflict with the U.S. Supreme Court’s ruling in McCutcheon.

In light of the ruling in McCutcheon, the Los Angeles Ethics Commission announced it would no longer enforce the aggregate limits on contributions to city and school board candidates. Limits on contributions to individual candidates remain in place.

The San Francisco Ethics Commission adopted a resolution stating it will not enforce the aggregate limit on contributions to city candidates in light of the McCutcheon ruling. The Campaign and Governmental Conduct Code imposes an aggregate limit of $500 multiplied by the number of city elective offices to be voted on in the election. The city’s $500 limit on contributions from an individual to a single city candidate remains in full force.

Analysis:

Quid pro quo corruption narrowly defined:

The Court maintained a narrow definition of quid pro quo corruption, preventing the government from limiting the First Amendment right to make contributions to as many candidates as an individual would like, within the base limits of contributions.

In the decision, the Court marked a solid delineation between corruption and appreciation: “[T]here is a clear, administrable line between money beyond the base limits funneled in an identifiable way to a candidate—for which the candidate feels obligated—and money within the base limits given widely to a candidate’s party—for which the candidate, like all other members of the party, feels grateful. . . . To recast such shared interest, standing alone, as an opportunity for quid pro quo corruption would dramatically expand government regulation of the politi­cal process.”

The Court found the possi­bility that an individual who spends large sums may garner “influence over or access to” elected officials or political parties does not give rise to such quid pro quo corruption.

The Court wrote, “The Government may no more restrict how many candidates or causes a donor may support than it may tell a newspaper how many candi­dates it may endorse.”

Arguing against the dissent’s argument that corruption could still occur even without the circumvention of the base contribution limits, the majority found such an argument would broaden the definition of quid pro quo corruption. The Court stated the dissent’s interpretation “dangerously broadens the . . . definition of quid pro quo corruption . . . and targets as corruption the general, broad-based support of a political party.”

Circumvention of base limits:

The Court found the argument that aggregate contributions could circumvent base contribution limits unconvincing.

The majority said the basis for allowing the law on aggregate limits to stand falls on “speculative” scenarios of corruption, which the Court found “highly implausible” and “hard to believe.” The Court said “experience and common sense” foreclose on many of the scenarios of schemes to funnel money, including one scenario the District Court found had merit. The Court found, “Based on what we can discern from experience, the indiscriminate ban on all contributions above the aggre­gate limits is disproportionate to the Government’s inter­est in preventing circumvention.”

The Court stressed that once an individual reaches the aggregate limit, the law denies “the individual all ability to exercise his expressive and associational rights by contributing to someone who will advocate for his policy preferences.”

Disclosure:

The Court also argued disclosure of contributions “minimizes the poten­tial for abuse of the campaign finance system.”

The majority maintained lifting the aggregate limits encourages money away from entities not subject to disclosure: “Indi­viduals can, for example, contribute unlimited amounts to 501(c) organizations, which are not required to publicly disclose their donors.”

Citing Citizens United, Justice Roberts wrote, “Disclosure requirements burden speech, but—unlike the aggregate limits—they do not impose a ceiling on speech.” In Citizens United, the Court held 8-1 that laws requiring the disclosure of political contribution were constitutional.

Legislative alternatives suggested by the Court:

The majority opinion suggested Congress could create other legislation to curtail circumvention of the base limits, such as enacting legislation targeting restrictions on transfers among candidates and political committees.

Additionally they wrote, “Congress might also consider a modified version of the aggregate limits, such as one that prohibits donors who have contributed the current maximum sums from further contributing to political committees that have indicated they will support candidates to whom the donor has already contributed.”

Overturning Buckley v Valeo’s holding on aggregate limits:

In overturning the 1976 U.S. Supreme Court Buckley v Valeo’s ruling on aggregate limits, the Court found the 38-year-old decision did not thoroughly address aggregate limits in its analysis. The Court also found subsequent laws enacted have “considerably strengthened” statutory safeguards against circumventing base limits through the transfer of contributions between parties and political committees. Additionally the Court argues Buckley did not address the “overbreadth challenge” with respect to the aggregate limits.

The Court rejected an alternative provided in the Supreme Court’s prior Buckley decision finding a person could personally volunteer for a candidate. The majority found “personal volunteering is not a realistic alternative for those who wish to support a wide variety of candidates or causes.”

The Court also heavily relied on campaign finance cases decided in the last few years, such as Citizens United v FEC and Arizona Free Enterprise Club’s Freedom Club PAC v Bennett.

Justice Thomas, in his separate opinion concurring with the majority ruling, writes Buckley “denigrates core First Amendment speech and should be overruled.”

Today, the Massachusetts Office of Campaign and Political Finance (OCPF) announced it will no longer enforce the state’s aggregate political contribution limit for the amount an individual may contribute to candidates.

The law, G.L. §55-7A(a)(5), limits the aggregate amount an individual can contribute to all candidates to $12,500. The OCPF made its decision based on today’s U.S. Supreme Court’s decision, McCutcheon vs. Federal Election Commission, which found aggregate limits on federal campaign contributions are an unconstitutional violation of the First Amendment’s guarantee of political expression and association.

However, the OCPF is going to review the decision more closely before deciding whether the $5,000 aggregate limit on contributions by individuals to party committees can remain standing. On its webpage, the OCPF stated, “The statutory provisions at the federal level that were analyzed by the Court in McCutcheon differ substantially from the law in Massachusetts, and a determination on the applicability of the ruling in this area will be made after careful review.”

A new Texas Ethics Commission Rule regarding contributions to direct campaign expenditure-only committees became effective today.

Texas Ethics Commission Rule §22.5 requires a political committee intending to act exclusively as a direct campaign expenditure-only committee to file an affidavit with the Texas Ethics Commission stating the committee intends to act exclusively as a direct campaign expenditure-only committee and will not use its contributions made to it to make political contributions to any candidate for elective office, any officeholder, or any political committee making a political contribution to a candidate or officeholder.

The new rule requires the committee file the statement before it can accept a political contribution from corporations or labor organizations.

A United States Supreme Court ruling deciding the constitutionally of aggregate limits on federal campaign contributions may be issued as early as this week.

The case, McCutcheon v. Federal Election Commission, seeks to allow Shaun McCutcheon to make political contributions to several federal candidates exceeding the two-year aggregate limit set in 2 U.S.C §441a(a)(3)(A). The plaintiff argues the limit is unconstitutional because it violates a citizen’s right to speak and to associate with not just any candidate, but every candidate of his choosing.

The Supreme Court decided to grant a review of the case in February 2013 and oral arguments were made on October 8, 2013.

Photo of the United States Supreme Court Building courtesy of UpStateNYer on Wikimedia Commons.

On February 13, the Texas Ethics Commission issued an advisory opinion concerning the requirements of lobbyists to disclose office holders or candidates compensating or reimbursing the lobbyist for services from political contributions.

In Ethics Advisory Opinion No. 515, the commission held that while a lobbyist must disclose in a registration the full name and address of a candidate or officeholder who uses political contributions to compensate or reimburse the lobbyist, he or she is not required to disclose compensation or reimbursement received by an entity for services rendered by someone other than the lobbyist or a person acting as an agent of the lobbyist.

Lobbyists must disclose the full name and address of a candidate or officeholder who uses political contributions to compensate or reimburse an entity that employs or hires the lobbyist to render services for the candidate or officeholder.

A lawsuit was filed in federal court this week challenging Louisiana’s $100,000 limit on contributions to political action committees (PACs).

The plaintiff in the suit is an independent expenditure-only PAC called The Fund for Louisiana’s Future. It is arguing that, because it only makes expenditures independent of any candidate, the limit violates the First and Fourteenth Amendments.

According to The Advocate, the PAC was created to support Sen. David Vitter’s future bid for governor or re-election bid for Senate.

Q. I am a registered lobbyist and on occasion I use my personal funds to make political contributions, as does my spouse.  Are there states that prohibit such activity?

A. A lobbyist, simply by virtue of his or her profession, may be prohibited from making personal political contributions.

There are nine states that either prohibit or limit a registered lobbyist’s ability to contribute to state candidates. In most instances, a lobbyist’s ability to contribute to political parties and ballot measure committees remains intact.

Kentucky, North Carolina, and Tennessee impose an outright ban on lobbyists’ contributions. In Connecticut and Massachusetts, there isn’t an outright ban, but instead a monetary limit of $100 and $200, respectively. In Connecticut, the limitation extends to family members of lobbyists.

Perhaps the state most mired in “red tape” is Alaska. A lobbyist may not contribute to a candidate for office in a district outside the lobbyist’s own voting district. This prohibition continues for one year after a lobbyist’s registration or renewed registration date. A lobbyist who contributes to a legislative candidate must file a Lobbyist Report of Contributions to Legislative Candidates (Form 15-5A) within 30 days after making the contribution.

In some states, lobbyists may not contribute to state candidates or officeholders if registered to lobby the candidate’s or officeholder’s agency. Such is the case in California and South Carolina.

Finally, as a registered lobbyist you should be aware there are numerous states that impose a lobbyist ban during the legislative session. Be sure to review the relevant statutes, regulations, and guidelines.

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

Phil Mendelson, the chairman of the Council of the District of Columbia, introduced a bill that would bar people who made political contributions from obtaining contracts or doing other business with the city.

Mendelson said the motivation behind his bill was to end the perception of pay-to-play in Washington, D.C.

The new contribution limits passed earlier this year take effect today. The contribution limit for individuals, corporations, PACs, and other groups increased from $500 to $3,000 for statewide candidates, and from $500 to $1,000 for legislative candidates.

The legislation also eliminated the contribution limits for contributions to political committees.

Effective today, Nevada Senate Bill 246 revises the definition of “committee for political action” to include new threshold levels.

Entities in Nevada whose primary purpose is to affect outcomes of elections are now defined as those with more than $1,500 in contributions or expenditures in a calendar year. Entities whose primary purpose is not to affect outcomes of elections have a $5,000 calendar year threshold. Committees must register with the Nevada secretary of state no later than seven days after qualifying under the revised definition.

The changes in the bill were modeled on similar statutes previously enacted by the state of Maine.

City Council passed an ordinance creating registration and reporting requirements for organizations involved in making independent expenditures. Organizations supporting or opposing any candidate for mayor, alderperson, or municipal judge are required to register with the city clerk upon accepting contributions made for, incurring obligations for, or making independent expenditures exceeding $25 in the aggregate during a calendar year. Such organizations are also required to file reports as required by Wisconsin Statutes.

The ordinance is meant to take the place of a provision no longer enforced by the Wisconsin Government Accountability Board (GAB) after it reached a settlement in a suit filed by two advocacy groups. As such, the ordinance is ripe for challenge on the same grounds as the original GAB rule was challenged.

Photo of the Madison skyline by Patrick43470 on Wikimedia Commons.

A new law in Arizona raising the limits of political contributions to candidates took effect today. Individuals and noncertified political committees will now be able to give $2,000 to candidates running for legislative and statewide offices who do not participate in the state’s Citizens Clean Elections Act campaign financing system. Contributions made to candidates running for local office may be made in amounts up to $2,500. Contribution limits by committees certified by the secretary of state have also been increased.

Additionally, the new law removes aggregate contribution limitations for individuals and some political committees.

Meanwhile, a lawsuit challenging the constitutionality of the new law, which was brought by the Arizona Citizens Clean Elections Commission and others from the state, is pending in Maricopa County Superior Court.

Several members of city council announced the introduction of legislation to reform independent expenditures made in the city. The legislation would close a “loophole” in state campaign finance law allowing limited liability companies to give at the individual aggregate contribution limit of $150,000 instead of the corporate aggregate limit of $5,000. Such a change would only apply to city elections.

The legislation would also require the disclosure of the top donors to independent expenditure communications.

Finally, the legislation would force any independent expenditure communication to inform voters the communication was not subject to the city’s campaign finance laws.

Photo of the New York City Hall by Momos on Wikipedia.