2016 Presidential Conventions: What Delegates and Attendees Need to Know

With the 2016 presidential conventions underway and as the November presidential election draws near, this post is part of a series on what different entities and groups need to know about their political activity as the 2016 election approaches. This post examines the rules governing contributions made to convention delegates under federal law.

Permissible Contributions to Delegates

Events and gifts paid for by the host cities (in this case, Cleveland, Ohio and Philadelphia, Pennsylvania) may be accepted by delegates. It is also permissible for a delegate to accept any gift paid for by any unit of federal, state, or local government. Delegates are also permitted to accept meals, lodging, entertainment, and transportation from a political organization in connection with a campaign or fundraising event that the organization is sponsoring.

Classification of Funds Raised and Spent for Delegate Activity

Funds raised and spent for the purpose of furthering delegate selection are considered contributions and expenditures made for the purpose of influencing a federal election. There are no limitations on the monetary amount of contributions from permissible sources to delegates for the purpose of furthering their own selection as delegates. Once selected, travel and subsistence expenses related to the delegate selection process and the national nominating convention are considered expenditures. Additional considerations may arise when a federal candidate or officeholder attends the convention as a delegate.

Who is Prohibited from Contributing to a Delegate?

Individual delegates may not accept contributions from sources prohibited from making contributions in connection with federal elections. These sources include:

  • Corporations (including banks, trade associations, and non-profit corporations);
  • Labor organizations;
  • Foreign nationals or businesses (except lawful permanent residents); and
  • Federal government contractors, such as partnerships and sole proprietors with federal contracts.

With the Republican National Convention underway and the Democratic National Convention is only a few days away, it is not too late for delegates and their potential supporters to be aware of the rules.

Babatunde Odubekun, a summer associate at Genova Burns, assisted in the preparation of this post.

New York State Issues Guidance on Prohibited Coordination with Super PACs

After Citizens United and its progeny paved the way for independent expenditure activity and unlimited contributions to Independent Expenditure Only committees (better known as Super PACs), one key question in campaign-finance law has become how to determine whether Super PACs are coordinating their activities with candidates, party committees, and their agents.

Although the FEC has issued guidance on what constitutes prohibited coordination under federal law, many states have yet to offer their own interpretation of the types of coordination that would be prohibited for Super PACs active in state or local elections. It is under this backdrop that the State of New York has defined for the first time what types of activities will give rise to a finding of prohibited coordination.

These factors include (but are not limited to):

  • Whether a candidate formed an entity that later makes expenditures benefitting the candidate;
  • Whether a candidate raised funds on behalf of an entity that later makes expenditures benefitting the candidate;
  • Whether an entity making expenditures benefitting a candidate is operated by former staffers or immediate family members of the candidate;
  • Whether a communication reproduces material prepared by a candidate’s campaign, such as b-roll footage;
  • Whether an entity making expenditures benefitting a candidate engages in strategic discussions with the candidate’s campaign regarding the campaign’s strategy;
  • Whether an entity making expenditures benefitting a candidate shares vendors or space with the candidate’s campaign; and
  • Whether a donor to a candidate also provides a material portion of total funding to an entity making expenditures benefitting the candidate.

As Citizens United develops from a new phenomenon to established law, it is likely that additional individual states will offer their own guidance on the definition of coordination. The state of New York is one of the first to establish factors for regulators to consider. New Jersey, through several bills currently under consideration in the Assembly, may be attempting to do the same. These types of definitions and the role that Super PACs may play will be felt in the 2016 presidential election, New Jersey’s 2017 gubernatorial election, and beyond.

Allison Benz, a summer associate at Genova Burns, assisted in the preparation of this post.

Independence, Coordination & Super PACs in the 2016 Presidential Election

Yesterday we celebrated Independence Day. In the next three weeks, the Nation will focus on the Republican and Democratic National Conventions. We cannot turn on the television without catching a political ad. Some ads will be run by the candidates themselves. Based on recent reports filed with the Federal Election Commission (“FEC”), there is a good chance that many ads will be run by Super PACs.

Although Super PACs are required to disclose their donors, it is not always clear who is behind a Super PAC ad and whether a Super PAC is truly independent from a candidate, a party or their agents. The FEC has, therefore, adopted a three-prong test to determine whether a Super PAC is acting independently and is, therefore, entitled to receive unlimited contributions.

Under the FEC’s coordination test, when an election-related communication (content prong) has been paid for by a third-party (payment prong), the FEC will ask the following questions (conduct prong) to determine whether the ad was coordinated:

  • Was the communication created, produced or distributed at the request or suggestion of the candidate, party or their agents?
  • Was the candidate, party committee or their agents materially involved in decisions related to the ad’s content, intended audience, mode of communications, etc.?
  • Were there substantial discussions between the Super PAC and the candidate, party or their agents?
  • Does the Super PAC share a common vendor with the candidate, party or their agents?
  • Does the Super PAC employ an employee or independent contractor who worked for the candidate or party committee during the previous 120 days?

Because proving an ad was not coordinated, isn’t always as easy as 1-2-3, it is not too late for Super PACs involved in the 2016 presidential election to develop policies, procedures and protocols to help protect against potential allegations of coordination.

New York State Announces Broad Set of Ethics and Campaign-Finance Reforms

Late last week, New York Governor Andrew Cuomo and State legislative leaders announced agreement on a broad set of ethics and campaign-finance reforms focused on increased disclosure, transparency, and public trust.

Pursuant to this reform package:

  1. Super PACs (also known as Independent Expenditure Committees) may make and receive unlimited contributions so long as they do not coordinate with a political candidate. New York’s agreement expands the definition of coordination in this context to include the retention of a common vendor, the employment of a candidate’s former staffers, and the sharing or rental of common space. This agreement also increases disclosure requirements for Super PACs.
  2. Any public officer convicted of corruption is precluded from collecting a public pension.
  3. New disclosure requirements will be put in place for political consultants who represent both political officeholders or candidates and also private-sector clients with government business.
  4. Various reporting thresholds have been lowered under the State’s lobbying laws, including a reduction from $50,000 to $15,000 of the reporting threshold for organizations that lobby on their own behalf.
  5. 501(c)(4) social-welfare organizations are permitted to engage in political activities so long as political activity does not become the primary purpose of the organization. In contrast, 501(c)(3) charitable organizations are strictly prohibited from engaging in any political activity. Under New York’s agreement, 501(c)(4)s will be required to disclose funding and support received from 501(c)(3)s.  Additionally, a 501(c)(4) will be required to disclose its funding sources if they engage in political activities.

Corporate Political Activity, Reputational Risk Management and the 2016 Federal Election

As the 2016 presidential primary season concludes, we are quickly approaching the summer conventions and the November presidential election. With the political contests becoming more heated, this post is part of a new series on what different entities and groups need to know about their political activity as the 2016 election approaches.

The 2016 presidential election poses unique challenges for companies and organizations. As we discussed here and here, both for-profit and not-for-profit corporations need to be mindful of their involvement in the electoral process. Corporations also need to make sure that their employees are not improperly using corporate resources for individual political activity. While it is easy to develop a policy prohibiting employees from using copy machines, conference rooms and other organizational resources in connection with federal political activity, it is not as easy to measure the potential reputational risk associated with their activity.

What if the CEO of the company decides to hold a political fundraiser for one candidate over the other?

The CEO of Intel “took heat” over an event that he was planning to host for Donald Trump. The event ultimately got canceled because customers were questioning whether the event signaled that Intel supported Donald Trump.

What if your organization decides to support one candidate over another by participating in independent expenditure activity?

Target faced backlash in 2011 when it supported an organization that in turn supported a candidate that many considered a bigot. The support drew criticism from customers, celebrities with products in Target stores and shareholders alike.

What if your connected federal PAC fails to get shareholder approval before making political contributions?

Corporations need to determine whether their company will suffer negative consequences if their connected federal PAC makes contributions to candidates that do not support the corporation’s overall goals and mission.

Many of these consequences are difficult to predict – it is not always clear at the outset how a decision to participate in an election as an individual, through independent expenditures or through a connected  corporate PAC will ultimately impact your organization and its reputation. Although hindsight is always 20/20, corporations need to be forward thinking so they do not find themselves at the center of political controversy.

New Jersey’s 2016 Primary: Potential Pitfalls of Per Election & Pay-to-Play Limits

New Jersey held its 2016 primary election on Tuesday, June 7, 2016. While most of the focus has been on the presidential primary, individuals and entities that contribute in connection with New Jersey state and local elections need to keep the following in mind:

  • New Jersey campaign finance law sets “per election” limits for contributions to candidate committees; however, the limit does not automatically reset the day after the primary election. Rather, the 2016 primary election cycle remains open until Friday, June 24, 2016 (candidates are required to file a 20-day post-election report with ELEC on Monday, June 27, 2016). So, any contribution made between the primary election and June 24, 2016 will count toward the 2016 primary and not the 2016 general. This is an important consideration if a contributor is concerned with pay-to-play compliance and wants to limit contributions to a particular candidate to no more than $300 per election.
    • If a contributor wants a contribution to count toward the 2016 primary, the contributor should make sure that the check arrives before June 24, 2016 and that the recipient committee will report the contribution in connection with the 2016 primary.
    • If a contributor wants a contribution to count toward the 2016 general, the contributor should wait to send the check after the June 24 “cut off” date to avoid any confusion (and the possibility of exceeding a pay-to-play limit).
  • New Jersey campaign finance law sets “per calendar” year limits for contributions to party committees, PACs and legislative leadership committees. So, if a contributor is concerned with pay-to-play compliance and wants to limit contributions to $300 or less, the limit does not re-set now that the primary is over.
  • Some New Jersey pay-to-play ordinances set “per calendar year,” “per contract” or “per election cycle” limits for contributions to candidates. Some even prohibit contributions in any amount during certain periods of time. So, if your company does business with a particular county or municipality or wishes to remain eligible for future contracts with a particular county or municipality, do not assume that because the 2016 primary election is over, it is now safe to write another check.

501(c)(3)s and the 2016 Federal Election: Do You Know What Your Employees Are Doing?

As the 2016 presidential primary season proceeds, we are quickly approaching the summer conventions and the November presidential election. With the political contests becoming more heated, this post is part of a new series on what different entities and groups need to know about their political activity as the 2016 election approaches.

There are many obvious benefits to earning the designation of a 501(c)(3) charitable organization—the organization is exempt from tax and donations are deductible. But the Internal Revenue Code places a key limitation on all 501(c)(3) organizations by prohibiting them from engaging in any political activity. Violation of this prohibition on political activity may lead the IRS to refuse or revoke 501(c)(3) status. A 501(c)(3) therefore must avoid any partisan activity that supports or opposes political candidates or political parties.

A 501(c)(3) generally MAY NOT:

  • Make political contributions (monetary or in-kind).
  • Issue a statement that supports or opposes a candidate (e.g., stand-alone statements, statements in newsletters, or material on a website).
  • Endorse a candidate.
  • Ask a candidate to sign a pledge on any issue.

However, a 501(c)(3) may generally engage in non-partisan activity that is related to the democratic process. Therefore, a 501(c)(3) generally MAY:

  • Engage in non-partisan election-related activities such as get-out-the-vote and voter registration drives.
  • Engage in limited lobbying (related to the mission of the organization), including ballot-measure advocacy.
  • Educate all candidates on issues within the purview of the organization.
  • Conduct non-partisan public-education and training sessions about participation in the political process.
  • Prepare and disseminate non-partisan candidate questionnaires and sample ballots.

However, the officers, directors, and employees of a 501(c)(3) retain the right to personally engage in political activity (just as we described in our recent post on political activity for corporations). A 501(c)(3) must simply be careful to avoid allowing organization resources (from mailing lists to letterhead) to be used for political activity or permitting individuals to engage in political activity that suggests the support or endorsement of the organization.

Corporations and the 2016 Federal Election: Do You Know What Your Employees Are Doing?

As the 2016 presidential primary season proceeds, we are quickly approaching the summer conventions and the November presidential election. With the political contests becoming more heated, this post is part of a new series on what different entities and groups need to know about their political activity as the 2016 election approaches.

One of the key principles of federal campaign-finance law is that corporations are prohibited from making political contributions to federal candidates, political action committees, and party committees. This means not only that corporations are prohibited from writing checks to federal candidates, political action committees, or parties, but that a corporation should not use its resources—or allow its resources to be used—for any federal election purpose (though some exceptions exist for a corporation’s federal connected PAC). This prohibition on the corporation’s activity must be balanced, though, with the individual political activity of a corporation’s employees. Although a corporation may not make federal political contributions, a corporation’s employees have a First Amendment right to engage in the political process.  To maintain this balance, corporations should keep the following guidelines in mind:

Employees MAY:

  • Make individual political contributions with personal funds.
  • Volunteer or work for a political campaign on their own time.
  • Run for political office.

Employees may NOT:

  • Be reimbursed for any political contributions they make.
  • Use any corporate resources (including letterhead, printers, conference rooms, and mailing lists) for federal-election purposes.
  • Provide even individual volunteer services for a federal campaign during normal business hours—the corporation’s time is itself a resource of the corporation.
  • Take even unpaid leave to work or volunteer for a federal campaign if the leave is granted in a way that demonstrates a preference for one candidate or political party.
  • If an employee runs for political office, the corporation may not endorse the candidate or indicate support through such avenues as a newsletter or website.

Because the scope of what is prohibited is so broad, it is important for corporations to adopt and enforce political-activity policies to ensure that employees are not unknowingly making prohibited political contributions by performing work for a political campaign during paid business hours or by using corporate resources for political purposes. Similarly, corporations should have a plan in place to govern how and when employees are entitled to take unpaid leave to work or volunteer for a federal campaign.

Corporations may be faced with navigating these and other challenges in this heated political season. It is therefore important for corporations to begin thinking about how to navigate between the federal prohibition on corporate political contributions and the First Amendment right of a corporation’s employees to engage in the political process.

Less Than One Month: NJ ELEC Broadens Annual Pay-to-Play Form & Requires Companies to Disclose Additional Information

Recent changes in the annual filing requirement for companies doing business with local, county or state government in New Jersey may make the process for completing this year’s ELEC Business Entity Annual Statement (“Form BE”) more complicated and time consuming. Although ELEC has yet to issue guidance on these additional requirements, government vendors must still electronically file the disclosure form by the March 30 submission deadline.

In effect since 2006, Form BE requires every company that receives payments of $50,000 or more from New Jersey government entities to disclose those contracts as well as its reportable New Jersey political contributions. All businesses that receive such payments must file regardless of whether the company or certain associated people have made any reportable contributions, but the level of detail required by Form BE depends on whether you have any contributions to report.

There are two new requirements for the 2015 reporting year (due March 30):

  • Fair-and-Open Check Box Requirement: Check a box to indicate whether each contract was awarded pursuant to a “fair-and-open-process”; and
  • Certification Requirement: Certify that the statements and/or information contained in Form BE are true and acknowledge that if any of the statements or information are willfully false that you may be subject to punishment.

Expect completing your 2015 Form BE to be more time consuming than in the past. Here are some obstacles to be on the alert for:

  • Businesses may find it challenging and time consuming to identify whether a contract was awarded pursuant to a “fair-and-open-process” given that your 2015 Form BE may cover long-term contracts that could very well have been awarded years ago.
  • In many cases it will be unclear how vendors should classify Executive Branch contracts awarded pursuant to a competitive process because the phrase “fair-and-open process” is a term of art with respect to county, municipal and legislative contracts.
  • In past years, ELEC asked the person filing Form BE to simply “acknowledge” that he or she was familiar with the information contained in the Form BE. Now, ELEC is asking the person filing Form BE to certify to the accuracy of the statement and to acknowledge that he or she may be subject to punishment for willfully false information.

New Jersey Lobbying Reports Due on February 16, 2016

A business that engages in New Jersey lobbying must electronically file an annual report with the New Jersey Election Law Enforcement Commission. Although the filing is normally due on February 15, this year’s deadline is moved to February 16 because of Presidents’ Day.

Any business that expended at least $2,500 on New Jersey lobbying during the 2015 calendar year is required to file the annual lobbying disclosure—but the specific form to be used depends on the particular facts and circumstances of the company’s lobbying efforts.

Short-Form Disclosure (Form L-2) – A business that is represented by only one lobbyist may file a short-form disclosure that merely designates the lobbyist to file the annual report on behalf of the business. The lobbyist’s report would then cover all relevant information about the lobbying efforts of the business.

Compliance Tip: If you are relying upon an outside lobbyist to file on your behalf be sure to communicate that expectation to your outside lobbying firm.

Full Disclosure (Form L1-L) – In contrast, a business that is represented by more than one lobbyist (either in-house or through an outside lobbying firm) must file its own lobbying form. As you prepare this form, you will need the following information for each of your lobbyists or lobbying firms:

  • Lobbyist information;
  • Lobbying purpose;
  • Compensation of lobbyist;
  • Prior government service of lobbyist; and
  • Communications expenses.

Compliance Tip: For an in-house lobbyist who performs functions other than lobbying for your organization, you are not required to report that individual’s total compensation; rather, you should report only the portion of his or her compensation that pertains to lobbying.

Grassroots-Lobbying Disclosure (Form L1-G) – This form is geared specifically toward a business whose only lobbying activity is communicating with the general public, also known as grassroots lobbying. The information required to be disclosed on this form is focused on the relevant expenditures and communications of the business.

Compliance Tip: A communication with the general public for the purposes of this form does not include communications by a business to its members, partners, individuals, or stockholders. Similarly, communications required to be made by law are not communications with the general public in this context.  

Consent to Service of Process (Form L-3) – An out-of-state business that engages in New Jersey lobbying must consent to service of process within the State of New Jersey by filing this form.

Compliance Tip: This form is required for any company that is not authorized to do business in New Jersey and for any individual who is not a resident of New Jersey.

In addition, lobbying firms must file their own specific forms to report their lobbying activity from the applicable calendar year.

If your business has not yet determined its lobbying-disclosure obligations, there is still time to do so before the February 16, 20 deadline.

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