Supreme Court Requires Donor Disclosure by 501(c) Organizations

Since the Supreme Court’s 2010 ruling in Citizens United, spending by outside groups and non-political organizations has increased in federal elections. Many of these groups are organized as 501(c)(4) social-welfare organizations and 501(c)(6) trade associations. Under current IRS rules, these groups are not required to disclose their donors and may engage in political activity, including making independent-expenditures, provided the political activity is not the organization’s primary purpose.

Previously, under FEC regulations, such groups and organizations were only required to identify donors who contributed over $200 for the purpose of influencing a federal election if the contribution was earmarked for a specific independent expenditure; general contributions were not required to be disclosed. Last month, in a case brought against the Federal Election Commission and Crossroads GPS by the Committee for Responsibility and Ethics in Washington, the U.S. District Court for the District of Columbia struck down the FEC regulation allowing 501(c)(4) and 501(c)(6) organizations to shield their donors, stating that the regulation was overly narrow and inconsistent with the Federal Election Campaign Act. Crossroads GPS appealed the decision, lost on appeal, and filed an application for a stay with the U.S. Supreme Court, which was denied.

The Supreme Court’s denial for a stay has important implications for 501(c)(4) and 501(c)(6) organizations. Going forward, nonprofit organizations that file independent expenditure reports with the FEC may be required to disclose ALL donors who contribute more than $200 toward influencing a federal election, regardless of whether that particular contribution was earmarked for a particular independent expenditure. The FEC has not issued any rules or guidance regarding this expanded disclosure requirement, but 501(c)(4) and 501 (c)(6) organizations should know that this new disclosure rule may require a change in their fundraising and disclosure processes.

Prior to the Supreme Court’s ruling, many donors felt comfort in giving to 501(c)(4) and 501(c)(6) organizations knowing they their identities would not be publicly disclosed. Now, with less than seven weeks until the 2018 Mid-Term Elections, this recent decision has these groups and their donors wondering what is next. At a minimum, groups considering running ads in connection with the 2018 Mid-Term Elections should evaluate their strategy to determine whether the ads fall within the category of independent expenditures (that would be subject to FEC reporting) or issue advocacy (that would be exempt from current reporting requirements). If disclosure is a concern, donors must also make sure that they fully understand whether a group to which they wish to make a donation plans to engage in independent expenditures.

While the finer details will not be known until the FEC issues temporary guidance or regulations, one thing is clear: the fact that the rules of the road have changed with less than two months before Mid-Term Elections means that many groups and donors may need to re-evaluate their strategy with respect to participation in the upcoming election. For more information on what this ruling means with respect to your plans for participating in the 2018 Mid-Term Elections, please contact Rebecca Moll Freed, Esq., Chair of the Corporate Political Activity Law Group, at rfreed@genovaburns.com or 973-230-2075, Rajiv D. Parikh, Esq. at rparikh@genovaburns.com or 973-535-4446, Avi D. Kelin, Esq. at akelin@genovaburns.com or 973-646-3267, or Paul M. Rozenberg, Esq. at prozenberg@genovaburns.com or 973-646-3283.

It’s Golf Outing Season: Do You Know Where Your Check Is Going?

Although it has been a long winter, we have recently had a taste of spring (or maybe even summer) here in New Jersey. The warmer weather means that golf outing season is upon us. In the political world, this means that your company may soon be receiving invitations to sponsor a hole, beverage cart or foursome at a golf outing. Before you register for the golf outing, you should ask yourself the following questions:

  • Who is hosting the event? Is it a political party committee, candidate committee, political action committee or not-for-profit entity?
  • If the host is a political recipient, does your company currently hold or are you seeking contracts in the jurisdiction where the political recipient is located?
  • Have you evaluated all applicable campaign finance and pay-to-play limits? Do they apply on a calendar year, per election or per election cycle basis?
  • Are you inviting anyone outside of your company to attend as your guest? If so, are they an elected official or government employee? If they are, is your invitation in compliance with relevant gift rules?

To assist compliance with campaign finance pay-to-play and gift rules, these questions should be a part of your company’s internal review process for each and every political event you are asked to attend. The bottom line is that your company should not write a check without knowing the exact name of the recipient committee, how it is organized and whether the sponsorship will jeopardize your eligibility for current or future government contracts.

Genova Burns LLC can help your company comply with campaign finance pay-to-play and gift rules. Contact Rebecca Moll Freed, Esq., Chair of the Corporate Political Activity Law Group, at rfreed@genovaburns.com or 973-230-2075 or Avi D. Kelin, Esq. at akelin@genovaburns.com or 973-646-3267.

Deadline for New Jersey’s Annual Pay-to-Play Disclosure is Approaching: Is Your Company Ready to File?

The New Jersey Election Law Enforcement Commission (“ELEC”) requires each business entity that received payments of $50,000 or more (in the aggregate) as a result of government contracts during the 2017 calendar year to electronically file a Business Entity Annual Statement (“Form BE”) with ELEC no later than Monday, April 2, 2018. (Although the Form BE must be filed in most years by March 30, the deadline has been extended this year because of Good Friday.)

The obligation to file arises whenever payments from New Jersey government entities reach the $50,000 threshold. This includes contracts with the State of New Jersey Executive and Legislative branches, counties, municipalities, boards of education, fire districts, and independent authorities, regardless of method of award.

Whether the $50,000 filing threshold is reached depends on payments received by the business entity during 2017. Therefore, the obligation to file may vary from year to year—a business entity that was not required to file in previous years may still be obligated to file for calendar year 2017.

Last, detailed contract and contribution information must be disclosed whenever the business entity or a covered individual made a “reportable” contribution during 2017. A contribution is “reportable” when it exceeds $300 per reporting period. In light of these requirements, it is necessary to review personal political contributions made by a business entity’s partners, officers, and directors (and certain members of their families). Additionally, because of varying election cycles, it may be necessary to review contributions made over the course of several years to determine whether any 2017 contributions are reportable.

Companies that fail to file on time may be subject to monetary penalties. To ensure a timely and accurate filing, companies that have yet to begin preparing Form BE should not delay.

Genova Burns LLC can help your company comply with the Form BE filing requirements. Contact Rebecca Moll Freed, Esq., Chair of the Corporate Political Activity Law Group, at rfreed@genovaburns.com or 973-230-2075 or Avi D. Kelin, Esq. at akelin@genovaburns.com or 973-646-3267.

New Jersey Governor Phil Murphy Tightens Executive Branch Gift Restrictions on First Full Day in Office

In his first full day in office, Governor Murphy signed Executive Order No. 2, tightening ethics restrictions and disclosure requirements on certain State employees and public officers.

The following State employees and public officers are required to file a detailed financial disclosure with the State Ethics commission within 120 days of commencing employment and then by May 15th each year:

  • The Governor;
  • The Lieutenant Governor;
  • Heads of principal departments in the Executive Branch;
  • Chiefs of staff and assistant or deputy heads of principal departments;
  • Heads and assistant heads of divisions within a principal department;
  • The Governor’s senior staff; and
  • The CEOs and board members of New Jersey’s various commissions and authorities.

These disclosure obligations also cover the spouses or domestic partners and dependent children of the above-listed individuals.

The financial disclosure must include:

  • A list of all assets over $1,000;
  • A list of liabilities owed, with certain exceptions; and
  • A list of all sources of income, including gifts received in the preceding twelve months in the following categories:
    • Cash gifts valuing $100 or more from a person;
    • Non-cash gifts with an aggregated fair market value of $200 or more from a person; and
    • Gifts with an aggregated cash or fair market value of $3,000 or more from a grandparent, parent, spouse or domestic partner, child, or grandchild.

The biggest change with respect to the Code of Ethics applicable to the Executive Branch are changes to the gift rules, which are seen as a rebuke to the practices of Governor Christie. In Executive Order No.2, Governor Murphy tightened gift restrictions for himself and Lieutenant Governor Oliver.  All gifts received from individuals that are not “longtime personal friends” and are valued at over $390 must be disclosed.  This restriction applies retroactively to all gifts received from January 2015. Under the EO, a “long-time personal friend” is defined as an individual who has had an existing personal relationship with the Governor at least three years prior to the date on which he or she took office.

Upon signing Executive Order No. 2, Governor Murphy said, “This administration will have the back of every New Jersey resident and that begins with having a government they can trust.  Our principles are strong and, today, we have taken the first step toward a fairer New Jersey.”

Although the Executive Branch gift restrictions apply to those serving in the Executive Branch, the private sector should pay attention to these restrictions and make sure that they do not put an Executive Branch employee or public officer in a position of potentially violating the EO. For more information on Executive Order No. 2 and how various gift rules may impact your company’s interactions with the government, please contact Rebecca Moll Freed, Esq., Chair of the firm’s Corporate Political Activity Law Group at rfreed@genovaburns.com or 973-230-2075.

Lessons Learned from the Della Pello Decision

Earlier this year, a government contractor lost just over $7 million in New Jersey state government contracts because of a single political contribution that was inadvertently made payable to the WRONG political recipient. Don’t let this happen to your company:

  • If an invitation for a political event gives you a choice of recipients to which you can write your check, always evaluate your options and understand the pay-to-play limits with respect to each recipient committee. Different pay-to-play restrictions apply to different types of recipients. Choose wisely …
  • Always have a clear understanding of each type of recipient committee. Ask yourself – are we writing our check to a candidate, party, PAC, Super PAC or legislative leadership committee?
  • Look at the check before it goes out to make sure the check is payable to the intended recipient. Ask yourself – does the name on the check match up with the name on the invitation? Is this the committee to which we want to contribute?
  • Use a cover letter with each contribution. Stick to the basics – Who, What , When, Where – remember less can sometimes be more – there is no need to include a Why!
  • Review your canceled checks on a regular basis to make sure your check was deposited by the intended recipient and didn’t end up in the wrong pile of checks (sometimes recipient committees share a Treasurer).
  • Train relevant people within your company about the “Dos and Don’ts” of political activity compliance (although too many cooks in the kitchen can sometimes be a recipe for disaster, having more than one set of eyes involved in the process is usually helpful).
  • Do not participate as a matter of routine – recipient committees will always be happy to accept your contribution after an event – contact the recipient committee if you need additional information and take your time to make an informed decision – remember – political contributions are NOT an emergency!
  • And, if a mistake occurs because you did not have (or follow) the proper procedures at the time of the contribution, review the refund provisions and do everything in your power to get the check back within the correct time-frame.

For more information on how you or your company may safely participate in the political process while preserving eligibility for government contracting opportunities, please contact Rebecca Moll Freed, Esq., Chair of the Corporate Political Activity Law Group, at rfreed@genovaburns.com or 973-230-2075.

NJ’s Gubernatorial Election – Public Matching Funds and the Role of Outside Money

On the same day that it was announced that Kim Guadagno and Phil Murphy both qualified for public matching funds in New Jersey’s 2017 gubernatorial election, the New Jersey Election Law Enforcement Commission issued a News Release reporting that independent spending reached an all-time high in New Jersey’s 2017 primary election. This means that, as we look toward the general election, our gubernatorial candidates will be limited in what they can spend in the general election ($13.8 million to be precise) while independent groups will not be subject to contribution or expenditure limits—this type of “outside spending,” which arises from sources other than candidates, is likely to become increasingly important in the 2017 gubernatorial election.

Under the First Amendment, independent groups are permitted to spend unlimited amounts of money in connection with an election provided they do not coordinate their activities with a candidate, his or her agents, or his or her campaign. Many think that Super PACs and independent-expenditure only committees are the only outside groups that play a role in elections; however, individuals, corporations, labor organizations and trade associations are also free to engage in the process and spend unlimited funds in New Jersey elections so long as there is no coordination with the candidate, his or her agents, or his or her campaign. Especially in New Jersey, home to strict pay-to-play restrictions that limit contributions to no more than $300 per election to a gubernatorial candidate and no more than $300 per calendar year to a party committee by a government contractor (and certain individuals associated with that contractor), independent spending is likely to play a big role in the upcoming general election.

For more information on how you or your company may participate in the political process, please contact Rebecca Moll Freed, Esq., Chair of the Corporate Political Activity Law Group, at rfreed@genovaburns.com or 973-230-2075.

Candidates, Contributions & Compliance in Connection with New Jersey’s 2017 Gubernatorial Election

On Tuesday, June 6th, New Jersey held its 2017 gubernatorial primary election. Voters went to the polls to choose the Republican and Democratic candidates for Governor. Now that we know that the general election will feature a race between Phil Murphy and Kim Guadagno, here are a few campaign-finance and pay-to-play reminders to keep in mind as you decide how you would like to participate:

  • If your company holds New Jersey State government contracts or would like to remain eligible for New Jersey State government contracts in the future, you should limit your corporate contribution to a gubernatorial candidate to no more than $300 per election per candidate.
    • Compliance Tip – Regardless of how your company is organized, contributions by your company’s shareholders, officers, equity partners, equity members and the spouses, resident children and civil union partners of these individuals may impact your company’s eligibility for State government contracts.
  • If remaining eligible for New Jersey State government contracts is not a concern, and your company is organized as a corporation, your company may contribute up to $4,300 per election per candidate.
    • Compliance Tip – Please note that affiliated corporations may share a contribution limit.
  • If your company is organized as a corporation, shareholders, officers and directors enjoy individual contribution limits that are separate from the limit enjoyed by the company.
    • Compliance Tip – Please note that certain regulated-industry companies may not contribute with corporate funds, but individual officers and directors may participate individually.
  • If your company is organized as a partnership or limited liability company, your company may not contribute as an entity, but each partner or member is entitled to his or her own limit.
    • Compliance Tip – If your contribution is drawn upon a partnership or limited liability company check, be sure to follow the allocation rules set forth under NJ campaign finance law.
  • Even though the primary election was held two days ago, any contribution received thru June 23rd counts toward your 2017 primary election limit. So, if you already maxed out in connection with the primary, you should wait until June 24th to write your next check. On the flip side, if you have yet to contribute (and would like to), you still have time!
    • Compliance Tip – To help properly track your contribution with the relevant election cycle, use the memo line of  your check and review relevant ELEC reports to make sure your contribution was reported in connection with the appropriate election.

Tuesday’s primary made it clear that New Jersey’s 2017 election season is now in high-gear! As we head into the summer months, it is the perfect time to focus on political-activity compliance.

Deadline for New Jersey’s Annual Pay-to-Play Disclosure is Approaching: Is Your Company Ready to File?

After ELEC sent out its reminder email on March 6, we are reproducing below a Genova Burns LLC client alert that was distributed last week for any potential filers who may require additional information about the annual pay-to-play disclosure.

The New Jersey Election Law Enforcement Commission (“ELEC”) requires each business entity that received payments of $50,000 or more (in the aggregate) as a result of government contracts during the 2016 calendar year to electronically file a Business Entity Annual Statement (“Form BE“) with ELEC no later than Thursday, March 30, 2017.

The obligation to file arises whenever payments from New Jersey government entities reach the $50,000 threshold. This includes contracts with the State of New Jersey Executive and Legislative branches, counties, municipalities, boards of education, fire districts, and independent authorities, regardless of method of award.

Additionally, detailed contract and contribution information must be disclosed whenever the business entity or a covered individual made a “reportable” contribution during 2016. A contribution is “reportable” when it exceeds $300 per reporting period. In light of these requirements, it is necessary to review personal political contributions made by a business entity’s partners, officers, and directors (and certain members of their families). Additionally, because of varying election cycles, it may be necessary to review contributions made over the course of several years to determine whether any 2016 contributions are reportable.

Companies that fail to file on time may be subject to monetary penalties. To ensure a timely and accurate filing, companies that have yet to begin preparing Form BE should not delay.

Genova Burns LLC can help your company comply with the Form BE filing requirements. Contact Rebecca Moll Freed, Esq., Chair of the Corporate Political Activity Law Group, at rfreed@genovaburns.com or 973-230-2075 or Avi D. Kelin, Esq. at akelin@genovaburns.com or 973-646-3267.

Calling all New Jersey Government Contractors: What is your Plan for Political Activity Compliance in Anticipation of the 2017 Gubernatorial Election?

With only 19 days until the presidential election and the final debate being held tonight, most of the country is focused on national politics. Although the presidential election may be taking center stage, now is the time for companies to focus on their New Jersey political-activity compliance.

We are currently within the 18-month period before the inauguration of New Jersey’s next governor, which means that a contribution made today may impact your company’s eligibility for contracts with the State of New Jersey for years to come. If your company or even one covered individual (including officers, shareholders, equity partners or their spouses, civil-union partners and resident children) contributes more than $300 to a gubernatorial candidate or certain other political recipients, your company could be declared ineligible for contracts with the State of New Jersey through January of 2022!

Focusing on political-activity compliance is important for all companies, but it is especially important if your company has recently gone through a merger, conducted a re-organization, hired new officers or partners, promoted individuals within your company to new roles or simply needs a refresher. If you have no policy is place, it is not too late to adopt one before New Jersey’s gubernatorial election kicks into full swing and you find yourselves ineligible to compete for government-contracting opportunities.

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.