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.

Top Ten New Jersey Pay-to-Play Myths

Now that David Letterman has hosted his last show, the universe is experiencing a distinct lack of top-ten lists. We are happy to take on this awe-inspiring responsibility in the best way we know how: with a list of the top ten New Jersey pay-to-play myths.

  1. MYTH: Contributions of $300 or less are always permissible.
    • FACT: Some stringent local pay-to-play ordinances do not allow contributions in any amount once a business entity has entered a contract (or even started negotiations for a contract) with the government entity.
  2. MYTH: Reduced contribution limits are the same before and during a contract.
    • FACT: As mentioned above, some local ordinances do not allow contributions, in any amount, to be made once a business entity starts negotiations for a contract even though they allow for reduced contributions prior to the negotiation period.
  3. MYTH: Contributions to New Jersey PACs are not subject to pay-to-play restrictions.
    • FACT: There are some local pay-to-play ordinances that cover contributions to PACs that were either “formed for the primary purpose of” or “that regularly engage in the support of” the jurisdiction’s candidates or elections. This is different than the treatment of PACs under statewide Executive Branch pay-to-play restrictions.
  4. MYTH: It is always permissible to contribute $300 to a candidate for the primary election and an additional $300 for the general election.
    • FACT: Some municipalities hold municipal elections once every four years and do not hold separate primary and general elections. So, in these jurisdictions, a contributor may only be permitted to contribute $300 over the course of four years. Also, some local ordinances impose a per-election-cycle limit, treating the primary and general elections as one unit.
  5. MYTH: Pay-to-play limits are the same for candidates, political party committees, and New Jersey PACs.
    • FACT: Pay-to-play limits are often based on reportable periods. A reporting period generally runs on a per-election basis for a candidate committee and a per-calendar-year basis for party committees and PACs.
  6. MYTH: Contributions to legislative candidate committees are not subject to pay-to-play.
    • FACT: Contributions to legislative candidate committees may have pay-to-play implications if the legislator serves as the presiding officer of either house or represents a legislative district that includes part of a State redevelopment area.
  7. MYTH: If a county or municipality has its own local ordinance in effect, there is no reason to worry about the State laws.
    • FACT: Local ordinances and the State laws can sometimes offer divergent limits. For example, some local ordinances impose a per-calendar-year contribution limit for a candidate, while the State laws work on a per-election basis for candidates. The best approach is for a business entity to comply with both the State laws and any local ordinance in effect.
  8. MYTH: Only shareholders and officers of a business entity are covered by pay-to-play.
    • FACT: Some local ordinances extend the definition of a business entity to include any employee who earns more than $100,000 in a calendar year. Spouses and children of a covered individual may also be subject to pay-to-play limits.
  9. MYTH: Contributions to federal PACs and candidates are subject to New Jersey pay-to-play restrictions.
    • FACT: Federal elections are outside of ELEC’s jurisdiction and thus contributions to federal committees are not subject to New Jersey pay-to-play laws.
  10. MYTH: Only procurement contracts are subject to pay-to-play restrictions.
    • FACT: Some municipalities have redevelopment or land-use ordinances, which set reduced contribution limits for a business entity that enters redevelopment agreements or seeks certain land-use approvals.

Calling All Government Contractors: Upcoming New Jersey Political Contribution Disclosure Form

For government contractors, the start of a new year brings with it a host of filing requirements in many states along the Northeast Corridor. Although some states (such as New York and Connecticut) do not impose annual or semi-annual filing requirements on government contractors, other states such as New Jersey, Pennsylvania, and Maryland require government contractors to file reports. This is the final part of our series of blog posts that focuses on the upcoming filing deadlines in Maryland, Pennsylvania, and New Jersey. These reports generally require government contractors to disclose certain information about their political contributions, but no two filing requirements are the same. As your company prepares to put its best foot forward in 2015, this series will share what you need to know about these disclosure requirements and some compliance tips to make sure that your company is accurately capturing all relevant information.

New Jersey (Filing Deadline – March 30, 2015)

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 2014 calendar year to electronically file a Business Entity Annual Statement (“Form BE”) with ELEC no later than Monday, March 30, 2015.

Compliance TipAll businesses that received payments in excess of the $50,000 threshold must file Form BE. Whether a company is required to file a “detailed” Form BE (setting forth contract and contribution information) depends on whether the company and/or certain associated individuals made any “reportable” contributions (a contribution in excess of $300) during the 2014 calendar year.

McCutcheon v. FEC: the Potential Impact on Aggregate Contribution Limits Under Local Pay-to-Play Ordinances

Last week the United States Supreme Court heard arguments in McCutcheon v. FEC, a challenge to the constitutionality of aggregate contribution limits under federal campaign finance law.

In addition to imposing base contribution limits, federal campaign finance law imposes an aggregate individual biennial limit of $123,200.  Out of this $123,200, an individual may not contribute more than $48,600 to candidate committees or more than $74,600 to any other federal committees (out of this $74,600, no more than $48,600 may be given to committees that are not national party committees).

Last week’s oral argument centered around whether aggregate contribution limits are justified by the need to prevent undue influence in the political process or are contrary to First Amendment rulings constraining the government’s ability to impose restrictions aimed at equalizing participation in federal elections.

If the Supreme Court holds that aggregate contribution limits are unconstitutional, the ruling will likely also be felt at the state level.  Currently, eight (8) states, including New York, impose analogous aggregate contribution limits on a single contributor’s contributions to multiple recipients during a specified time period.  What is less clear is how the McCutcheon ruling might impact aggregate contribution limits under local pay-to-play ordinances in New Jersey.

Many New Jersey local pay-to-play ordinances place an aggregate limit on the amount that a “business entity” may contribute to a group of covered political recipients during a specified time period.  (The definition of business entity may encompass one or more contributors, depending on the complexity of the entity and specified relationships.)  Putting aside issues associated with subjecting multiple contributors to the same aggregate limit, the question posed by a potential McCutcheon holding is whether there is a significant constitutional distinction between an across-the-board aggregate limit and an aggregate limit imposed solely as a condition of eligibility for a government contract.

Given that these local aggregate contribution limits are designed solely to prevent corruption, or the appearance thereof, in the government procurement process, these aggregate limits may withstand constitutional scrutiny regardless of the outcome in McCutcheon.  In other words, the local pay-to-play aggregate limits may be constitutionally distinct because businesses and individuals have a choice between engaging in business with the government (thereby voluntarily subjecting themselves to additional limitations meant to ensure the integrity of those business dealings) or fully participating in local elections by making bigger contributions to more recipients up to higher contribution limits.

A different federal case, Wagner v. FEC, which challenges the federal ban on contributions by government contractors may, in the end, prove more relevant to the continuing viability of the local aggregate limits and other features of pay-to-play laws.