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.

Political Law Roundup – July 13, 2015

This is the first post in a new series on the blog, providing a quick recap of recent political-law news and developments.

  • What role will non-profits have on the 2016 presidential election? According to a report in the New York Times, 501(c)(4) political activity is expected to be an important factor in the upcoming race.
  • In Wagner v. FEC, the DC Circuit Court upheld the prohibition on political contributions by federal contractors. You can see our full analysis of this important case here.
  • Challenges in defining coordination and enforcing restrictions means that Super PACs will continue to play an important role in federal elections, including the 2016 presidential race.
  • The New York City Campaign Finance Board is holding a hearing on Monday, July 13, 2015 to solicit comments on proposed amendments to Board rules on public-funds eligibility and disclosure-statement documentation. More information is available here.
  • The Brennan Center for Justice, the New York City Campaign Finance Board, and the Committee for Economic Development will be hosting a conference titled American Elections at the Crossroads, on Wednesday, July 22. Ann Ravel, chair of the FEC, will deliver remarks.

District Judge Permanently Enjoins PA Law that Prohibited Corporate Contributions to IE Committees

On Wednesday, U.S. District Judge William Caldwell permanently enjoined enforcement of Pennsylvania’s prohibition on campaign expenditures by banks, corporations or unincorporated associations (such as labor unions) as against contributions these entities make to independent expenditure-only committees. See General Majority Pac v. Aichele,  No.: 1:14-CV-332 (M.D. Pa. Aug. 13, 2014). Thus, Pennsylvania now joins its sister states in removing all limits on corporate contributions to Super PACs.

The Next Domino – New York Knocks Down Limits to SuperPACs

Last week, Judge Paul Crotty of the Southern District of New York ruled that New York Election Laws §§ 14-114(8) and 14-126, which impose limits on the amount of money that may be contributed to political candidates, are unconstitutional as applied to independent expenditure-only organizations. The full opinion can be downloaded here. 

New York’s Election Law had applied the $150,000 aggregate contribution limit to SuperPACs. In other words, a contributor could only give up to $150,000, despite contrary rulings in Citizens United and SpeechNow v. FEC (see here).  The Second Circuit made clear back in October that it disagreed when it reversed the district’s decision to deny the preliminary injunction sought to prevent enforcement of the limit and sent the case back down.

Consequently, contribution limits to independent expenditure-only committees have seen their last day in New York. This decision represents the fall of yet another domino in the ongoing movement away from contribution limits by U.S. courts.  The next one? New York’s $150,000 annual aggregate limit applicable to all political recipients, including candidate committees and political parties.

Independent Spending in NJ’s 2013 Elections Reaches a Record-Breaking High

Last week the New Jersey Election Law Enforcement Commission announced  “[a]n unprecedented explosion of independent special interest spending pushed the cost of the 2013 state elections to an all-time high . . .”  Although final numbers won’t be available until January, reports filed with ELEC indicate that spending on New Jersey’s 2013 elections reached a record $129 million.  Special interest groups are responsible for spending nearly $41 million independent of parties and candidates on state campaigns during the recent election cycle.  This constitutes approximately 32% of the total amount of money spent statewide (compared to .3% in the 2005 and 15% in 2009).  Thus, the numbers have doubled since New Jersey’s last gubernatorial election.

This year marks the first election in which the governor’s office and all 120 seats of the legislature were up for grabs since the 2010 U.S. Supreme Court decision in Citizens UnitedSome argue that decision spurred this dramatic growth in independent spending, although it is worth noting that, unlike federal law prior to Citizens United, New Jersey campaign finance law did not restrict independent spending by corporations.

Yet it is apparent that Citizens United marks at least a psychological sea change that has driven up spending by independent entities and dramatically changed election dynamics in the Garden State.