Is New Jersey’s Regulated-Industry Ban on Political Contributions Ripe for Challenge?

Since 1911, New Jersey law has prohibited the making of political contributions by such highly regulated industries as banks, utilities, and insurance companies. The reasoning underlying this prohibition was clarified by a New Jersey Attorney General Advisory Opinion, which explained that these “[c]omprehensive regulatory programs, vital to the protection of the public, could become prime targets of elected officials seeking to satisfy perceived debts to corporate benefactors affiliated within a regulated industry.” For more than a century, this law has remained in effect. But new legal developments raise questions about the constitutional validity of this ban on regulated-industry political contributions.

In early May of 2017, in Free and Fair Election Fund, et al. v. Missouri Ethics Commission, et al., the U.S. District Court for the Western District of Missouri declared unconstitutional a provision of Missouri campaign-finance law that prohibited banks, insurance companies, and telephone companies from making any political contributions to PACs. (Missouri law already prohibitions all contributions to candidates and political parties from corporations, without regard to whether the corporations in engaged in a heavily regulated industry.) The court determined that this complete ban on contributions from heavily regulated industries is unconstitutional because the law was not closely drawn to avoid abridging First Amendment rights to engage in the political process. This decision was based in part on the U.S. Supreme Court’s recognition that “there is not the same risk of quid pro quo corruption or its appearance when money flows through independent actors to a candidate, as when a donor contributes to a candidate directly.” In this case, making contributions to PACs did not give rise to the same risks of quid pro quo corruption or the appearance thereof because the PACs were independent entities that could determine for themselves how to use funds received from a contributor. This lessened risk was not reason, in the eyes of the court, to prohibit certain corporations from participating in the political process.

This issue is far from settled, as Missouri’s Attorney General announced that he will appeal the court’s decision, and there are key differences between New Jersey’s regulated-industry ban and Missouri’s regulated-industry ban and New Jersey campaign-finance law and Missouri campaign-finance law.  However, the Free and Fair Election Fund decision begs the question whether New Jersey’s regulated-industry ban is ripe for challenge.

 

What Do The Jersey Shore, The 2015 General Election & Understanding Applicable Contribution Limits Have in Common?

No – this is not a bad joke (although it could have the makings of one) – rather, because this past weekend marked the “official” start to summer and also marked the start of New Jersey’s 2015 general election cycle, we thought we would use this opportunity to discuss one of the most common mistakes in political-contribution compliance.

Although the 2015 primary election was held on June 2nd, the cut-off for receiving primary-election contributions was June 19th. So, contributors that maxed out with respect to the 2015 primary are now starting with a clean slate with respect to the 2015 general. Or are they?

We know that most contributors would rather be spending their summer days at the Jersey Shore than worrying about political-contribution compliance, but contributors can do both if before writing a check in connection with what the contributor believes is the 2015 general election, the contributor checks to make sure:

  • Any contributions made prior to the June 19th primary election deadline were in fact received and reported in connection with the 2015 primary.
    • Compliance tip – contributors often use the date on the check as the date of the contribution and committees often use the date of deposit.
  • No local ordinance is in place with “election cycle” limits that impose a combined limit on the 2015 primary and general election cycles.
    • Compliance tip – the Bergen County Ordinance is one example of this type of ordinance.
  • The candidate was successful in the 2015 primary and will be seeking election in the 2015 general.
    • Compliance tip – this is especially important with joint candidate committees.

Although election cycles seem straightforward, understanding when a new election cycle begins is often a source of confusion for contributors. This confusion can lead to mistakes, which may result in excessive contributions and violations of applicable pay-to-play limits.

So, if you want to maximize your time in the summer sun without the headaches associated with making contributions in violation of applicable limits, consider communicating your intent to the recipient committee by using cover letters and by writing “2015 General” on the memo line of your check. While we cannot guarantee that these simple steps will eliminate all confusion, they may very well help if you learn that the contribution you thought was made in connection with one election was in fact deposited and reported in connection with another!