OLR Bill Analysis

sHB 5471 (as amended by House “A”)*

AN ACT CONCERNING INDEPENDENT EXPENDITURES.

SUMMARY:

This bill removes the prohibition on independent expenditures made by businesses and organizations (e. g. , labor unions) and authorizes them to make unlimited independent expenditures. By removing the prohibition, it conforms state law to the recent U. S. Supreme Court decision in Citizens United v. Federal Election Commission (see BACKGROUND).

The bill establishes reporting and attribution requirements for independent expenditures made by businesses and organizations similar to those under existing law for independent expenditures made by individuals. It also establishes new requirements. Principally, independent expenditure reports must be filed electronically with the State Elections Enforcement Commission (SEEC) and advertisements by 501(c) and 527 organizations must list their top five contributors.

The bill removes a requirement that groups of two or more individuals register as a political committee (known as a PAC) upon receiving any funds or making or incurring any expenditures to promote or oppose a candidate, political party, or referendum question. Instead, it requires them to register upon receiving or raising $ 1,000.

The bill makes conforming and technical changes.

*House Amendment “A” (1) adds to the rebuttable presumption campaign-related consultant or creative services expenditures, (2) requires electronic filing for independent expenditure reports and changes their deadlines, (3) expands attribution requirements for 501(c) and 527 organizations, (4) requires “express advocacy” expenditures to be reported in advance of a primary, and (5) makes technical corrections.

EFFECTIVE DATE: Upon passage

DEFINITIONS

By law, a “business entity” is a stock corporation; bank; insurance company; business association; bankers' association; insurance association; trade or professional association that receives funds from membership dues and other sources; partnership; joint venture; private foundation; trust or estate; cooperative; or any other profit-making association, organization, or entity, whether organized in or outside of this state. It does not include professional service corporations owned by a single individual; non-stock corporations that are not engaged in business or profit-making activity; organizations (defined below); or candidate committees, party committees, or PACs.

An “organization” is a labor organization; employee organization; bargaining representative organization for teachers; any local, state, or national organization to which a labor organization pays membership or per capita fees based upon its affiliation or membership; or a trade or professional association that receives its funds exclusively from membership dues, whether organized in or outside of this state. It does no include a candidate committee, party committee, or PAC.

Under the bill, entities may include organizations and certain business entities. Specifically, the bill defines “entity” as an organization, corporation, cooperative association, limited partnership, professional association, limited liability company, or limited liability partnership, whether organized in this or another state.

By law, “committee” means a party committee, a PAC (formed by two or more individuals, a labor organization, or a business), or candidate committee organized for a single primary, election, or referendum, or for ongoing political activities, to promote or oppose a political party, a candidate for public office or town committee member, or a referendum question.

By law, an “individual” is a human being; proprietor; or professional service organization owned by a single human being. A “person” is an individual, committee, firm, partnership, organization, association, syndicate, company trust, corporation, limited liability company, or any other legal entity other than the state or one of its political or administrative subdivisions. The bill expands the meaning of “agent” to include the entities defined as a person, rather than an individual, as under current law.

Finally, the bill changes the definition of expenditure to include expenditures for “express advocacy” advertisements made during the 90 days preceding a primary, not only the 90 days preceding the election. Thus, it requires these expenditures to be reported to SEEC during this 90-day window. Express advocacy advertisements (1) refer to one or more clearly identified candidates; (2) are broadcast on radio or television, other than on a public access channel, or appear in a newspaper, magazine, or on a billboard; and (3) are broadcast or appear during the 90-day period.

INDEPENDENT EXPENDITURES

The bill removes the prohibition on independent expenditures by organizations and certain business entities. It thus authorizes organizations and entities to make unlimited independent expenditures just as individuals may under existing law. Existing law does not limit expenditures by committees that are not coordinated with a candidate.

The bill also (1) redefines independent expenditure; (2) eliminates coordinated expenditures and in so doing, partly redefines contribution; and (3) establishes a rebuttable presumption that certain expenditures are not independent expenditures.

Under the bill, “independent expenditure” means an expenditure that is made without the consent, coordination, or consultation of a (1) candidate or candidate's agent, (2) candidate committee, (3) PAC, or (4) party committee. The definition under current law includes expenditures made without the consent, participation, or consultation of a candidate or candidate committee's agent and explicitly excludes all items defined as coordinated expenditures.

The bill redefines “contribution,” in part, as an expenditure that is not an independent expenditure. Under current law, it means an expenditure that is made in cooperation with, or at the request of, a candidate or his or her committee or agent, including a coordinated expenditure.

Rebuttable Presumption

The bill eliminates coordinated expenditures (considered contributions under current law). Instead, it creates a rebuttable presumption that certain expenditures are not independent expenditures and thus, are considered contributions for campaign finance purposes. It also specifies that the State Elections Enforcement Commission (SEEC) evaluates expenditures to determine whether they are independent expenditures.

Under the rebuttable presumption, the expenditures that are considered contributions are generally the same as coordinated expenditures under current law, with two exceptions. The bill specifies that the following also are not independent expenditures:

1. one made by a person whose officer, director, member, employee, fundraiser, consultant, or other agent serving the person in an executive or policymaking position also serves as or has served in the same election cycle as the candidate, campaign chairperson, campaign treasurer, or deputy treasurer of a candidate committee, PAC, or party committee benefiting from the expenditure, or in any other executive or policymaking position in the candidate committee, PAC, or party committee and

2. one made by a person or entity for consultant or creative services, including services related to communications, design, or campaign strategy, that is used to promote or oppose a candidate if the service provider also provides consultant or creative services to (a) the candidate, (b) his or her candidate committee, (c) any candidate he or she opposes in a primary or the general election, or (d) an opposing candidate's candidate committee.

The bill specifies that “communications strategy” does not include printing costs or costs “for the use of a medium for the purpose of communications.

Reporting Requirements

The bill subjects entities and committees that make independent expenditures to the same reporting requirements as the law establishes for individuals who make these expenditures. It also sets new ones.

Under current law, any individual who makes or obligates to make an independent expenditure or expenditures exceeding $ 1,000 in the aggregate to promote the success or defeat of a statewide office or legislative candidate must file a report with the SEEC. The bill extends this requirement to entities and committees and to independent expenditures made for any purpose, not only to promote the success or defeat of a candidate.

Current law requires the report to include a statement identifying the candidate whom the expenditure promotes or opposes. It is filed under penalty of false statement, which is a class A misdemeanor. Anyone can file a complaint with the SEEC alleging a false report or statement, or that a report was not filed at all. The SEEC must promptly decide the complaint

The bill establishes an electronic filing requirement for independent expenditure reports. It also requires the reports to (1) affirm, under penalty of false statement, that the expenditure is an independent expenditure and (2) provide any other information that the SEEC requires to facilitate compliance with campaign finance laws or the Citizens' Election Program.

The bill changes the deadlines for filing the reports. If the independent expenditure is made more than 90, rather than 20, days before the primary or general election, the individual, entity, or committee must file the report within 48 hours of doing so. If the expenditure is made 90, rather than 20, days or less before the primary or general election, the report must be filed within 24 hours.

As under current law, an individual, entity, or committee that fails to file a report for an independent expenditure made more than 20 days before the primary or general election is subject to a civil penalty of up to $ 5,000, which the SEEC imposes. An individual, entity, or committee that fails to file a report for an independent expenditure made 20 days or less before the primary or general election is subject to a civil penalty of up to $ 10,000. A knowing and willful failure to file is punishable by an additional fine of up to $ 5,000, up to five years in prison, or both.

Attribution Requirements

By law, printed, video, and audio political communications paid for by people or committees must generally include an attribution. The bill expands the attribution law to cover political communications paid for by entities, including businesses and organizations, making independent expenditures to (1) promote the success or defeat of any candidate, (2) promote or oppose any political party, or (3) solicit funds to benefit any political party or committee. The attribution requirements are similar to those under existing law for candidates, candidate committees, and other committees. Table 1 shows the bill's attribution requirements.

Table 1: Attributions Requirements for Communications Made Using Independent Expenditures

Type of Political Communication

Requirement

Written communication, including one that is typed, printed, or web-based

The material must bear upon its face:

“Paid for by” and the name of the entity, the chief executive officer (CEO) or equivalent, and the principal business address;

“This message was made independent of any candidate or political party; ” and

In the case of a 501(c) or a 527 tax-exempt organization, “Top Five Contributors,” followed by a list of the five people or entities making the largest reportable contributions during the previous 12 months.

Television or Internet video advertising

The end of the video must show, for at least four seconds:

a clearly identifiable image of the entity's CEO or equivalent;

a simultaneous, personal audio message, stating “I am (name of entity's CEO or equivalent), (title) of (entity). This message was made independent of any candidate or political party, and I approved its content; ” And

In the case of a 501(c) or a 527 tax-exempt organization, “Top Five Contributors,” followed by a list of the five people or entities making the largest reportable contributions during the previous 12 months.

Radio or Internet audio advertising

The communication must include a personal audio statement by the CEO or equivalent:

identifying the entity paying for the expenditure;

indicating that the message was made independent of any candidate or political party, using the following form: “I am (name of entity's CEO or equivalent), (title) of (entity). This message was made independent of any candidate or political party, and I approved its content; ” and

In the case of a 501(c) or a 527 tax-exempt organization (1) “Top Five Contributors,” followed by a list of the five people or entities making the largest reportable contributions during the previous 12 months or (2) an audio message providing a website that list the same if the advertisement is 30 seconds or less.

“Robo Calls” (i. e. , automated telephone calls)

The narrative of the telephone call must identify the entity and its CEO or equivalent.

In the case of a 501(c) or a 527 organization, the narrative must also include a message stating, “The top five contributors to the organization responsible for this telephone call are,” followed by a list of the five people or entities making the largest reportable contributions during the previous 12 months.

If a 501(c) or a 527 organization runs a radio or Internet audio advertisement that is 30 seconds or less, it must establish and maintain a website listing its top five contributors for the duration of the advertisement.

The bill also changes the standard for determining when communications paid for by individuals must include an attribution. Under current law, the requirement applies to communications paid for by individuals (1) cooperating with, (2) at the request or suggestion of, or (3) acting in consultation with, a candidate or his or her agent or committee to promote or defeat a candidate. Under the bill, it applies to individuals (1) acting with the consent of, (2) coordinating with, or (3) acting in consultation with, a candidate or his her agent or committee to promote or defeat a candidate.

Finally, the bill extends to a group of two or more individual who make expenditures under $ 1,000 the attribution requirements for written, typed, printed, or written web-based communications.

Illegal Practices

The bill makes a conforming change by making it illegal to make an expenditure other than an independent expenditure for a candidate without his or her knowledge. As under current law, a candidate is not liable for any such expenditure.

GROUPS OF TWO OR MORE INDIVIDUALS

The bill removes the requirement that a group of two or more individuals acting together that spends up to $ 1,000 to support or oppose a candidate or a referendum question must designate a campaign treasurer and depository institution or file a certification that the group's expenditures will not exceed $ 1,000. It also eliminates the requirement that a group of individuals that spends $ 1,000 or less in support or opposition to a referendum must file a certification with the SEEC or town clerk, whichever is applicable.

BACKGROUND

Related Case

On January 21, 2010, the U. S. Supreme Court ruled in Citizens United v. Federal Election Commission, 558 U. S. ,____(2010), that corporations and unions have the same political speech rights as individuals under the First Amendment. It found no compelling government interest for prohibiting corporations and unions from using their general treasury funds to make election-related independent expenditures. Thus, it struck down a federal law that banning this practice and also overruled two of its prior decisions. Additionally, in an 8-1 decision, the Court ruled that the disclaimer and disclosure requirements associated with electioneering communications are constitutional.

COMMITTEE ACTION

Government Administration and Elections Committee

Joint Favorable Substitute

Yea

14

Nay

0

(03/24/2010)