PA 10-187—sHB 5471

Government Administration and Elections Committee

AN ACT CONCERNING INDEPENDENT EXPENDITURES

SUMMARY: This act removes the prohibition on independent (political) 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 U. S. Supreme Court decision in Citizens United v. Federal Election Commission (see BACKGROUND).

The act 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, (1) independent expenditure reports promoting or opposing a statewide office or legislative candidate must be filed electronically with the State Elections Enforcement Commission (SEEC) within 90, rather than 20, days before a primary or election and (2) advertisements by 501(c) and 527 organizations must list their top five contributors.

The act 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.

Finally, the act makes conforming and technical changes.

EFFECTIVE DATE: Upon passage

CAMPAIGN FINANCE DEFINITIONS

State campaign finance laws regulate campaign contributions and expenditures, including who can make and accept contributions and when. 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 not include a candidate committee, party committee, or PAC.

Under the act, entities may include organizations and certain business entities. Specifically, the act 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 act expands the meaning of “agent” to include a person who acts at the discretion of another person, not only at the discretion of an individual, as under prior law.

Finally, the act 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. These 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 act removes the prohibition on independent expenditures by organizations and certain business entities. It thus treats them the same as individuals by allowing unlimited independent expenditures. Existing law does not limit expenditures by committees that are not coordinated with a candidate.

The act also (1) broadens the definition of independent expenditure; (2) eliminates the term “coordinated expenditure” and partially redefines contribution; and (3) establishes a rebuttable presumption that certain expenditures are not independent expenditures.

Under the act, “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 prior law included expenditures made without the consent, participation, or consultation of a candidate or candidate committee's agent and explicitly excluded all items defined as coordinated expenditures.

The act redefines “contribution,” in part, as an expenditure that is not an independent expenditure. Under prior law, it meant an expenditure 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 act eliminates coordinated expenditures (considered contributions under prior 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 prior law, with two exceptions. The act 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; or

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

Existing law requires 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 to file a report with the SEEC. The act extends this requirement to entities and committees and to independent expenditures made for any purpose (e. g. , a referendum), not only to promote the success or defeat of a candidate.

The law, unchanged by the act, requires the report to include a statement identifying any candidate the expenditure promotes or opposes. It is filed under penalty of false statement, which is a class A misdemeanor (see Table on Penalties). 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 act requires these reports to additionally (1) affirm under penalty of false statement that the expenditure is an independent expenditure and (2) provide any information the SEEC needs to facilitate compliance with campaign finance laws and the Citizens' Election Program. It also establishes an electronic filing requirement for independent expenditure reports when the expenditure promotes or opposes a statewide office or legislative candidate.

The act changes the deadlines for filing reports promoting or opposing a statewide office or legislative candidate. The individual, entity, or committee must file the report within 48 hours of any independent expenditure made more than 90, rather than 20, days before the primary or general election. 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 prior law, failure to file a report for an independent expenditure promoting or opposing such a candidate (1) made more than 90 days before the primary or general election carries a civil penalty of up to $5,000 and (2) made 90 days or less before the primary or general election carries 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 act 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 that the law establishes for candidates, candidate committees, and other committees. Table 1 shows the act's attribution requirements.

Table 1: Attribution 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 advertisement 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, “The top five contributors to the organization responsible for this advertisement,” 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 end with 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) “The top five contributors to the organization responsible for this advertisement,” 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 lists 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 act also changes the standard for determining when communications paid for by individuals must include an attribution. Under prior law, the requirement applied 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 act, it applies to individuals (1) acting with the consent of, (2) coordinating with, or (3) acting in consultation with, a candidate or his or her agent or committee to promote or defeat a candidate.

Finally, the act extends to a group of two or more individuals who make expenditures under $1,000 the attribution requirements for written, typed, printed, or written web-based communications. The group must state its name and the name and address of its agent in the attribution.

Illegal Practices

The act 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 existing law, a candidate is not liable for any such expenditure.

GROUPS OF TWO OR MORE INDIVIDUALS

The act 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 two or more 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. 50 (2010), that corporations and unions have the same political speech rights as individuals under the First Amendment. It found no compelling governmental 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 banning this practice and also overruled two of its prior decisions. Additionally the Court ruled that the disclaimer and disclosure requirements associated with electioneering communications are constitutional.

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