OLR Bill Analysis
sHB 5589 (as amended by House "B")*
AN ACT CONCERNING CAMPAIGN FINANCE REFORM.
This bill modifies laws affecting election administration and campaign finance, including the Citizens' Election Program (CEP), which is the state's voluntary public campaign financing system. Principally, it:
1. codifies “independent expenditure political committees” (known as IE-only PACs) and requires their registration with the State Elections Enforcement Commission (SEEC);
2. prohibits IE-only PACs from accepting covered transfers of more than $70,000, in the aggregate, from any one person during a calendar year (See BACKGROUND: Federal Court Decisions on Covered Transfer Limits);
3. expands covered transfer disclosure requirements;
4. requires the governing boards of certain Connecticut entities to vote to pre-authorize campaign-related disbursements of more than $10,000;
5. prohibits foreign-influenced entities from making independent expenditures (IEs) or contributions to IE-only PACs;
6. expands political advertising disclaimer requirements for entities, generally, to include messaging from the chief executive officer or equivalent;
7. establishes a uniform deadline for certifying minor party nominations, submitting nominating petitions, and filing affidavits of intent under the CEP for candidates not in a primary;
8. establishes a four-step grant reduction schedule under which candidate committees that submit applications closer to the election receive a reduced CEP grant; and
9. requires that the chairperson of each political committee be an individual with chief or primary direct, extensive, and substantive decision-making authority over the committee's fundraising and spending activities (§ 14).
By law, “political committee” means
1. a committee organized by a business entity or organization;
2. persons other than individuals, or two or more individuals organized or acting jointly, conducting activities in- or out-of-state;
3. an exploratory committee;
4. a slate committee in a primary for the office of justice of the peace; or
5. a legislative caucus or legislative leadership committee. Candidate committees and party committees are not political committees.
Violators of the bill are subject to SEEC's enforcement authority. Among other things, SEEC may levy civil penalties or refer matters to the chief state's attorney.
The bill also makes several minor, technical, and conforming changes.
*House Amendment “B” replaces the underlying bill and adds the provisions on (1) uniform candidate deadlines, (2) CEP grants, (3) political committee chairpersons, and (4) certain internet advertisements. It eliminates provisions on (1) “coordinated spenders”; (2) the rebuttable presumption for IEs; and (3) source and amount of IE disclosures by persons, other than IE-only committees, making IEs.
Finally, the amendment (1) increases, from $4,000 to $10,000, the threshold at which certain governing boards must vote to pre-authorize campaign-related disbursements and (2) for IE-only PACs, applies the $70,000 aggregate limit on accepting covered transfers to each person that makes a transfer, rather than collectively to all persons making transfers, during a calendar year.
EFFECTIVE DATE: Upon passage, except for the provisions on uniform candidate deadlines and CEP grants, which are effective October 1, 2017.
§§ 1 - 3, 5-12 & 18 — IE-ONLY PACS
The bill codifies “independent expenditure political committee” (IE-only PAC) as a type of PAC under Connecticut's campaign finance laws and, like other committees that make IEs, requires their registration with SEEC. It defines them as PACs that make only (1) IEs and (2) contributions to other IE-only PACs.
The bill makes several conforming changes, including specifying that (1) individuals, business entities, and labor unions may make contributions to IE-only PACs and (2) various types of IE-only PACs, such as those formed for a single election or primary, are prohibited from making contributions, other than to other IE-only PACs (see BACKGROUND: IE-Only PACs). It also establishes disclosure requirements for these PACs (see below: Disclosures by IE-Only PACs).
Lawful Purposes (§ 3)
The bill defines “lawful purposes of the committee” for IE-only PACs as promoting (1) a political party, (2) the success or defeat of candidates for nomination or election, or (3) the success or defeat of referendum questions. It requires these committees to act entirely independently of any candidate, candidate committee, party committee, PAC (other than an IE-only PAC), or agent of such a candidate or committee.
Surplus Distributions (§ 5)
By law, candidate committees and PACs, other than exploratory committees or PACs organized for ongoing political activities, must generally spend or distribute surplus funds within 90 days after (1) a primary when a candidate loses or (2) March 31 following an election or a referendum held in November.
The bill establishes a surplus distribution procedure for IE-only PACs, other than those formed for ongoing activities. Specifically, it requires them to distribute surplus funds, according to the schedule outlined above, to (1) their contributors, on a prorated basis; (2) state or municipal governments or agencies; or (3) tax-exempt organizations.
Limit on Acceptance of Covered Transfers (§ 18)
The bill prohibits IE-only PACs from accepting covered transfers of more than $70,000, in the aggregate, from any one person during a calendar year. Under current law, any person, including an IE-only PAC may accept unlimited covered transfers. (It appears that limiting covered transfers in this way may conflict with recent federal court decisions (see BACKGROUND: Federal Court Decisions on Covered Transfer Limits).)
By law, a “covered transfer” is, with certain exceptions, any donation, transfer, or payment of funds by a person to a recipient that (1) makes IEs or (2) transfers funds to another person that makes IEs (CGS § 9-601(29)).
§§ 4 & 17 — REPORTING IEs AND COVERED TRANSFERS
By law, a person must disclose information about IEs it makes that exceed $1,000 in the aggregate by filing certain reports with SEEC. If the IE (1) is made or obligated to be made during a primary or general election campaign and (2) promotes the success or defeat of a statewide office or legislative candidate, the person must file the report electronically within 24 hours after making or obligating to make it.
The bill expands IE disclosure requirements for IE-only PACs and persons that make IEs without forming a PAC (known as “incidental spenders”). 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 its political or administrative subdivisions) (CGS § 9-601(10)).
Disclosures by IE-Only PACs (§ 4)
Existing law requires PACs to disclose information about IEs they make by filing campaign finance statements with SEEC (i.e., SEEC Form 20 for regular PACs and SEEC Form 40 for IE-only PACs). Under the bill, an IE-only PAC must include additional information in these statements if any of its contributors received covered transfers that exceed $5,000, in the aggregate, during the 12-month period preceding the applicable primary or election. The requirement applies when persons contribute more than $1,000 in the aggregate.
Dedicated Accounts. Under the bill, a person that makes a contribution that exceeds $1,000, in the aggregate, to an IE-only PAC from a dedicated IE-expenditure account must provide the source and amount of each donation, transfer, or payment that exceeds $5,000, in the aggregate, to the account. The treasurer must include this information in the periodic campaign finance statements the PAC files with SEEC. A “dedicated IE-account” is one that is segregated from any other account the person controls.
The bill creates parameters for dedicated IE-accounts. It (1) allows such an account to receive covered transfers directly from any person, other than the person establishing it, and (2) prohibits the account from receiving covered transfers from any other account the person who established it controls, with one exception. A covered transfer can be moved to a dedicated account from another account that person controls, upon a covered transfer-maker's request, for the purpose of making IEs. In that case, it must be treated as a covered transfer directly to the dedicated IE-account.
Other Sources. A person that makes a contribution that exceeds $1,000, in the aggregate, to an IE-only PAC from a source other than a dedicated IE-expenditure account must provide the source and amount of each donation, transfer, or payment that exceeds $5,000, in the aggregate, to the person during the 12 months before the primary or election for which the IE is made. The treasurer must include this information in the periodic campaign finance statements the PAC files with SEEC.
Additional Requirements. The bill prohibits (1) recipients of covered transfers that exceed $5,000 in the aggregate from knowingly making a contribution to an IE-maker without disclosing the source and amount information described above and (2) IE-only PAC treasurers from accepting contributions that exceed $1,000 in the aggregate, unless the information is disclosed.
Under the bill, a person that makes contributions to an IE-only PAC that separately, or in the aggregate, exceed $1,000 per calendar year must provide the IE-only PAC with a statement, signed under penalty of false statement, if it receives covered transfers that separately, or in the aggregate, exceed $5,000. By law, the penalty for false statement is a class A misdemeanor, punishable by up to one year in prison, up to a $2,000 fine, or both.
The statement must include:
1. if the contributor is a human being, the name of his or her employer or employers, if any;
2. the contributor's status as a client or communicator lobbyist, or immediate family member of a communicator lobbyist, under the State Code of Ethics;
3. a certification that the contributor is not a state contractor, principal of a state contractor, foreign-influenced entity, or otherwise prohibited from making a contribution to the IE-only PAC; and
4. the name of any person required to be disclosed and the corresponding covered transfer amounts.
The bill requires SEEC to prepare a sample form for the above certification and make it available to treasurers and contributors. The sample form must explain (1) the terms "covered transfer" and “campaign-related disbursement” and (2) prior authorization notice requirements for boards making such disbursements (see below: Board Authorizations for Campaign-Related Disbursements). IE-only PACs must include the sample form's information in any written solicitation they conduct.
A treasurer must (1) send a request by certified mail, return receipt requested, within three business days after receiving a contribution without a certification and (2) refrain from making the deposit until obtaining it. If the contributor still does not provide the certification, the treasurer must return the contribution at the end of the reporting period in which it was received or within 14 days after the treasurer's written request, whichever is later.
The bill provides treasurers a complete defense to any action taken against them, including an investigation by SEEC, concerning a contribution they deposit based on a signed certification later determined to be false.
Disclosures by Incidental Spenders (§ 17)
Existing law requires persons, other than PACs (as discussed above), to disclose information about IEs they make using SEEC's long- and short-form reports (i.e., SEEC Form 26) (see BACKGROUND: Long- and Short-Form IE-Reports). The bill expands the information these IE-makers must disclose in their reports.
The bill requires IE-makers that are not human beings to disclose in the long-form report the name of the individual who had direct, extensive, and substantive decision-making authority over the IE or IEs being disclosed. It also requires the individual who files the long-form report to certify, under penalty of false statement, that due inquiry was made by the chief executive or chief financial officer, or equivalent officer, to determine that the IE-maker was not a foreign-influenced entity on the date when the IE was made or obligated to be made (see below: Foreign-Influenced Entities).
§ 13 & 15-17 — ENTITIES
The bill makes various changes affecting “entities,” which, by law, are organizations (i.e., unions), profit and nonprofit corporations, cooperative associations, limited partnerships, professional associations, limited liability companies and partnerships, 501(c) tax-exempt organizations, and 527 tax-exempt political organizations (CGS § 9-601(19)).
Board Authorizations for Campaign-Related Disbursements (§§ 13 & 15)
The bill requires the governing board, if any, of an entity incorporated, organized, or operating in Connecticut to vote to pre-authorize each campaign-related disbursement it makes of more than $10,000, in the aggregate, during a calendar year. Under the bill, “campaign-related disbursement” means a covered transfer to an IE-only PAC or an IE.
Prior to the vote, the board must be informed of the money's specific use, including whether it may be used for an IE to target or benefit a candidate. The entity must disclose individual board members' votes and details on the expenditures (1) publicly on its website no later than 48 hours after the vote and (2) electronically with SEEC in a manner the commission prescribes.
Foreign-Influenced Entities (§§ 15-17)
Federal law generally prohibits foreign nationals from making contributions, donations, or IEs in connection with federal, state, or local elections (see BACKGROUND: Foreign Nationals and Related Federal Law). The bill additionally prohibits foreign-influenced entities from making IEs or contributions to an IE-only PAC.
Penalties. The bill subjects violators of its foreign-influenced entity prohibitions to a SEEC civil penalty of up to $5,000 or three times the amount of any improper IE or contribution, whichever is greater. However, under the bill, no violation occurs if and only if the chief executive, chief financial, or equivalent officer made due inquiry to determine that the entity was not a foreign-influenced entity (as described above). Due inquiry must have been made before making the IE or contribution to the IE-only PAC (see above: Disclosures by Persons Making IEs).
Definitions. Under the bill, a "foreign-influenced entity" means an entity that:
1. one foreign owner holds, owns, controls, or has directly or indirectly acquired beneficial ownership of equity or voting shares of at least 5% of the total equity or outstanding voting shares;
2. two or more foreign owners hold, own, control, or have directly or indirectly acquired beneficial ownership of equity or voting shares of at least 20% of the total equity or outstanding voting shares; or
3. any foreign owner participates in any way, directly or indirectly, in the process of making decisions with regard to the entity's political activities in the United States, including its political activities during an election in the state or any town, city, municipality, borough, or other local government unit within the state.
A “foreign owner” is a (1) foreign national, as defined in federal law, or (2) business entity of which a foreign national holds, owns, controls, or otherwise has directly or indirectly acquired beneficial ownership of equity or voting shares of at least 50% of the total equity or outstanding voting shares (see BACKGROUND: Foreign Nationals and Related Federal Law).
§ 19 — POLITICAL ADVERTISING
By law, printed, video, and audio political advertisements must include certain attributions, known as “disclaimers.” Among other things, they must identify the person making the expenditure and indicate that additional information is available on SEEC's website. For IEs made during the 90 days before a primary or election, the disclaimers must identify names of the five persons that made the five largest aggregate covered transfers of $5,000 or more to the person making the communication during the 12 months before the applicable primary or election (i.e., “top five transferors”).
Expanded Requirements for Entities
The bill expands the disclaimer requirements for entities, as shown in Table 1.
Table 1: Expanded Disclaimer Requirements for IEs Made by Entities
Type of Advertisement
for Which IE Is Made
New Information Required Under the Bill
Written communication, including one that is typed, on a billboard, printed, or web-based
The name of the entity's chief executive officer, or equivalent, and principal business address
Video advertising broadcast by television, Internet, or satellite
The end of the advertisement must air, for at least four seconds, (1) a clearly identifiable video, photographic, or similar image of the chief executive officer or equivalent and (2) the following personal audio message: “I am… (name of entity's chief executive officer or equivalent), … (title) of … (entity). This message was made independent of any candidate or political party, and I approved its content.”
Audio advertising broadcast by radio, internet, or satellite
The end of the advertisement must air the following personal audio message: “I am… (name of entity's chief executive officer or equivalent), … (title) of … (entity). This message was made independent of any candidate or political party, and I approved its content.”
Telephone calls (including Robo calls)
The narrative of the telephone call must identify the entity's chief executive officer or equivalent.
Reporting Covered Transfers Identified in Advertisements
By law, if a person identified in a political advertisement as a “top five transferor” is also a recipient of a covered transfer (“recipient transferor”), the IE-maker must disclose in its reports to SEEC the names of the top five transferors to that recipient transferor. The bill eliminates provisions in current law that prohibits certain disclosures in these reports.
Specifically, the bill lifts the current prohibition on disclosing the name of any person that made a covered transfer to a 501(c)(4) organization if the organization is a top five transferor. (Under federal law, these organizations are not required to publicly disclose their donors.)
It also lifts the prohibition on disclosing the name of any person that made a covered transfer to a top five transferor if (1) the recipient accepts covered transfers from 100 or more different sources and (2) no source accounts for 10% or more of the covered transfers accepted by the recipient during the 12 months immediately preceding the applicable primary or election.
The bill also specifies that a person is not required to list in a disclaimer any other person that made a covered transfer to it of less than $5,000, in the aggregate, during the 12 months immediately preceding a referendum for which an IE is made. This provision already applies to primaries and elections.
Under current law, the top five transferors need not be listed on a disclaimer for an internet text advertisement (1) that appears based on the result of an internet search and (2) has 200 or fewer characters in its text. But in that case, the communication must (1) include a link to a website disclosing the names of the top five transferors and (2) contain the other disclaimer statements required by law and under the act.
The bill limits this disclaimer requirement to Internet text advertisements that are IEs. Additionally, the bill exempts from all disclaimer requirements the internet text advertisements described above if they are made by participating CEP candidates.
The bill also exempts certain internet text communications from the requirement that a disclaimer appear on their face. The exemption applies to internet text communications if (1) they are transmitted from, appear on, or are otherwise generated by a social media account or website of a candidate or candidate's agent; (2) they contain a link to another political advertisement covered by the law; and (3) the other advertisement complies with the law's disclaimer requirements.
§§ 20-22 — CANDIDATE DEADLINES
As shown in Table 2, the bill aligns certain deadlines associated with (1) minor party nominations and certifications, (2) nominating petitions, and (3) affidavits of intent to participate or not participate in the CEP (see BACKGROUND: CEP Affidavits of Intent).
Table 2: Candidate Deadlines
Deadline Under the Bill
Certifying minor party nominations
62nd day before the election
(September 7, 2016)
Day of the primary
(August 9, 2016)
Submitting nominating petitions
90th day before the election
(August 10, 2016)
Day of the primary
(August 9, 2016)
Filing affidavits of intent under the CEP for candidates not in a primary
40th day before the election to the day of the primary
(September 29, 2016)
Day of the primary
(August 9, 2016)
By law, nominating petitions and CEP affidavits are due by 4:00 p.m. on the day of the deadline. The bill establishes the same requirement for minor party nomination certificates.
§§ 23-26—CEP GRANTS
Under the CEP, statewide and legislative office candidates who receive qualifying contributions, agree to abide by certain spending limits, and comply with other requirements, are eligible to receive state grants to fund their campaigns. The bill establishes a four-step grant reduction schedule under which candidate committees receive reduced grants, beginning 70 days before the election, the closer to the election that they submit their application.
The schedule applies to general election grants for major party candidates who are currently eligible for (1) a full grant when they are opposed by a major party candidate, (2) 60% of the applicable grant when they are opposed by a minor or petitioning party candidate, or (3) 30% of the applicable grant when they are unopposed.
It similarly applies to minor and petitioning party candidates. Currently, minor party candidates may receive a general election grant equal to the full grant for a major party candidate if the candidate for the same office representing the same minor party at the last regular election received at least 20% of the votes cast for that office. An eligible petitioning candidate may receive a full grant for the general election if his or her petition is signed by a number of qualified electors equal to at least 20% of the number of votes cast for the same office at the last regular election. Both receive a one-third grant by meeting a 10% threshold or a two-thirds grant by meeting a 15% threshold.
Table 3 shows the bill's grant reduction schedule.
Table 3: CEP Grant Reduction Schedule
Days Before Election When Application Received
% of Applicable Grant Received
70 through 57 days
56 through 43 days
42 through 29 days
28 days through the last day that SEEC accepts applications
By law, for a general election, SEEC accepts grant applications starting on the third Wednesday in May in the election year (e.g., May 18, 2016), and every subsequent Wednesday, through the fourth to last Friday before the election (e.g., October 14, 2016) (CGS § 9-706(g)(1)).
In Declaratory Ruling 2013-02, SEEC ruled that, in light of a line of cases ruling that contribution limits to IE-Only PACS are unconstitutional, it would no longer enforce contribution limits to PACs that receive and spend funds only for IEs, unless it received further guidance from the legislature or a court.
Federal Court Decisions on Covered Transfer Limits
In New York Progress and Protection PAC (NYPPP) v. Walsh, et al., 733 F.3d 483 (2013), the Second Circuit Court of Appeals found that a New York law limiting political contributions to an independent expenditure political committee violated NYPPP's First Amendment right to political speech. Relying on several other circuit court decisions, the court stated that because the government has no anti-corruption interest in limiting independent expenditures, it follows that “a donor to an independent expenditure committee such as NYPPP is even further removed from political candidates and may not be limited in his ability to contribute to such committees.”
Long- and Short-Form IE-Reports
As part of these reports, a person must disclose the source and amount of any covered transfer of $5,000 or more, in the aggregate, it received during the 12 months before the applicable primary or election. This requirement applies if the IE (for which the report is being filed) is made or obligated to be made 180 or fewer days before the primary or election.
Foreign Nationals and Related Federal Law
Foreign Nationals. Federal law defines a “foreign national” as any of the following:
1. a government of a foreign country and a foreign political party;
2. a person outside of the United States, unless it is established that the person is (a) an individual and a U.S. citizen domiciled within the United States or (b) not an individual, has its principal place of business in the United States, and is organized under, or created by, the United States, a state, or other place subject to U.S. jurisdiction;
3. a partnership, association, corporation, organization, or other combination of persons organized under the laws of, or having its principal place of business in, a foreign country; or
4. an individual who is not a U.S. citizen or national and who is not lawfully admitted for permanent residence (52 U.S.C. § 30121 and 22 U.S.C. § 611(b)).
Prohibited Activities. Federal law prohibits a foreign national from, among other things, directly or indirectly making:
1. in connection with a federal, state, or local election, a contribution or donation of money or anything of value; an express or implied promise to make a contribution or donation; or an expenditure or IE or
2. a contribution or donation to a federal, state, or local political party's committee.
It similarly prohibits a person from soliciting, accepting, or receiving any contribution or donation described above from a foreign national (52 U.S.C. § 30121 and 11 C.F.R. § 110.20).
CEP Affidavits of Intent
With one exception, the law requires candidates to file an Affidavit of Intent to Abide or an Affidavit of Intent Not to Abide by the CEP's spending limits. Candidates do not have to file an affidavit if they will not receive or spend more than $1,000 from outside sources. These candidates are considered “nonparticipating candidates.”
Candidates who intend to participate must file the Affidavit of Intent to Abide only once, at which point they are considered “participating candidates.” Those who file before a primary and win the party endorsement are not required to re-file before the general election. The affidavit must include certain certifications from the candidate and his or her treasurer.
SB 582, reported favorably by the House Government Administration and Elections (GAE) Committee, contains the same provisions on foreign-influenced entities (except that it uses the term “foreign-influenced business entities”) and prohibits any person, not just an IE-only PAC, from accepting covered transfers of more than $70,000.
sSB 934, reported favorably by the GAE Committee, also modifies campaign finance laws and contains provisions expanding political advertising disclosure requirements.
Government Administration and Elections Committee