Monday, April 29, 2013

The New York State Attorney General (the AG) has proposed broad new regulations which will require not-for-profit organizations filing with the AG’s Charities Bureau to disclose their financial involvement in “New York Elections.” The proposed regulations were first issued in December of 2012 and were revised on April 17th. The AG’s proposed regulations require disclosure of all expenditures made for electoral communications, regardless of whether the communication expressly advocates for the support or opposition of a candidate, and would apply to all elections “for New York state or local office, or any election at which any New York state or local constitutional amendment, proposition, referendum or other question is submitted to the voters.” The comment period regarding the revised proposed regulation closes on May 17, 2013.

New York Election Law and the corresponding regulations require entities that raise and expend money on independent expenditures “that expressly advocate[] for the election or defeat of a candidate” in New York to register with the New York State Board of Elections (the Board). Once registered, these entities are required to regularly disclose information regarding the entity’s donors and expenditures. The Board, however, uses the standard established in the U.S. Supreme Court case Buckley v. Valeo to define express advocacy as any communication using words “such as vote, oppose, support, elect, defeat, or reject, which call for the election or defeat of a candidate.” The AG’s proposed regulations take a significantly broader interpretation of political speech and would require reports to be filed regarding funds used for any “Election Related Expenditure,” regardless of whether the communication contains the Buckley “magic words.” In justifying the new proposed regulations, the AG argued that there “has been a well-documented proliferation of secretive non-profit groups engaging in electioneering activities with minimal disclosure to regulators and the public.”

The revised proposed regulation requires disclosure of “Election Related Expenditures,” and defines that phrase to include expenditures for “Express Election Advocacy,” expenditures for “Election Targeted Issue Advocacy,” and the transferring funds or providing services to another organization that will then subsequently engage in express advocacy or election targeted issue advocacy.

“Express Election Advocacy” includes both communications that meet the Buckley definition of express electoral advocacy, as well as communications that don’t use the magic words, but are “susceptible of no reasonable interpretation other than as a call of the nomination, election or defeat of . . . candidates in an election, the election or defeat of . . . political parties, or the passage or defeat of . . . constitutional amendments, propositions, referenda or other questions submitted to the voters in any election.” In contrast, as a result of revisions made to the initial proposal, “Election Targeted Issue Advocacy” is now defined to mean issue advocacy made within 45 days of a primary election or 90 days prior to a general election that (i) identifies one or more candidates running in that election; (ii) “depicts the name, image, likeness or voice of one or more” of such candidates; or (iii) identifies any political party, constitutional amendment, proposition, referendum or other question submitted to the voters in that election.” In an attempt to address concerns raised by certain membership organizations, the revised proposed regulation also clarifies that Election Targeted Issue Advocacy will not include communications made solely to the organization’s members, or expenditures related to non-partisan candidate debates, town halls or similar forums.

If the regulations are adopted as proposed, all not-for-profit organizations required to register and file reports with the AG’s Charities Bureau (other than 501(c)(3) organizations, which are completely barred from engaging in political activity) will be required to disclose information regarding these Election Related Expenditures as part of their Charities Bureau filings. Covered entities will be required to annually report “the amount and percentage of total expenses . . . [attributable to] . . . election related expenditures.” Entities that make Election Related Expenditures in excess of $10,000 during the reporting period will be subject to further disclosures obligations. Those organizations will be required to disclose: (i) the amount spent on or the fair market value of each Election Related Expenditure; (ii) the date of each Election Related Expenditure; (iii) the name and address of the recipients of the Expenditure; and (iv) a description of the Election Related Expenditure, including the identity of the relevant candidate, party, or referendum, and whether the filer supports or opposes that person, party, or issue. Covered entities that makes more than $10,000 in Election Related Expenditures must also complete a form disclosing information regarding contributions received by the entity, regardless of what the contributions are used for, as long as that “Covered Donation” “is available to be used for” an Election Related Expenditures. That report will include disclosure of: (i) the name and address of each donor who gave more than $1,000 during the reporting period; (ii) the name of each donor’s employer; and (iii) the date and amount of each Covered Donation.

In order to avoid reporting to multiple agencies, entities registered with and disclosing all activity to the Board of Elections would not be required to disclose Election Related Expenditures to the AG’s Charities Bureau. Similarly, if the entity is already reporting the information to the New York City Campaign Finance Board or any other government agency that makes the information available to the public, the filer would not have to report the Election Related Expenditure information to the AG.

The AG intends to make publicly available all of the information required to be disclosed, for all contributions made after the effective date of the final regulation. Organizations that can demonstrate that their “primary activities involve areas of public concern that create a substantial likelihood that disclosure will cause undue harm, threats, harassment or reprisals to any person or organization” may request that the AG withhold the information from public disclosure. Requests to prevent information from being disclosed must be submitted to the AG at least 45 days prior to the reporting due date.

The revised proposed regulation provides that the Electioneering Disclosure reports must be filed annually, no later than the 15th “day of the fifth month after the organization’s accounting period ends.” The regulation explicitly states that extensions will not be permitted.

The requirements imposed by the revised proposed regulations are in addition to the other disclosure obligations that are imposed by the Joint Commission on Public Ethics, the New York State Board of Elections, and the New York City Campaign Finance Board, which affect entities engaged in lobbying and political activity in New York.

Practice is available to assist potentially affected organizations in understanding all of the new requirements.