Top Five Political Law Compliance Tips for 2020

Another election year is upon us, and once again federal and state candidates are on track to raise and spend unprecedented sums for their election efforts.  That means corporations, trade associations, 501(c)(4) advocacy organization, and their leaders, members and donors will be inundated with political contribution requests.  They may also be asked to help candidates and political parties in other ways, such as hosting fundraisers or providing in-kind contributions of goods or services.
For many organizations, political engagement is not an option – decisions by federal, state and local officials may be critical to their success.  Any organization engaged in political activity must understand the basic rules of the road in order to avoid common pitfalls.  Here are our Top 5 compliance tips for addressing the political law risks facing your organization this election year.

IRS Issues Proposed Regulations and Announces Penalty Relief to Allow Certain Section 501(c) Organizations to Continue to Omit Donor Names and Addresses from IRS Form 990, Schedule B Filings

As we previously reported, this past summer a U.S. District Court judge in Montana invalidated the IRS’s 2018 rule that had eliminated the need for most 501(c) organizations to report the names and addresses of their large donors to the IRS.   In response to that ruling, the IRS issued proposed regulations in September to address the Administrative Procedure Act rulemaking defect in the prior rule that was the focus of the District Court ruling.  

District Court Revives Donor Reporting Requirement in IRS Form 990, Schedule B

On July 30, a U.S. District Court judge in Montana invalidated the IRS’s 2018 rule that had eliminated the need for most 501(c) organizations to report the names of their large donors to the IRS.    
In July 2018, the IRS adopted Rev. Proc. 2018-38, in which it relieved Section 501(c) organizations, other than Section 501(c)(3) organizations, of the obligation to report the names and addresses of donors giving $5,000 or more during the year on IRS Form 990, Schedule B, beginning with tax year 2018 (due on or after May 15, 2019 unless an extension is elected).  Under the revenue procedure, organizations were still required to collect and preserve this information, as well as to provide it upon request to the IRS. As before, all donor information, whether or not reported to the IRS, remained strictly confidential and not subject to public disclosure.

IRS Ignites Political Firestorm by Eliminating the Requirement for Most Nonprofit Organizations to Submit Confidential Donor Information to the IRS

On July 16, 2018, the IRS announced that it has eliminated the requirement for most nonprofit organizations to provide confidential donor information to the IRS on Schedule B to their annual IRS Form 990.  Although limited in scope and with no impact on public transparency, the change has significant political ramifications and has ignited a firestorm of support and condemnation across the political spectrum.  This includes a partisan Senate Finance Committee vote and delay in the Senate confirmation vote on the new IRS Commissioner.

DC Federal District Court Voids FEC Independent Expenditure Reporting Rule - Expands Donor Disclosure

In an opinion released on August 3rd, US District Court Judge Beryl Howell greatly expanded the FEC donor disclosure reporting requirements for independent groups – like Section 501(4) and 501(c)(6) organizations – that sponsor independent expenditures and other candidate advocacy communications.  The court delayed the implementation of its ruling for 45 days to give the FEC time to draft interim rules.

Stand Up and Be Heard in an Election Year

Originally published by ASAE.

Nonprofit organizations are often overly cautious in speaking out about their causes and interacting with candidates in election years for fear of violating a complex set of laws and rules. You can and should participate in the election-year conversation. Here’s how. 

Corporate Political Contributions Webcast

DC Partner Jim Kahl and Nancy Bukar, Sodexo Vice President of Government Affairs & Assistant General Counsel, co-presented to The Association of Corporate Counsel (National Capital Region) in a webcast last Tuesday on “Election Year Corporate Political Activity: Understanding the Legal Risks and Strategic Opportunities.” Click here to see

New Government-Wide Ethics Rules

The Office of Government Ethics (OGE) adopted new gift rules for all government employees, which went into effect on January 1, 2017.   Government employees are generally prohibited from accepting gifts from “prohibited sources” (e.g., persons regulated by or that have business before an agency), or gifts given because of the employee’s official position, unless allowed by a specific gift exception.  The amended rules leave some old rules in place, tighten some rules, and open up a few new opportunities for engagement with government officials.

FEC Adjusts Some Political Contribution Limits for 2017-2018 Cycle

The Federal Election Commission has made minor adjustments to some of the individual and PAC contribution limits for the 2017-2018 election cycle.  The amount that individuals and non-multicandidate PACs can give to federal candidates remains at $2700 per election to each federal candidate.  Since primary and general election contests are viewed as separate “elections,” an individual or a non-multicandidate PAC may contribute a total of $5400 to a federal candidate.  The $5,000 per year individual contribution limit to PACs is also not affected.

On the Horizon in 2017: Are Political Spending Restrictions on Section 501(c)(3) Organizations Going Away?

2017 is sure to bring more changes on the political law front.  Just last week, President Trump repeated his support for overturning the “Johnson Amendment” – a long-standing provision in the tax code that strictly prohibits churches and other Section 501(c)(3) charitable organizations from engaging in any political campaign activities.  If the law is changed, individuals and organizations may be able to support entities engaging in political speech with tax deductible deductions.

Election 2016: The Homestretch

We’re entering the final stretch of the 2016 election. All organizations and their leaders need to know the rules of the road for engaging with public officials during an election year and responding to requests and opportunities to engage in candidate fundraising.

More DOJ Prosecutions of Illegal Contributions

Over the past few years, the Department of Justice has aggressively prosecuted illegal campaign contributions, particularly those that involve conduit schemes. That trend has continued in recent months –

FEC Commissioners Focused on Foreign Money

Federal campaign finance laws prohibit foreign nationals from making contributions and expenditures in connection with any election in the United States – federal, state or local. Two FEC Commissioners believe that this restriction is in need of some fortification.

New IRS 501(c)(4) Filing Requirements

The PATH Act, which was enacted at the end of 2015, requires a 501(c)(4) organization to notify the IRS within 60 days of organizing of its intent to operate under that section of the IRC. The notification must be submitted on Form 8976, which can only be filed electronically. The first filings, for organizations that were formed prior to July 8, 2016, were due last month. The IRS portal for submitting the form can be accessed at this link.

Corporation May Not Deduct Charitable Matching Funds Linked to Employee PAC Contributions

A recent IRS Private Letter Ruling (PLR 201616002) concluded that a corporation could not deduct as a business expense under IRC Section 162 the matching funds it contributed to charities as a part of a corporate PAC charity match program. The IRS found that the employee contribution to the PAC was a prerequisite for the corporation’s matching contribution, thus making the PAC contribution and the corporation’s charitable matching contribution inextricably linked.

Rhode Island Enacts Lobbying Reform Act

This summer, the Rhode Island legislature passed significant changes to the state’s lobbying laws. The lobbying law now regulates efforts to influence executive branch actions as well as legislative lobbying activities. The new law also broadens the definition of lobbyist to include any employee, officer, or agent of a business entity or organization whose job responsibilities include lobbying.

Maryland Pay-to-Play Reports Due November 30 – New Attribution Rule in Effect

The next filing deadline for Maryland public contractor contribution disclosure reports is November 30. This time around, a new attribution rule will be in effect. In the past, contributions by a subsidiary of the contractor had to reported if the subsidiary was at least 30% owned by the parent entity and the subsidiary itself had been awarded state or local government contracts. Under an amendment that becomes effective on October 1, the requirement that the subsidiary also have public contracts has been deleted.