CALIFORNIA LOBBYING REGISTRATION AND REPORTING Steptoe & Johnson LLP (California) Dave Roll. Foley Hoag LLP (Federal) Tad Heuer and Pat Cerundolo

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1 Last Updated: September 2011 Federal Update: October 2013 CALIFORNIA LOBBYING REGISTRATION AND REPORTING Steptoe & Johnson LLP (California) Dave Roll Foley Hoag LLP (Federal) Tad Heuer and Pat Cerundolo Table of Contents 1. Federal Registration and Reporting 2. California Registration and Reporting The following is intended to provide a brief overview of the various potentially applicable registration and reporting requirements under federal and California laws with respect to the lobbying activities of social sector organizations, both nonprofit and for-profit, including public charities, social welfare organizations and other forms of organization with a social change mission. The lobbying limitations imposed on tax-exempt organizations by the Internal Revenue Code are described in the section entitled Nonprofit Taxation and are not reiterated here. 1. Federal Registration and Reporting Organizations that engage in a specified amount of lobbying activities and lobbying contacts through personnel that receive financial or other compensation are required to register and file disclosure reports under the Lobbying Disclosure Act of 1995, as amended (most recently by the Honest Leadership and Open Government Act of 2007). Other than religious orders, tax-exempt churches, and their integrated auxiliaries, all social sector organizations nonprofit as well as for-profit that otherwise meet the thresholds on lobbying contacts and overall expenses (discussed below) must register and file reports. a. Registration The federal Lobbying Disclosure Act (the Act ) is intended to reach professional lobbyists those paid to lobby on behalf of an employer or client. Thus, if a social sector organization engages in covered lobbying contacts through its own staff that exceed the statutory thresholds, that organization must register as a lobbying entity, and must register its individual employee-lobbyists (who are sometimes referred to as in- 1

2 house lobbyists). If, however, a social sector organization employs lobbyists only from an outside lobbying firm, the outside lobbying firm must register (and identify its social sector client) if its lobbying exceeds the statutory thresholds, but the social sector organization itself is not required to register. All federal lobbying registrations and reports must be filed electronically at a single location, which covers registration for both the Secretary of the Senate s Office and the Office of the Clerk of the House. A social sector organization is required to register its employee-lobbyists if it meets the following two conditions: First, the organization must have one or more compensated employees who (a) make more than one lobbying contact on behalf of the organization and (b) spend at least 20% of their total time for the organization on lobbying activities over a given quarterly reporting period. A lobbying contact is a written, oral or electronic communication to a covered federal official, (which includes a Member of Congress, congressional staff, and certain senior executive branch officials), with respect to the formulation, modification or adoption of a federal law, regulation, rule, program, or policy, or the administration or execution of a federal program or policy. Lobbying activities include not only lobbying contacts but also background activities, research, and other efforts that support lobbying contacts. Note that there are also several enumerated exceptions to what constitutes lobbying contacts for purposes of the Act for instance, they do not include testifying or submitting written testimony, and do not include lobbying either legislators or governmental bodies at the state or local levels. A Section 501(c)(3) organization that has made the safe harbor election under Section 501(h) of the Code has the option of using either the Act s definition of lobbying activities or the Internal Revenue Code s definition of influencing legislation to determine the organization s reporting obligation. Second, the organization must have spent more than $12,500 in a quarterly reporting period on lobbying activities. The $12,500 includes salaries, overhead, and other expenses, as well as payments to any outside lobbyists made during the three-month reporting period. This figure is increased periodically for inflation. If an organization hires an outside lobbyist or a lobbying firm, then the outside lobbyist and his/her lobbying firm must register on behalf of the client/organization if he/she (a) makes more than one lobbying contact with a covered official on behalf of that client/organization, (b) spends at least 20% of his/her time for that client/organization in a given quarterly reporting period on lobbying activities, and (c) his/her/its total income 2

3 from that client/organization for lobbying exceeds $3,000 in that quarterly reporting period. Lobbyists are required to be registered within 45 days after either (a) being hired by a client (if the intent is that the lobbyist will make more than one lobbying contact and meet the 20% threshold), or (b) making a second lobbying contact (if the intent to make a second contact did not exist at the outset of the engagement) and meeting (or intending to meet) the 20% threshold. Information required on the registration form, known as the LD-1 form, includes: identification of the lobbyist(s); the client or employer of the lobbyist(s); identification of any foreign entity and its contributions over $5,000 (if the foreign entity owns 20% of the client or controls, plans or supervises its activities); and a list of the general issue areas on which the registrant expects to lobby. b. Reports Registrants under the Lobbying Disclosure Act are required to file both quarterly and semi-annual reports. Quarterly reports by the lobbying entity (either the outside lobbying firm or the employer of in-house lobbyists), also known as LD-2 reports, are to be filed within 20 days after the end of each calendar quarter. Among other items, these reports must include not only the issues lobbied upon, but the bill numbers lobbied upon, the names of the lobbyists, and the Houses of Congress and federal executive branch agencies contacted. Reports must also include a good faith estimate of either lobbying expenditures (for reports filed by organizations who employ in-house lobbyists), or income received from clients (for reports filed by outside lobbyists). Amounts in excess of $5,000 are to be rounded to the nearest $10,000. Semi-annual reports by individual lobbyists, also known as LD-203 reports, are due on January 30 and July 30. The required disclosures in these reports include: the names of all political committees established or controlled by the lobbyist or registered organization; disclosures of contributions by each lobbyist of more than $200 to federal candidates or officeholders, political committees, or leadership PACs; and funds disbursed for events to honor covered government officials, to entities that are named for or in recognition of such officials and to entities that are controlled or designated by such officials. The name of each presidential library and inaugural committee to which contributions of at least $200 were made during the semi-annual period must also be reported. Additionally, registrants are required to certify that the organization or person filing the report has read and is familiar with the rules of the House and Senate regarding gifts and travel, and that they are compliant with these rules. 3

4 For more detailed information, the House Clerk maintains a comprehensive Guide to the Lobbying Disclosure Act at c. Penalties Amendments in 2007 to the Lobbying Disclosure Act increased the civil penalties for violations of the Act and for failing to remedy a defective filing to up to $200,000. In addition, the amendments imposed criminal penalties for knowingly and corruptly failing to comply with the Act, with a maximum of five years imprisonment. d. Grassroots Lobbying The Lobbying Disclosure Act only applies to direct lobbying direct communications with covered federal officials, and the lobbying activities that the person making the direct communication engages in to prepare for those contacts. Grassroots lobbying is not covered. An organization that engages only in grassroots lobbying will not be required under the Act to register and report. e. Congressional Gift and Travel Rules The Lobbying Disclosure Act imposes civil and criminal penalties on registered lobbyists (or organizations that employ them) for violations of congressional gift and travel rules. The Act expressly prohibits any registered lobbyist, any organization that employs them (and is required to register), and any employee required to be listed as a lobbyist from making a gift or providing travel to a Member of Congress or staffer (and other covered officials ) if the registrant has knowledge that the gift or travel may not be accepted under House and Senate rules. The congressional gift and travel rules, and the numerous exceptions to those rules, are extremely detailed and particularly restrictive with regard to registered lobbyists. No attempt will be made here to summarize those rules. Any questions concerning the applicability of the congressional gift and travel rules to specific situations should be addressed to counsel with specific expertise in this area of law. f. Federal Funds and Grants Grant money and funds under federal contracts may not be used by nonprofits and other organizations for lobbying or for other advocacy or political activities unless authorized by Congress. These restrictions apply to both direct and grassroots lobbying at the federal, state and local levels. 4

5 g. Resources Jack Maskell, Lobbying Regulations on Non-Profit Organizations, CRS Report (May 7, 2008). The House gift and travel rules are available online at al.pdf The Senate gift and travel rules are available online at Office of the Clerk, United States House of Representatives, Guide to the Lobbying Disclosure Act (Effective Jan. 1, 2008; Revised Feb. 15, 2013), William V. Luneburg, Tomas M. Susman, & Rebecca H. Gordon, The Lobbying Manual: A Complete Guide to Federal Lobbying Law and Practice (4th ed. 2009). 2. California Registration and Reporting a. Overview Several sections of California s Political Reform Act (Cal. Gov. Code ) govern lobbying, political campaigns, conflicts of interest and enforcement. These statutes also created the Fair Political Practices Commission ( FPPC ), the agency charged with promulgation of implementing regulations and enforcement responsibility. The FPPC regulations are in Title 2 of the California Code of Regulations, et seq. The FPPC s Information Manuals and Forms may be obtained from the FPPC, 428 J Street, Suite 800, P.O. Box 807, Sacramento, CA The lobbying provisions of these California statutes and regulations impose registration, reporting and record keeping requirements on lobbyists and lobbyist employers and restrictions and prohibitions on the making of gifts by lobbyists. Lobbying firms that lobby on behalf of others are not discussed here because most social sector organizations are not likely to lobby on behalf of others. Similarly, the recent laws and regulations covering placement agents who assist investment managers in selling services to pension and retirement plans are not discussed here. Social sector organizations that plan to employ or retain lobbyists or to participate in lobbying coalitions need to be familiar with California laws and regulations governing lobbying and should consult with experienced counsel in advance. 5

6 b. Lobbyists Under the statutes and FPPC regulations, a lobbyist is a person who has a direct communication, other than administrative testimony, with a qualifying official in order to influence legislation or administrative action and who also meets one of the following two criteria: 1. is acting on behalf of h/her employer and spends 1/3 or more of compensated time in any calendar month on lobbying; or 2. is acting on behalf of someone other than h/her employer and receives or is entitled to receive $2000 in compensation in any calendar month for lobbying. A direct communication does not include a request for or provision of purely technical data or analysis to an administrative agency by a person who does not otherwise engage in direct communication for the purpose of influencing legislative or administrative action. A qualifying official includes any elected state official, any legislative official, any member or director of a state agency and any staff member of a state agency who makes direct recommendations to an agency member or director or who has decisionmaking authority over such recommendations. c. Lobbyist Employers and Lobbying Coalitions A lobbyist employer is a person that employs a lobbyist for lobbying purposes or contracts for the services of a lobbying firm. A lobbying coaltion is a group of ten or more entities or persons formed primarily to influence legislative or administrative action whose members share in the expenses of the coalition. d. Exempt Activities Lobbying does not include appearing as a witness or providing comments in an administrative proceeding provided the proceeding is a noticed public hearing, a record is created and the public has access to the record. e. Registration by Lobbyist Employers and Lobbying Coalitions A lobbyist employer and a lobbying coalition that employs one or more lobbyists must register with the California Secretary of State within 10 days of qualifying as a lobbyist employer or coalition. The registration statement is FPPC Form 603 (online registration is permitted) A lobbyist employer that only contracts for the services of a lobbying firm need not register but must file an authorization statement (FPPC Form 602) and provide a copy to the lobbying firm. Between November 1 and December 1 of each even-numbered year, every lobbyist employer (and coalition) must renew its registration. Each lobbyist 6

7 must also renew h/her lobbyist certification in connection with the lobbyist employer s renewal. f. Reporting and Record Keeping by Lobbyist Employers and Lobbying Coalitions Lobbyist employers and lobbying coalitions must file FPPC Form 635 for each calendar quarter to report payments to lobbyists, payments to influence legislative and administrative action, campaign contributions and other specified categories of expenses and payments received. Lobbyist employers and coalitions must also preserve records of these payments and expenses for at least 4 years. g. Reporting and Record Keeping by Lobbyists Lobbyists must file a Lobbyist Report with the Secretary of State on FPPC Form 615 for each calendar quarter and submit it to h/her lobbyist employer within two weeks after the end of the quarter. Lobbyists for whom the total amount of any category of payments, expenses, contributions, gifts or other items are $5000 or more in a calendar quarter must file their report online with the Secretary of State. The Lobbyist Report requires lobbyists to provide detailed information on activity expenses and campaign contributions. Lobbyists must also maintain and preserve records of specified categories of expenses and contributions for at least 4 years. h. Persons Who Spend More Than $5000 Persons or entities that do not employ lobbyists or retain a lobbying firm but who make qualifying payments of $5000 or more to influence legislative or administrative action in any calendar quarter are required to file a report on FPPC Form 645. If payments are made to a lobbying coalition then Form 630 should be attached. In general, the categories of payments that qualify include: (1) payments in connection with direct communications with state officials or in connection with urging others to engage in such communications; (2) payments to a lobbying coalition; and (3) payments that benefit state officials of their immediate families but only if other payments to influence are made during the same quarter. The FPPC regulations spell out in considerable detail the components of these various categories. i. Gift Restrictions and Prohibitions Lobbyists are prohibited from making, arranging or acting as an intermediary in the making of gifts totaling more than $10 per month to or for the benefit of a state candidate, an elected state officer, legislative official or agency official. 7

8 State and local elected officials, candidates and certain other designated officials may not accept more than $420 in gifts from any single source in any year. Similarly, these officers are barred from accepting an honorarium for speeches, articles, attendance at gatherings and the like from any single source in excess of $420 in any year. Note: the FPPC has proposed revisions to the entire gift section of the regulations. Social sector organization should consult experienced counsel to advise on the substance of these regulations and the date when they go into effect. There are several other prohibited practices and a few exemptions that are spelled out in the Government Code. Again, if a social sector organization plans to become active in attempting to influence legislative or administrative action in California, it should consult experienced counsel. j. Penalties A knowing or willful violation of any of the California provisions governing lobbying is a misdemeanor. Persons convicted may be barred for 4 years from serving as a lobbyist or running for office. In addition, violators can be subject to civil penalties, monetary damages and injunctive relief. k. Resources The FPPC staff is a helpful resource. The FPPC has also published Information Manuals. The FPPC website is at and the telephone number is or (toll-free). Poliakoff and Dyer, Lobbying, PACs, and Campaign Finance, 50 State Handbook, 2009 Edition (West, 2009). 8