ILLINOIS LOBBYING REGISTRATION AND REPORTING Lex Mundi Pro Bono Foundation (Illinois) 1 Kevin G. Frisch

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1 Last Updated: March 2013 Federal Update: October 2013 ILLINOIS LOBBYING REGISTRATION AND REPORTING Lex Mundi Pro Bono Foundation (Illinois) 1 Kevin G. Frisch Foley Hoag LLP (Federal) Tad Heuer and Pat Cerundolo Table of Contents 1. Federal Registration and Reporting 2. Illinois Registration and Reporting The following is intended to provide a brief overview of the various registration and reporting requirements under federal and Illinois laws with respect to the lobbying activities of most 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 Taxation of Nonprofits 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. 1 Previous reviews were completed by Beata Krakus and Bella Shirin of Sonnenschein Nath & Rosenthal LLP. 1

2 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 inhouse 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. 2

3 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 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, 3

4 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. 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 4

5 by Congress. These restrictions apply to both direct and grassroots lobbying at the federal, state and local levels. 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. Illinois Registration and Reporting a. Lobbyist Registration Individuals who engage in lobbying for compensation, unless the person receives no compensation other than reimbursement for expenses of up to $500 per year while engaged in lobbying State government and have not made reportable expenditures (which are expenditures attributable to lobbying in excess of $100), must register with the Illinois Secretary of State before any lobbying service is performed. Entities required to register which are qualified under Section 501(c)(3) of the Internal Revenue Code shall remit a single, annual, and nonrefundable $150 registration fee. Lobbying means any communication with an official of the executive or legislative branch of State government for the ultimate purpose of influencing executive, legislative, or administration action. b. Organization Filings If an organization is registering, it must provide the necessary information for each person associated with the registrant who will be lobbying, regardless of whether lobbying is a significant part of his or her duties. 5

6 c. Lobbyist Filings Lobbyists must also file annual expenditure reports. Where the expenditures are made on behalf of an employer, the employer shall be responsible for reporting all lobbying expenditures incurred on the employer s behalf. d. Links to Instructions and Forms e. Gift and Lobby Expenditure Restrictions There do not currently appear to be any Illinois-specific restrictions on gifts and lobbying in the Registration Act. f. Penalties A person who violates the registration provisions shall be guilty of a business offense and may be fined up to $10,000 and would be prohibited from lobbying for a period of 3 years from the date of conviction. g. Resources Website for Illinois Secretary of State Jesse White, Lobbyist Services, (2009) Lobbyist Registration Act, 25 ILCS 170 (2009). Christianson, Coyle, Poliakoff and Dyer, Lobbying, PACs, and Campaign Finance, 50 State Handbook (Thomson West 2008 Edition). 6