MICHIGAN LOBBYING REGISTRATION AND REPORTING Butzel Long, a professional corporation Susan Johnson and Jennifer Dukarski

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1 Last Updated: January 2013 Federal Update: October 2013 MICHIGAN LOBBYING REGISTRATION AND REPORTING Butzel Long, a professional corporation Susan Johnson and Jennifer Dukarski Foley Hoag LLP (Federal) Tad Heuer and Pat Cerundolo Table of Contents 1. Federal Registration and Reporting 2. Michigan Registration and Reporting The following is intended to provide a brief overview of the various potential registration and reporting requirements under federal and Michigan 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 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 1

2 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. 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 2

3 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, 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. Michigan Registration and Reporting a. Lobbying in Michigan In Michigan, lobbying is controlled under the Lobbyist, Lobbying Agents, and Lobbying Activities Act of The intent of the legislature was to establish a law governing the registration of lobbyists and lobbying agents, creating financial reporting requirements, and establishing penalties for violations. Michigan law establishes a lobbyist category and a lobbyist agent category for registration and reporting purposes. Each of the financial threshold requirements for both categories are adjusted annually based on the consumer price index for the city of Detroit. What is lobbying? Lobbying is defined as any means of direct contact or communication with a public official in order to influence the official s legislative or administrative actions. In order to meet the definition of lobbying, the communication must be direct, express and intentional. Communications extend to verbal conversations and written communications made in person or sent electronically. In Michigan, lobbying pertains to the Executive and Legislative branches of government acting at the state level. In Michigan, the actions of vendors may fall under the definition of lobbying. Submitting an unsolicited proposal to a public official who has personal discretion to make decisions on the proposal is lobbying, if the intent is to influence action, even if the official does 5

6 not act on the proposal. If no policy decision is required by the public official, the action is not lobbying. This definition, however, does not include grassroots lobbying, lobbying city government members, or lobbying U.S. House of Representatives members or U.S. Senators from Michigan. Who are lobbyable public officials? Lobbyable public officials are officials who work at the state level. These individuals include elected or publically appointed officials. Individuals under this definition include but are not limited to the Governor, chief officers of the executive departments, state commissioners, legislators, and presidents of public universities. A list of lobbyable public officials is available at the Secretary of State, Bureau of Elections website. b. Lobbyist Registration In Michigan, lobbyists must register with the Michigan Department of State within 15 calendar days after making lobbying expenditures of more than $2, during any 12 month period or spending more than $ during any 12 month period to lobby a single public official. Who is a lobbyist? A person (an individual, corporation, association, government agency, or any organization) who engages in lobbying through expenditures of more than $2, during any 12 month period or who spends more than $ during any 12 month period to lobby a single public official. Any individual who enters into a contract to exceed either the $ individual or $2, total expenditure threshold must register as a lobbyist. Several groups are excluded from the definition of a lobbyist or lobbyist agent: Publishers, owners or workers of the press, radio or television when reporting news or making editorial comments to the public; Elected or appointed officials including employees of state colleges, townships, cities, villages, school boards and the judicial branch who are acting under their office and not working for compensation; Members of a lobbyist organization if the member does not qualify as a lobbyist independently under the rules, such as individuals who provide financial support but have no direct contact with lobbyable public officials; and 6

7 Churches and religious institutions. c. Lobbyist Agent Registration In Michigan, lobbyist agents must register with the Michigan Department of State within three calendar days after receiving compensation or reimbursement exceeding $ during a 12 month time period. Any individual who enters into a contract to receive more than $ during any 12 month period must also register as a lobbyist agent. The exclusions for lobbyists also apply to lobbyist agents. Who are lobbyist agents? Lobbyist agents are individuals or firms who receive compensation or reimbursement for lobbying during a 12 month period. Lobbyist agents may be retained by lobbyists for the purpose of influencing or attempting to influence legislative or administrative action. d. Organization Filings In Michigan, registration is required for a corporation, association, or organization that compensates a lobbyist agent or employee to lobby public officials. Organizations, depending on the level of lobbying and contributions, may be classified as either a lobbyist or a lobbyist agent. An organization must comply with the filing guidelines of either lobbyist or lobbyist agent, whichever applies based on expenditures, compensation and reimbursement. Under Michigan law, it is not required for a lobbying organization to submit membership lists or to disclose members. e. Lobbyist and Lobbyist Agent Filings After registration, all lobbyists and lobbyist agents must file a winter and summer financial report, regardless of expenditures or lobbying activity during the time period. The documents required for disclosure include the Financial Report Summary form and the Itemized Expenditures form. The Financial Report Summary must be filed regardless of activity for the reporting period. The Itemized Expenditures form must be submitted if one or more the following thresholds are met: Financial transactions of $1, or more; or Travel and lodging expenditures for public officials over $750.00; or Food and beverage expenditures for individual public officials exceeding $58.00 per month; or Group food and beverage expenditures for public officials exceeding $ per year. 7

8 In order to submit on time, a report must be post-marked two or more calendar days before the filing deadline. If a report due date is missed, a late filing fee will be imposed. The late fee for 2012 is $23.00 per calendar day late, up to a maximum fee of $ In addition to traditional paper filing, Michigan has a Lobby Electronic Filing Program (e-lobby) that allows registered lobbyists and lobbyist agents to file the Lobby Financial Report Summary online. The system is cost-free and completely paperless for those who are registered. At this time, however, the actual Lobby Registration Form must be filed on paper and cannot be submitted online. What expenses are included in the reporting requirements? Under the Michigan rules, expenditures include but are not limited to: Payments made on behalf of public officials to influence legislative or administrative action Payments made directly to influence legislative or administrative action Actual expenses for lobbying other than travel expenses, regardless of reimbursement Salary and fees paid to contract individuals, lawyers, support staff and vendors to assist in the preparation of lobbying materials Expenses for providing or using information, statistics, studies or analysis that would not have been incurred if no lobbying were to take place. 8

9 f. Links to Instructions and Forms e-lobby Electronic Filing Program Financial Report Summary Form Itemized Expenditure Form Lobbyist Registration Form Public Officials List State of Michigan - Lobby Disclosure g. Gift and Lobby Expenditure Restrictions In Michigan, a gift is a payment, advance, forbearance, or the rendering or deposit of money, services or anything of value that exceeds $58.00 during a one month period. The gift value threshold is determined on a yearly basis, reflecting the change in consumer price index for the city of Detroit. Gifts may be single items or multiple goods or services. Sports tickets are an example of a gift. The Michigan Act bans lobbyists or lobbyist agents from giving gifts to public officials. The gift restrictions are: Anything of value, either a single item or multiple goods, exceeding $58.00 during a one month period is a gift and is banned under Michigan legislation. There are few exceptions to the gift provisions, including: Expenditures for lobbying that are less than $12.00 for goods or services when a receipt or proof of purchase is not normally available do not have to be reported. Gifts received from a member of the person s immediate family or a relative of a spouse is not considered a gift under the statute. Symbolic awards or citations are not gifts unless the value exceeds provisions of the statute and is given for the purpose of lobbying. 9

10 h. Penalties A breakfast, luncheon, dinner or refreshments provided for immediate consumption are not gifts. A campaign contribution is not a gift. A loan made during the ordinary course of business by a bank, insurance company, or related entity is not a gift. Contributions made to legal defense funds registered with the Secretary of State with the purpose to defend elected officials against criminal, civil or other actions arising from governmental duties are not gifts. Penalties include civil penalties up to $10,000 for an individual and up to $25,000 for a business or organization. Further criminal liability may occur, including both misdemeanor and felony charges. Late financial report filing fees are imposed at a rate of $23.00 per calendar day up to a maximum late fee of $ Failure to register within thirty days may result in a misdemeanor and fine not exceeding $1,000. Failure to maintain an accounting of the itemized expenditures, including receipts and appropriate documentation, may result in a misdemeanor punishable by a fine of not more than $1,000.00, or imprisonment for not more than 90 days, or both. If the person is a business or organization, and not an individual, the person shall be fined not more than $10, Failure to abide by the gift ban may result in either a misdemeanor or felony charge along with civil penalties, depending on the cost of the gift. A person violating the gift provision shall be guilty of a misdemeanor if the value of the gift is $3, or less, and may be punished by a fine of not more than $5,000.00, or imprisoned for not more than 90 days, or both. If the person is other than an individual (e.g. the person is a corporation or organization) it shall be punished by a fine of not more than $10, A person who knowingly gives a gift worth more than $3, shall be guilty of a felony. Individuals may be punished by a fine not more than $10,000.00, or imprisonment for not more than 3 years, or both. If the person is other than an individual (e.g. the person is a corporation or organization) it shall be punished by a fine of not more than $25,

11 i. Resources Christianson, Coyle, Poliakoff and Dyer, Lobbying, PACs, and Campaign Finance, 50 State Handbook (Thomson West 2008 Edition)] Michigan Secretary of State, Michigan Lobbying Declaratory Rulings and Interpretive Statements, Michigan Secretary of State, Michigan Lobbying Disclosure Information Site, 11