Public Policy Advocacy Highlights for January 2022

Public Policy Advocacy Highlights for January 2022

[PRELIMINARY NOTE: For more than a decade, the First Tuesday Lunch Group, made up of legal practitioners who are Democrats, Republicans, independents and non-partisans from across the United States, has met monthly to discuss current legal issues in tax-exempt organization, constitutional, and campaign finance law and developments in public advocacy. Participants represent diverse organizations, interests and views spanning the political spectrum – non-partisan, left, right, and center, sometimes in adversarial positions in the legal arena. Yet participants are united in our commitment to the rule of law. These non-partisan discussions help candidates, news media, government officials, and other Americans navigate difficult and complex federal laws.

There is no set FTLG agenda, but each month, a draft of possible topics for discussion, based on highlights of the prior month, is circulated; the actual FTLG discussions generally include only a few of these topics and often several other topics. This post includes only Barnaby Zall’s suggestions for possible topics and highlights, not those of the FTLG itself or its participants. This draft is intended for active FTLG participants, and thus includes abbreviations and references to government agencies or individuals, legal doctrines and terms, and other shorthand phrases or terms.]

IRS Form 1024 must now be submitted electronically: Using Paygov. Reminder: not for c3s or c4s. Form 1024-A, for c4s, must also be submitted electronically.

DCRA Confusion: (a recurring topic) Bill Farah’s question about separate corporate filings of certificate and articles.

New FEC Nominee: Dara Lindenbaum, from Sandler Reiff, will be nominated as Commissioner at the FEC, replacing Steven Walther. Walther has announced he will resign as soon as Lindenbaum is confirmed. Lindenbaum was a law clerk at the FEC for Commissioner Cynthia Bauerly while attending GWU Law School, and was an associate counsel at the Voting Rights Project of the Lawyers’ Committee for Civil Right Under Law. In addition to her election law practice, she also advises non-profit organizations on charitable solicitations, corporate governance issues, securing tax-exempt status with the IRS, and the scope of permissible political activities.

Who Says the FEC Can’t Make A Decision? In MUR 7593, the FEC voted 5-1 to dismiss and close a complaint that Fox News made a prohibited indirect campaign contribution when two of its TV personalities made an appearance onstage during a 2018 campaign rally for Josh Hawley, then a Senate candidate.

Broussard Requests Rulemaking Making Definition of “Earned Income” More Fair: FEC Commissioner Shana Broussard voted against designating VA Disability Benefits as “earned income” for calculating permissible candidate compensation, but also seeks a rulemaking to make the definition more “fair.”

Luke Wachob on How Long It Took FEC to Recognize SuperPACs on its Forms Page: “So the registration process for these newfound [in 2010] political entities, which raise and spend billions of dollars each election cycle, was ultimately developed – in the words of Commissioner Ellen Weintraub at Thursday’s meeting [Jan 13, 2022] – “out of something that Commissioner [Don] McGahn and I scrawled on a napkin in a conference room. … Anyone looking to start a super PAC was left to fill out the regular political action committee registration form, then attach a cover letter stating their intention to operate as an independent expenditure-only committee. It’s almost comical. If you want to start a super PAC, get your stapler ready.” Now there’s an actual form.

DoJ ANPRM on FARA: Reminder: the clock is ticking on sending comments to DoJ on its ANPRM on reforms and changes needed to FARA. Comment period closes on Feb. 11. Only three relatively brief comments have been filed as of Jan. 29.

Breyer Retires: It’s official.

Ted Cruz for Senate Argued on Jan. 19: “Ted Cruz: Litigious hot coffee spiller or civil rights champion?” Media comment on the oral arguments in Cruz for Senate v. FEC focused on “only $10,000” and “obscure arguments,” but significant issues were raised. Chief Justice Roberts, for example, asked “How are you supposed to weigh such imponderables such as the marginal burden on the exercise of First Amendment rights against the marginal assistance in preventing corruption?” Transcript, at 24.

Igor Fruman Sentenced to Year and a Day for Soliciting Foreign Campaign Contributions: Fruman pled guilty.

Washington Supreme Court Sustains $18 Million Fine for Failing to Register and Report Contributions to Oppose Initiative: Washington voters adopted a sweeping regime of registration and reporting that covered both candidates and ballot measures. The Grocery Manufacturers Association (now called the Consumer Brands Association) set up a separate account for contributions against a GMO-labeling initiative, as a means of avoiding disclosing donors. The Washington Supreme Court decided that $18 million – roughly the amount spent against the initiative – was the appropriate fine for failing to register and report the contributions properly. Case is headed for the “other” Supreme Court.

“Fair Notice” Law Found Unconstitutional in Montana: Judge Malloy of the U.S. District Ct for Montana, on summary judgment, found that a law requiring contemporary notice of any ad mentioning, but not endorsing, a candidate was unconstitutional. The Ninth Circuit had held earlier that disclosure laws do not limit speech, but provide more speech. Nat’l Association for Gun Rights v. Mangan, 933 F.3d 1102, 1112 (9th Cir. 2019). But here, citing inter alia, AFPF/TMLC v. Bonta, Judge Malloy found that this was a content-based restriction that was not viewpoint neutral. And, that was a kiss of death.

Judge Rules Connecticut Law Requiring Pre-approved Fundraising Scripts Unconstitutional: Pacific Legal Foundation reports that, not only did Connecticut’s law require pre-registration for fundraisers, but pre-approval of their contacts and their scripts. After AFPF/TMLC v. Bonta, a federal judge enjoined the requirement.

Open Secrets Publishes List of Pending Campaign Finance Legislation: What’s next for campaign finance reform?

A Popular Structure Question to Hold Endowments – Trust or Corporation? Tom Antonucci’s question about pros and cons for using a trust or a corporation to hold a 501(c)(3)’s endowment elicited differing views.

Is Donors’ Threat to Withhold Future Contributions Corruption or Coordination? A lively discussion on the Election Law Blog’s mailing list is sparked by Prof. Eugene Volokh’s question of whether a donors’ letter to Sen. Sinema would be considered quid pro quo corruption, and Prof. Mark Scarberry’s followup asking if it would be coordination if sent by an independent PAC. Spoiler: Consensus that the letter was artfully drawn enough to likely not be either. Meanwhile, on the other hand, The Hill notes that GOP megadonor Ken Langone maxed out to Sen. Manchin after his rejection of Build Back Better.

NPR Raises “Red Flags” About Groups Fundraising to Support Jan. 6 Defendants: Quoting “experts,” NPR explores the Patriot Freedom Project.

New York Sched B Filing NPRM: From Robert Tigner of the Nonprofit Alliance (and a longtime FTLG member): “Courtesy NonProfit Times, last week we learned the NY AG has initiated a rulemaking governing the submission of Schedule B to the Charity Bureau.  The AG, evidently, made no public announcement other than the publication of the proposal in the Dec 1 NYS Register (the relevant text is attached here, if it made it through the web and software traps).  It proposes a redacted Schedule B but, as you can see, there is a catch or two. One obvious question: would the rule, eliciting donated amounts and the donor’s state (only) square with Bonta?  And another: what is the rule supposed to accomplish?  If any of you have a theory, please share.”

Text of proposed rule: Subdivisions (c) and (d) of section 91.5 are amended to read as follows:

(c)(1) CHAR500 (annual filing for charitable organizations) or a successor form, which shall include identifying and contact information, annual report exemption claim information (see subdivision [e] of this section), [and ]information regarding the submission of schedules required under article 7-A and, unless a Schedule B to IRS form 990 of a public charity, with the names and addresses of contributors redacted, is attached pursuant to subdivision (3)(i)(b), a statement of the gross amount of contributions received during the reporting period from individuals and entities residing or domiciled in the state of New York. …

(3) CHAR500 attachments.

(i) All organizations that do not claim annual report exemptions for all laws under which they are registered, as described in subdivision (e) of this section, must include a copy of the following IRS forms with their submission of the CHAR500, regardless of whether such IRS forms are submitted or required to be submitted to the IRS:

(a) a copy of the complete IRS form 990, 990-EZ or 990-PF with all required schedules including a Schedule B, unless exempt from such filing pursuant to subsection (b), and

(b) public charities required to submit Schedule B to the IRS must file either (i) a redacted Schedule B with the Charities Bureau, without the names and street addresses of the donors but including the amounts of donations and the states from which those donations were received during the reporting period, or (ii) a statement of the gross amount of contributions received during the reporting period from individuals and entities residing or domiciled in New York (see section C(1)),

BanPACs Act Draft Leaks: Axios reports a leaked copy of legislation to be proposed by Sens. Ossoff and Kelly called “The Ban Corporate PACs Act,” which, not surprisingly, would ban corporate PACs. Both Senators are up for re-election, and both refused contributions from corporate PACs – but not other PACs.

Calif. Bill Would Suspend Tax-Exemption of Organizations that “[p]romotes, engages in, commits to, supports, or aids insurrection against the United States or any state in the Union, at any time, past or present.”: Nonprofit Times expects the bill, SB 834, to be introduced in February. CalNonprofits Public Policy Director Lucy Salcido says: “They (Senator Wiener and staff) are aware of what the senator describes as ‘threading that needle’ to ensure protected activities aren’t affected by the bill, and they are looking forward to working with us to address our concerns.”

Florida Considers “Personal Privacy Protection” Law for Donors: The proposed law would, according to the Tampa Bay Times, “prohibit government entities from requiring corporations, associations, and nonprofit organizations to provide information about their direct or indirect support to any entity. The public entities would also be barred from publicly releasing the information if they have it.”

538 Says Inexperienced Candidates Winning More: One argument offered by supporters of Citizens United is that it helps challengers and inexperienced candidates, which may not be all puppies and rainbows. The statistics-spouting column 538 reports that “the amount of money spent in politics following the Supreme Court’s 2010 decision in Citizens United v. Federal Election Commission is likely working in concert with the increased interconnectedness brought about by the internet to collectively boost amateur candidates’ profiles. ‘We don’t think it’s a coincidence that all of this kind of came to a head at the same time,’ said Porter.” 538 says having more inexperienced candidates “may lead to more diversity within Congress, with more women and people of color holding office, as they historically have had more difficulty breaking into the elected offices that have traditionally served as stepping stones to Congress,” but cautions that “if many successful political amateurs are uninterested in governing, Treul and Porter fear Congress will become even more dysfunctional.”

Reading Between the Lines of Public Citizens’ Consultant $1B Double-Dipping Report: Axios reports that Public Citizen “finds extensive overlap in the vendors employed by “regulated” political entities — such as campaigns and party committees — and “unregulated” groups, which include super PACs and 501(c)(4) nonprofits.” The Public Citizen “dual agents” report begins: “Political consulting firms that worked for a candidate or political party and also for an unregulated super PAC or other purportedly independent entity in the same elections (“common vendors”) received $1.4 billion for work in those contests during the past two election cycles.” (Emphasis added.) Probably need to explain how ad-buying works to understand “the scale of the vendor overlap.” As Axios reports: the $1 Billion figure “Much of that was for ad-buying services, meaning the firms didn’t just pocket the funds.”