BILL ANALYSIS Ó
AB 45
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Date of Hearing: April 23, 2013
ASSEMBLY COMMITTEE ON ELECTIONS AND REDISTRICTING
Paul Fong, Chair
AB 45 (Dickinson) - As Amended: April 15, 2013
SUBJECT : Political Reform Act of 1974.
SUMMARY : Makes numerous significant changes to the Political
Reform Act of 1974 (PRA). Specifically, this bill :
1)Provides that a payment made to a multipurpose organization,
as defined, is a contribution to that organization if the
donor knows or has reason to know that the payment, or part of
the payment, will be used to make a contribution or an
independent expenditure.
a) Provides that a donor knows that a payment to a
multipurpose organization will be used to make a
contribution or an independent expenditure if the donor
specifies that to be the purpose for which the payment must
be used or if the donor makes the payment in response to a
solicitation indicating the multipurpose organization's
intent to make a contribution or an independent
expenditure.
b) Provides that a donor is presumed to have reason to know
that a payment to a multipurpose organization will be used
to make a contribution or an independent expenditure if the
recipient multipurpose organization has made aggregate
contributions or independent expenditures of $2,000 or more
during the calendar year in which the payment is made or
during any of the four preceding calendar years.
c) Provides that a donor who makes an aggregate payment of
$50,000 or more to a multipurpose organization within six
months prior to an election is presumed to have reason to
know that the aggregate payments will be used by the
multipurpose organization to make a contribution or an
independent expenditure if the multipurpose organization
makes an aggregate contribution or independent expenditure
of $50,000 or more to support or oppose a candidate or
ballot measure within the six months prior to that
election.
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d) Requires a donor who makes a contribution described
above to be identified and reported by the multipurpose
organization receiving the contribution, in accordance with
regulations adopted by the Fair Political Practices
Commission (FPPC).
e) Defines "multipurpose organization," for the purposes of
this bill, as a nonprofit organization, a federal or
out-of-state political action committee, or a local club
focusing on educational or social activities.
2)Provides that a person retains his or her status as a
"candidate," for the purposes of the PRA, for the duration of
time that he or she holds office.
3)Requires a filing officer to immediately affix a date stamp to
each statement of economic interests filed pursuant to the PRA
to reflect the date of receipt by the filing officer.
4)Increases the threshold of contributions received or
independent expenditures made by an entity, from $1,000 to
$2,000 in a calendar year, before that entity is considered a
"committee," for the purposes of the PRA.
5)Increases, from $100 to $250, the threshold at which
contributions must be itemized, and information must be
provided about the names, addresses, occupations, and
employers of contributors, on campaign reports.
6)Provides that for committees primarily formed to support or
oppose a statewide ballot measure, the threshold at which
contributions and expenditures must be itemized, and greater
details must be provided about those contributions and
expenditures, shall be set pursuant to regulations adopted by
the FPPC, and may be adjusted by the FPPC in any odd-numbered
year after 2013, provided that the threshold shall be no lower
than $500 and no higher than $2,500.
7)Provides that, in the case of candidates and committees that
are required to file campaign disclosure reports with the
Secretary of State (SOS), those reports need to be filed in a
paper format only if the filer is not required to file the
statement by online or other electronic means. Provides that
an original paper copy of the report shall nonetheless be
filed with the SOS if the online or electronic system operated
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by the SOS is malfunctioning, unavailable, or otherwise not
capable of receiving online or electronically filed disclosure
statements and reports.
8)Requires a statement or report filed with the SOS pursuant to
specified provisions of the PRA to be made available to the
FPPC upon request.
9)Permits the FPPC to seek injunctive relief in superior court
to compel disclosure consistent with the PRA. Permits a
superior or appellate court to grant a stay of an order
granting relief pursuant to these provisions. Requires the
court to grant expedited review to an action filed pursuant to
this procedure, as specified.
EXISTING LAW :
1)Creates the FPPC, and makes it responsible for the impartial,
effective administration and implementation of the PRA.
2)Requires multipurpose organizations to disclose the sources of
funds behind their campaign expenditures when donors have made
donations to the organization in response to a solicitation
that indicates the organization's intent to use such funds to
make campaign contributions or expenditures, or when such
organizations have previously made contributions or
independent expenditures from their general treasuries of
$1,000 or more during the calendar year, or the previous four
years, in California.
3)Defines the term "candidate" to include an officeholder who is
the subject of a recall election. Provides that an individual
who becomes a candidate shall retain his or her status as a
candidate until that status is terminated, as specified.
4)Provides that any person or combination of persons who
directly or indirectly does any of the following is considered
a "committee" for the purposes of the PRA:
a) Receives contributions of $1,000 or more in a calendar
year;
b) Makes independent expenditures of $1,000 or more in a
calendar year; or,
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c) Makes contributions totaling $10,000 or more per year to
or at the behest of candidates or committees.
5)Requires periodic campaign statements that are filed pursuant
to provisions of the PRA to include specified information,
including the following:
a) The cumulative amount of contributions received during
the period covered by the statement;
b) The total amount of contributions received during the
period covered by the statement from persons who have given
a cumulative amount of $100 or more;
c) The total amount of contributions received during the
period covered by the statement from persons who have given
a cumulative amount of less than $100; and,
d) For each person from which the committee received a
cumulative amount of contributions of $100 or more, all of
the following information with respect to any contributions
received from that person during the period covered by the
statement:
i) The full name of the person;
ii) The person's street address;
iii) The person's occupation;
iv) The name of the person's employer, or if
self-employed, the name of the business;
v) The date and amount received for each contribution
received during the period covered by the statement; and,
vi) The cumulative amount of contributions from that
person.
6)Requires candidates and committees that are required to file
specified campaign statements by online or electronic means
with the SOS to additionally file the original and one copy of
those campaign statements in a paper format with the SOS.
Provides that the paper original shall be the official filing
for audit and other legal purposes until the SOS determines
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that the online or electronic campaign disclosure system is
operating securely and effectively.
7)Prohibits an audit or investigation of any candidate,
controlled committee, or committee primarily supporting or
opposing a candidate or measure in connection with a report or
statement required by specified provisions of law from
beginning until after the last date for filing the first
report or statement following the general, runoff, or special
election for the office for which the candidate ran, or
following the election at which the measure was adopted or
defeated, except as specified.
8)Permits the FPPC to make investigations and audits with
respect to any reports or statements required by specified
provisions of the PRA.
FISCAL EFFECT : Unknown. State-mandated local program;
contains a crimes and infractions disclaimer; contains
reimbursement direction.
COMMENTS :
1)Purpose of the Bill : According to the author, "Without AB 45,
we will continue to see last minute 'money bombs' flowing into
California elections without informing voters where this money
is coming from. The public has a right to know the source of
the money so informed decisions can be made at the ballot
box."
2)Multipurpose Organizations, Campaign Disclosure, & the "One
Bite" Rule : Under existing law, when a multipurpose
organization makes contributions or independent expenditures
of specified amounts in connection with an election in
California, that organization must file a report disclosing
that it made the contributions or independent expenditures.
In some cases, the organization is required to report only the
fact that it made a contribution or independent expenditure,
while in other cases, the report must also disclose certain
donors to the organization. One of the key rules in
determining whether or not a multipurpose organization is
required to disclose its donors when it makes contributions or
independent expenditures in connection with California
elections is commonly referred to as the "one bite at the
apple" rule. This rule is particularly relevant to entities
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that are organized under Section 501 of the Internal Revenue
Code, since those entities typically are not otherwise
required to publicly disclose their donors.
The "one bite" rule is intended to ensure that a multipurpose
organization is required to reveal the name of a donor to that
organization only if the donor knew, or had reason to know,
that his or her donation could be used for political purposes
in California. Under the "one bite" rule, a multipurpose
organization is not necessarily required to disclose any
information about donors to that organization unless that
organization has previously made expenditures or contributions
of at least $1,000 during the calendar year, or at any time in
the prior four calendar years. Once a multipurpose
organization takes its first "bite" by making contributions or
expenditures of $1,000 or more, donors to that organization
are presumed to know that the organization is involved in
making contributions or expenditures in connection with
California elections, and thus are presumed to know that their
donations may be used for political purposes.
Even if a multipurpose organization has not taken its "one bite
at the apple," that organization nonetheless may still be
required to disclose the names of donors when it makes a
contribution or expenditure if those donors knew or had reason
to know that their donations would be used for political
purposes. For instance, if a multipurpose organization sent a
solicitation for donations, and that solicitation specified
that the donations were being sought for the purpose of making
contributions or expenditures in a California election,
individuals who donated to the organization in response to
that solicitation would know that their donations would be
used for political purposes, and as a result their names may
be subject to disclosure notwithstanding the fact that the
organization did not previously take its "one bite at the
apple." However, it can be difficult to enforce this
reporting requirement, since an enforcement agency needs to
have access to the organization's solicitations or other
communications with donors in order to determine whether those
donors had reason to know that their donations would be used
for political purposes.
Without adequate enforcement of these reporting requirements,
there is a concern that individuals who wish to conceal their
involvement in making contributions or expenditures in
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connection with California elections can do so by moving their
money through multipurpose organizations that have not yet
taken their "one bite at the apple." This frustrates one of
the key purposes of the PRA: to ensure that receipts and
expenditures in election campaigns are fully and truthfully
disclosed so that the voters may be fully informed and
improper practices may be inhibited.
This bill is intended to address some of the challenges with
ensuring thorough and appropriate disclosure of campaign
contributions and expenditures made by multipurpose
organizations by specifying circumstances in which a donor to
a multipurpose organization is deemed or presumed to know or
have reason to know that his or her donations will be used for
political purposes. Some of these provisions are similar to
regulations adopted by the FPPC. This bill also establishes,
however, a new situation in which a donor would be presumed to
have reason to know that his or her donations to a
multipurpose organization would be used for a political
purpose. Under this provision if an individual makes
donations of $50,000 or more to a multipurpose organization in
the last six months before an election, and that multipurpose
organization makes contributions or independent expenditures
of $50,000 or more in the six months before the election, then
the donor is presumed to have reason to know that his or her
donations would be used for a political purpose. The
implication of this provision is that if a person makes a
large contribution shortly before an election to an
organization that, in turn, makes a significant amount of
contributions or independent expenditures in connection with
that election, it is likely that the donor knew about the
organization's plans to make contributions or expenditures.
3)Injunctive Relief : This bill gives the FPPC greater authority
to seek to compel disclosure in court on an expedited basis
when necessary to ensure that contributions and expenditures
are appropriately disclosed prior to an election. These
provisions, along with the multipurpose organization
provisions discussed above, appear to be in response, in part,
to an $11 million campaign contribution made to the Small
Business Action Committee PAC (SBAC PAC) three weeks prior to
the November 2012 statewide general election.
The SBAC PAC, which was a primarily formed committee that was
opposing Proposition 30 and supporting Proposition 32 at the
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time the contribution was received, reported that the $11
million contribution was made by Americans for Responsible
Leadership (ARL), an Arizona-based non-profit organization.
ARL initially refused to disclose the names of its donors,
arguing that it was not required to do so under California law
because it had not "solicited earmarked contributions for any
particular project" and because "[n]o contributors to ARL at
any time specified where any of their donations 'must go.'"
ARL had not made contributions or independent expenditures in
California in the four years preceding the $11 million
contribution, so it had not taken its "first bite," as
described above.
After receiving a complaint regarding the $11 million
contribution, the FPPC requested to review certain records
held by ARL to ensure compliance with state campaign
disclosure laws, and subsequently commenced a discretionary
audit of ARL. When ARL did not produce records as requested
by the FPPC, the FPPC sued ARL in Sacramento Superior Court
seeking an order to compel ARL to produce those records. ARL
opposed that request on a variety of grounds. The Court
ultimately granted the FPPC's request for an order for ARL to
produce the requested records. After an unsuccessful appeal,
ARL and the FPPC reached a settlement in which ARL revealed
that it was not the true source of the $11 million
contribution, but instead was an intermediary for that
contribution. ARL disclosed that the actual source of the $11
million was another nonprofit organization, Americans for Job
Security (AJS), which made a contribution to a second
intermediary (and another nonprofit organization), the Center
to Protect Patient Rights (CPPR). CPPR, in turn, made the
contribution to ARL. AJS has not disclosed its donors.
This bill seeks to give the FPPC additional tools to ensure
compliance with the PRA by permitting the FPPC to seek
injunctive relief to compel disclosure that is required by the
PRA, and by requiring the court to grant expedited review to
any such action in order to ensure that campaign contributions
and expenditures are disclosed, if appropriate, prior to the
election.
4)Disclosure Thresholds & Potential Amendments : When originally
enacted, the PRA required the public disclosure of the names
and street addresses of all campaign contributors who made
contributions to a committee of $50 or more. Subsequent
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legislation in 1978 (AB 3155 (W. Thomas), Chapter 650,
Statutes of 1978) raised the public disclosure threshold for
the names and addresses of campaign contributors to $100.
Adjusting those thresholds for inflation, $50 in 1974 is
approximately the equivalent of $236 today, while $100 in 1978
is approximately the equivalent of $357 today. This bill
proposes to raise the threshold at which contributions must be
itemized for most committees to $250, which is roughly in line
with what the original disclosure thresholds were when
adjusting for inflation.
By contrast, federal law requires campaign reports for political
committees of federal election campaigns to disclose detailed
information for contributions of $200 or more. If the
committee is supportive of the proposal to raise this itemized
disclosure threshold, it may wish to consider whether it would
be appropriate to raise the threshold to $200, instead of
$100, so that it is consistent with the federal threshold.
For contributions that are made to a committee primarily formed
to support or oppose a statewide ballot measure, however, this
bill allows the FPPC, by regulation, to set the threshold at
which contributions must be itemized, provided that the
threshold cannot be less than $500 nor more than $2,500. This
change in the threshold at which contributions must be
itemized represents a significant increase from the thresholds
that were originally established when the PRA was enacted. By
significantly increasing the dollar threshold for campaign
contributions before the names and addresses of those
contributors are required to be publicly disclosed, this bill
could be viewed as contrary to the stated purpose of the PRA
of ensuring that receipts in election campaigns are fully
disclosed.
On the other hand, the current $100 itemization threshold for
contributions made to committees primarily formed to support
or oppose statewide ballot measures is low enough that it
could be susceptible to being struck down by a court. In
fact, there is litigation pending in federal court dealing
with this issue. On January 9, 2009, ProtectMarriage.com, a
committee in support of Proposition 8 on the November 2008
statewide ballot, filed a lawsuit in the United States
District Court for the Eastern District of California against
the SOS and the FPPC ( ProtectMarriage.com et al. v. Bowen et
al. ). The lawsuit sought to invalidate as unconstitutional
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the PRA's $100 disclosure threshold for contributors to ballot
measure committees. Although the District Court upheld the
constitutionality of the PRA's campaign disclosure
requirements in November 2011, the Plaintiffs subsequently
appealed the District Court's decision. The case is currently
pending before the Ninth Circuit Court of Appeals.
If the committee supports giving the FPPC the authority to set
this particular disclosure threshold by regulation, and to
adjust that threshold on a periodic basis, the committee may
wish to consider whether the adjustments made by the FPPC
should be limited to reflect a change in the Consumer Price
Index (CPI). While the FPPC has statutory authority to adjust
certain limits and thresholds in the PRA, those adjustments
are required to be tied to changes in the CPI.
5)Committee Qualification Thresholds : This bill also seeks to
increase the threshold of contributions received or
independent expenditures made by an entity, from $1,000 to
$2,000 in a calendar year, before that entity is considered a
"committee," for the purposes of the PRA. When the PRA was
originally enacted, those thresholds were set at $500. In
1987, that threshold was raised to its current $1,000 level
through the passage of SB 1547 (Ellis), Chapter 632, Statutes
of 1987. Adjusting those thresholds for inflation, $500 in
1974 is approximately the equivalent of $2361 today, while
$1000 in 1987 is approximately the equivalent of $2049 today.
The committee qualification thresholds proposed by this bill
are roughly in line with what the original committee
qualification thresholds were when adjusting for inflation.
In support of updating the committee qualification thresholds,
the FPPC argues that this change "will update the outdated
committee qualification monetary threshold in a manner that
balances the rights of smaller groups and grassroots advocates
with the burdens imposed once an organization qualifies as a
committee under the [PRA]."
6)Paper Copies of Campaign Reports : Under existing law, certain
candidates and committees that file campaign reports online or
electronically with the SOS are also required to file those
reports on paper. This bill eliminates that requirement,
except during times when the online or electronic system
operated by the SOS is malfunctioning, unavailable, or
otherwise not capable of receiving online or electronically
filed statements.
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7)Definition of a Candidate : The PRA provides that a person who
becomes a candidate retains that status as a candidate under
the PRA until that status is terminated pursuant to specified
provisions. The determination of whether a person is a
candidate under the PRA effects whether that person is
required to file certain campaign reports and whether that
person can control a committee that makes independent
expenditures. Regulations adopted by the FPPC provide that a
candidate retains his or her status as a candidate until he or
she leaves office. This bill codifies that determination.
8)Technical Errors : This bill contains two technical errors
that committee staff recommends addressing should this bill
move out of committee.
First, on page 16, line 35, committee staff recommends deleting
the words "initiative or", as they are duplicative and
unnecessary.
Second, on page 25, line 36, this bill contains a cross
reference to a code section that does not exist. Committee
staff recommends that this cross reference be replaced by a
reference to the PRA, generally.
9)Related Legislation : SB 27 (Correa), which is pending in the
Senate Elections & Constitutional Amendments Committee,
revises the disclosure rules that apply to multipurpose
organizations that make contributions and expenditures in
California elections.
AB 800 (Gordon), which is also being heard in this committee
today, permits the FPPC to seek injunctive relief to compel
disclosure, among other provisions.
AB 914 (Gordon), which is also being heard in this committee
today, requires specified nonprofit organizations that make
campaign contributions, expenditures, or independent
expenditures in California elections to file reports
disclosing the donors to the nonprofit organization, as
specified.
10)Previous Legislation : AB 1881 (Donnelly) of 2012, would have
increased the threshold, from $100 to $5,000, at which the
names and addresses must be publicly reported for campaign
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donors who contributed to committees that are not candidate
controlled committees. AB 1881 failed passage in this
committee on a 2-5 vote.
11)Political Reform Act of 1974 : California voters passed an
initiative, Proposition 9, in 1974 that created the FPPC and
codified significant restrictions and prohibitions on
candidates, officeholders and lobbyists. That initiative is
commonly known as the PRA. Most amendments to the PRA that
are not submitted to the voters, including those contained in
this bill, must further the purposes of the initiative and
require a two-thirds vote of both houses of the Legislature.
REGISTERED SUPPORT / OPPOSITION :
Support Opposition
California Common Cause (if amended)Center for Competitive
Politics
Fair Political Practices Commission
Analysis Prepared by : Ethan Jones / E. & R. / (916) 319-2094