BILL ANALYSIS �
AB 800
Page 1
Date of Hearing: April 23, 2013
ASSEMBLY COMMITTEE ON ELECTIONS AND REDISTRICTING
Paul Fong, Chair
AB 800 (Gordon) - 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 committee is presumed to be a controlled
committee of a candidate if the candidate or his or her agent
satisfies any of the following conditions:
a) Is a voting member of the committee's governing body;
b) Is involved in the decisionmaking of the committee, or
the development or implementation of the committee's
campaign strategy;
c) Is involved in directing, planning, or implementing the
committee's fundraising activities in a greater capacity
than making endorsements or appearing at fundraisers; or,
d) Is substantially involved in directing the day-to-day
operations of the committee.
2)Requires subagents and subcontractors that make expenditures
on behalf of or for the benefit of a candidate or committee to
make known to the agent or independent contractor of the
candidate information about those expenditures. Requires the
agent or independent contractor to make this information
available to the candidate or committee not later than three
working days prior to the time that the campaign statement
reporting the expenditure is required to be filed. Provides
that, in the case of an expenditure that is required to be
reported by a candidate or committee within 24 hours of the
time that it is made, the agent or independent contractor is
required to make this information available to the candidate
or committee within 24 hours.
3)Extends, for a period of 90 days, the period of time before
campaign funds that are under the control of a former
candidate or elected officer become surplus campaign funds,
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and thus subject to additional restrictions on how those funds
can be spent.
4)Repeals a provision of law that prohibits the Fair Political
Practices Commission (FPPC) from beginning audits or
investigations of certain entities prior to the election.
5)Allows the FPPC and the Franchise Tax Board (FTB) to make
audits and investigations regarding any statement or report
that is required by any provision of the PRA, instead of
allowing such audits and investigations only of specified
statements or reports.
6)Repeals a one year limit on the amount of time that the FTB
has to complete its report of any audit that it conducts under
specified provisions of the PRA.
7)Prohibits a member, employee, or agent of the FPPC from
divulging or making known in any manner the particulars of any
record, documents, or information that he or she receives as
part of an audit or investigation conducted pursuant to the
PRA, except in furtherance of the work of the FPPC or in
connection with a court proceeding or the lawful investigation
of any agency.
8)Permits the FPPC, and the FTB at the direction of the FPPC, to
audit any record required to be maintained under the PRA to
ensure compliance with the PRA prior to an election, even if
the record or statement has not yet been filed. Permits the
FPPC, to further the purposes of this provision, to seek
injunctive relief in superior court to compel disclosure.
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.
9)Makes various findings and declarations about the public
disclosure of political contributions and expenditures.
EXISTING LAW :
1)Creates the FPPC, and makes it responsible for the impartial,
effective administration and implementation of the PRA.
2)Defines a "controlled committee" to mean a committee that is
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controlled directly or indirectly by a candidate or state
measure proponent or that acts jointly with a candidate,
controlled committee, or state measure proponent in connection
with the making of expenditures. Provides that a candidate or
state measure proponent controls a committee if he or she has
a significant influence on the actions or decisions of the
committee.
3)Prohibits an expenditure of $500 or more from being made by an
agent or independent contractor of a candidate or committee
unless it is reported by the candidate or committee as if the
expenditure were made directly by the candidate or committee.
Requires the agent or independent contractor to make known to
the candidate or committee the information required to be
reported pursuant to this provision.
4)Provides that campaign funds under the control of a former
candidate or elected officer shall be considered surplus
campaign funds at the time the person leaves office or at the
end of the postelection reporting period following the defeat
of a candidate for elective office, whichever occurs last.
Provides that surplus campaign funds shall be used only for
the following purposes:
a) The payment of outstanding campaign debts or elected
officer's expenses;
b) The repayment of contributions;
c) Donations to a bona fide charitable, educational, civic,
religious, or similar tax-exempt, nonprofit organization,
where no substantial part of the proceeds will have a
material financial effect on the former candidate or
elected officer, any member of his or her immediate family,
or his or her campaign treasurer;
d) Contributions to a political party committee, provided
that the campaign funds are not used to support or oppose a
candidate for elective office, provided, however, that the
campaign funds may be used by a political party committee
to conduct partisan voter registration, partisan
get-out-the-vote activities, and slate-mailers;
e) Contributions to support or oppose a candidate for
federal office, a candidate for elective office in a state
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other than California, or a ballot measure; or,
f) The payment for professional services reasonably
required by the committee to assist in the performance of
its administrative functions, including payment for
attorney's fees for litigation that arises directly out of
a candidate's or elected officer's activities, duties, or
status as a candidate or elected officer, including, but
not limited to an action to enjoin defamation, defense of
an action brought for a violation of state or local
campaign, disclosure, or election laws, and an action from
an election contest or recount.
5)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.
6)Permits the FTB and the FPPC to make investigations and audits
with respect to any reports or statements required by
specified provisions of the PRA.
7)Requires the FTB to complete its report of any audit conducted
on a random basis pursuant to specified provisions of law
within one year after the person or entity subject to the
audit is selected by the FPPC to be audited.
8)Prohibits a member, employee, or agent of the FTB from
divulging or making known in any manner the particulars of any
record, documents, or information that he or she receives as
part of an audit or investigation conducted pursuant to the
PRA, except in furtherance of the work of the FTB or in
connection with a court proceeding or the lawful investigation
of any agency.
FISCAL EFFECT : Unknown. State-mandated local program; contains
a crimes and infractions disclaimer.
COMMENTS :
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1)Purpose of the Bill : According to the author:
More and more, voters receive information from or see
advertisements funded by entities other than the
candidate for office or the committee proposing a
ballot measure. It is vital for a fully informed
electorate that the public knows, in a timely manner,
who if not the candidate or ballot measure committee,
is paying for political messaging. Moreover, there
must be a means of inhibiting improper practices and
holding entities involved with election campaigns
accountable.
The Political Reform Act governs campaign financing
and spending, including disclosure of political
campaign contributions and expenditures by candidates
and committees. AB 800 contains several distinct
changes to the Political Reform Act intended to
clarify the Fair Political Practices Commission's
authority to carry out the provisions of the PRA in a
manner that ensures information is provided to the
public in an expedited manner prior to elections.
2)Audits and Investigations : This bill makes a number of
significant changes to state law governing audits and
investigations that are conducted under the PRA. Some of
these provisions 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
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, in turn, initially refused to disclose the names of its
contributors, 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.'"
After receiving a complaint regarding the $11 million
contribution, the FPPC requested to review certain records
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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, including
arguing that the FPPC was prohibited from conducting an audit
or an investigation prior to the election. The Court
ultimately granted the FPPC's request for an order for ARL to
produce the requested records, finding that the statutory
prohibition against pre-election audits and investigations
applied only to candidates and certain types of committees,
and was not applicable to ARL. 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), and that the contribution was then passed
through 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 prior to the election. This
bill additionally gives the FPPC the authority to audit any
record that is required to be maintained prior to an election
in order to ensure compliance with the PRA, and permits the
FPPC to make investigations and audits with respect to any
report or statement that is required to be filed pursuant to
the PRA. Finally, this bill repeals a prohibition against an
audit or investigation of a candidate, controlled committee,
or committee primarily supporting or opposing a candidate or
measure in connection with a report or statement required by
certain provisions of the PRA from being commenced prior to
the election.
3)Controlled Committees & Suggested Amendment : Under the PRA, a
committee is considered a "controlled committee" if it is
controlled directly or indirectly by a candidate or state
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measure proponent, or it acts jointly with a candidate,
controlled committee, or state measure proponent in connection
with the making of expenditures. A candidate or state measure
proponent controls a committee if he or she, or his or her
agent or any other committee he or she controls, has a
significant influence on the actions or decisions of the
committee. Controlled committees are subject to certain
reporting requirements and restrictions that do not apply to
other types of committees, including, in the case of a
committee that is controlled by a candidate, a prohibition
against making independent expenditures and against
contributing funds to another committee for the purpose of
making independent expenditures to support or oppose other
candidates.
While the PRA provides that a candidate or state measure
proponent controls a committee if he or she has a significant
influence on the actions or decisions of the committee, it
does not include greater detail about what types of actions
would constitute having a "significant influence" on the
actions or decisions of the committee. Furthermore, the FPPC
has not adopted regulations to clarify what constitutes having
"significant influence" over the actions or decisions of a
committee. Instead, the FPPC has provided guidance about what
constitutes "significant influence" through a series of advice
letters. Among other things, the FPPC has advised that a
candidate is presumed to be controlling a committee if the
candidate is a voting member of the committee's leadership,
and can be considered to be controlling a committee if the
candidate has extensive involvement in the committee's
fundraising activities.
This bill establishes a presumption that a committee is
significantly influenced by a candidate, and thus is a
"controlled committee," if the candidate is a voting member of
the
committee's governing body, the candidate or his or her agent is
involved in the decision-making of the committee or the
development or implementation of the committee's campaign
strategy, the candidate or his or her agent is involved in
directing, planning, or implementing the committee's
fundraising activities in a greater capacity than making
endorsements or appearing at fundraisers, or the candidate, or
his or her agent, is substantially involved in directing the
day to day operations of the committee. These provisions are
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intended to codify advice that the FPPC has given regarding
what constitutes having "significant influence" over the
actions or decisions of a committee.
It is not clear, however, that the current language of this bill
accomplishes that goal. Under the provisions of this bill, a
committee is deemed to be a controlled committee if a
candidate is involved in "directing, planning, or implementing
the committee's fundraising activities in a greater capacity
than making endorsements or appearing at fundraisers." This
appears to differ from the standard that the FPPC established
through advice letters, where it has advised that an elected
official's participation in fundraising activities for a
committee can result in that committee being considered a
controlled committee of the official, but has also advised
that an official's participation in fundraising activities for
a committee that go beyond making endorsements or appearing at
fundraisers will not necessarily result in that committee
being deemed a controlled committee of the official. For
instance, the FPPC has previously advised that, under certain
circumstances, a candidate could provide access to a committee
to his or her contributor list, solicit funds for the
committee in writing over the telephone, be featured on
invitations to fundraising events for the committee, speak at
such events, and distribute a committee's funds in person or
by mail, and still not be considered to control that committee
(Erenbaum Advice Letter, No. I-01-242). This conduct appears
to be more extensive than making endorsements or appearing at
fundraisers, and thus under this bill would result in the
committee being presumed to be a controlled committee of the
candidate.
Because the intent of this portion of the bill is to codify FPPC
advice, committee staff recommends removing the provisions of
this bill that presume that a committee is significantly
influenced by a candidate if the candidate or his or her agent
is involved in certain fundraising activities. By removing
this provision of the bill, longstanding FPPC advice about the
extent that a candidate may be involved in fundraising
activities for a committee without that committee being
considered to be controlled by the candidate will remain
unaffected, while other, objective criteria that the FPPC has
used to determine that when a candidate is deemed to be
controlling a committee will be codified.
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4)Subcontractor Reporting : As noted above, the PRA requires a
candidate or committee to report payments of $500 or more that
are made by an agent or independent contractor as if the
candidate or committee had made the payment directly. For
example, if a candidate pays a media buying company $50,000 to
pay for advertisements supporting that candidate, and the
company arranges for the placement of individual
advertisements with numerous television and radio stations,
the candidate would be required to report the identity of and
the amount paid to any television or radio station that
received $500 or more from the media buying company for the
purpose of broadcasting those advertisements. In order that
the candidate can comply with this requirement, existing law
also requires the agent (in this case, the media buying
company) to provide the candidate with details about the
payments that it made sufficient for the candidate to report
those payments. However, if a subagent or subcontractor makes
a subsequent payment of $500 or more on behalf of the
candidate, there is no explicit requirement for that subagent
or subcontractor to provide the relevant information to the
agent or independent contractor on a timely basis so that the
agent or independent contractor, and the candidate or
committee, can comply with their obligations under the law.
This bill imposes such a requirement, which should help
candidates and committees comply with their disclosure
obligations under the law.
5)Surplus Funds : Existing law provides that campaign funds that
are held by a candidate or elected official become surplus
campaign funds once the person leaves elective office or at
the end of the postelection campaign reporting period
following the defeat of the candidate for elective office,
whichever occurs last. Once funds are considered surplus
campaign funds, they are subject to additional restrictions on
how the funds may be used, including a prohibition against the
candidate using the funds for a future election. Because of
the short period of time that a candidate or officeholder has
to determine what to do with these campaign funds before they
become surplus funds, FPPC staff indicates that many
candidates simply create new committees as placeholders until
they can decide whether they want to run for another office in
the future, and the tight timelines under which those new
committees must be created and money must be transferred
generates additional workload for the FPPC in the form of
requests for advice. This bill increases the period of time
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before campaign funds become surplus funds by 90 days, thereby
allowing candidates and officials to make decisions about the
use of those funds in a more deliberate manner.
6)Repeal of Time Limit on FTB Audits and Possible Amendment :
This bill repeals an existing requirement for the FTB to
complete certain audits within a one year period from the time
that the person or entity subject to the audit is selected to
be audited by the FPPC. According to FPPC staff, this
provision will give the FTB the ability to adjust their
workload to work more rapidly on major audits, rather than
rushing to complete lower-priority audits within the one year
time limit. By repealing the time limit entirely, however,
candidates and committees that are being audited could be
stuck in a state of uncertainty for long periods of time even
in situations where those candidates and committees have fully
complied with the law. In order to provide the FPPC and the
FTB with greater flexibility to prioritize audits, while
providing greater certainty to candidates and committees about
the potential duration of those audits, the committee may wish
to consider amending this bill to extend the time limit for
the FTB to complete these audits from one year to two years,
rather than repealing the time limit altogether.
7)Arguments in Support : In support of this bill, California
Common Cause writes:
As the complainant in the ongoing investigation
against Americans for Responsible Leadership, the
Arizona-based 501(c)4 that attempted to launder $11
million into two ballot campaigns, we are in strong
support of AB 800 that will give the Fair Political
Practices Commission the tools it needs to further
investigate money laundering and other dark money
schemes. Since the United States Supreme Court
decision in Citizens United v. FEC, we have seen an
explosion of deceptive and shadowy tactics developed
by political operatives to sneak money into campaigns
while avoiding public disclosure. California should
adopt common sense measures like AB 800 that will
further shine a light on money in politics.
8)Related Legislation : AB 45 (Dickinson), which is also being
heard in this committee today, permits the FPPC to seek
injunctive relief to compel disclosure, among other
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provisions.
9)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. Amendments to the PRA that are not
submitted to the voters, such as 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 None on file.
Fair Political Practices Commission
Analysis Prepared by : Ethan Jones / E. & R. / (916) 319-2094