BILL ANALYSIS �
AB 914
Page 1
Date of Hearing: April 23, 2013
ASSEMBLY COMMITTEE ON ELECTIONS AND REDISTRICTING
Paul Fong, Chair
AB 914 (Gordon) - As Amended: April 15, 2013
SUBJECT : Political Reform Act of 1974: campaign disclosures.
SUMMARY : 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.
Specifically, this bill :
1)Requires a nonprofit organization that makes combined
contributions, expenditures, and independent expenditures in
California aggregating $50,000 or more during the entity's
fiscal year, to file a Nonprofit and Multipurpose Organization
Disclosure Statement (NMODS), as specified.
2)Requires the Fair Political Practices Commission (FPPC) to
develop the NMODS form. Provides that the form shall provide
for disclosure of the following information:
a) The aggregate amount of contributions, expenditures, and
independent expenditures made during the reporting period;
b) The amount of expenses attributable to contributions,
expenditures, and independent expenditures as a percentage
of the entity's total expenses that are made during the
reporting period;
c) If the entity's combined amount of contributions,
expenditures, and independent expenditures exceeds 10
percent of the entity's total expenses during the reporting
period, each of the following with respect to
contributions, expenditures, and independent expenditures
made during the period:
i) The amount of any funds, or the fair market value of
any services or assets, that are provided in relation to
a contribution, expenditure, or independent expenditure;
ii) The amount or fair market value of liabilities
incurred in relation to a contribution, expenditure, or
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independent expenditure;
iii) The date that the funds, services, or assets were
provided or the liabilities were incurred;
iv) The name and address of the recipient of the
contribution, expenditure, or independent expenditure;
v) A description of the contribution, expenditure, or
independent expenditure and its purpose, including
whether it was made in support of or opposition to a
candidate, political party, ballot measure, or other
question put before the voters in an election; and,
vi) Information related to each donor who made donations
in an aggregate amount of $10,000 or more to the entity
during the reporting period, including the name and
address of the donor; the name of the employer of the
donor, if available; and the date and amount of each
donation form that donor during the reporting period.
3)Requires the NMODS form to be filed as follows:
a) In the case of a charitable corporation, unincorporated
association, or trustee that is required to file reports
with the Attorney General (AG) pursuant to specified
provisions of law, as an attachment to that periodic report
for any year in which the entity meets the $50,000
threshold for combined aggregate contributions,
expenditures, and independent expenditures during a fiscal
year. Requires the AG to make the disclosure statement
available to the public as provided.
b) In the case of a nonprofit corporation, as defined in
Section 501(c) of the Internal Revenue Code, that is not
required to file periodic written reports with the AG
pursuant to specified provisions of law, with the FPPC at a
time to be determined by the FPPC for any year in which the
entity meets the $50,000 threshold for combined aggregate
contributions, expenditures, and independent expenditures
during a fiscal year. Requires the FPPC to make the
disclosure statement available to the public as provided.
4)Provides that an entity is not required to disclose any
information on a NMODS form if that information has previously
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been disclosed on a campaign statement or report filed
pursuant to the Political Reform Act (PRA).
5)Provides that if an entity that is required to file a NMODS
form maintains one or more segregated bank accounts for the
purpose of making election-related contributions,
expenditures, or independent expenditures, and those accounts
represent the exclusive source of the entity's
election-related contributions, expenditures, and independent
expenditures, the entity is only required to report
information with respect to donations deposited into the
segregated election-related accounts.
6)Permits an entity that is subject to the reporting
requirements of this bill, or any donor to such an entity, to
petition to maintain the confidentiality of donor information
that is disclosed on the statement no later than 45 days prior
to the date on which the NMODS form must be filed. Requires
that petition to be made with the governmental body (either
the AG or the FPPC) with which the entity is required to file
its NMODS form. Requires the AG or the FPPC, as appropriate,
to treat such information as confidential if the petitioner
demonstrates by clear and convincing evidence that either of
the following is true:
a) The public disclosure of donor information will cause
undue harm, threats, harassment, or reprisals to the donor;
or
b) The donor did not know or have reason to know that his
or her donation would be used to make a contribution,
expenditure, or independent expenditure in this state.
7)Requires the AG or the FPPC, as appropriate, when it grants a
petition to maintain the confidentiality of donor information
disclosed on an NMODS form pursuant to this bill, to redact
the donor and donation information from any documents that are
made available to the public. Requires the AG or the FPPC, as
appropriate, to inform a petitioner, in writing, whether a
petition to maintain the confidentiality of donor and donation
information has been granted or denied. Requires the grant or
denial determination to including a statement of findings and
conclusions, and the reasons or basis for the determination.
8)Requires an entity that files a NMODS form with the AG to file
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a copy of that form with the FPPC at the same time. Provides
that if the entity or a donor to the entity petitions the AG
to maintain the confidentiality of donor and donation
information, the entity is not required to file a copy of the
disclosure statement with the FPPC until the AG has informed
the petitioner whether the petition has been granted or
denied.
EXISTING LAW :
1)Creates the FPPC, and makes it responsible for the impartial,
effective administration and implementation of the PRA.
2)Requires certain entities, including charitable corporations,
unincorporated associations, and trustees, to file periodic
written reports with the AG, under oath, setting forth
information as to the nature of assets held for charitable
purposes and the administration thereof by the corporation,
unincorporated association, or trustee.
3)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.
FISCAL EFFECT : Unknown. State-mandated local program; contains
a crimes and infractions disclaimer.
COMMENTS :
1)Purpose of the Bill : According to the author:
AB 914 would provide for additional disclosure by a
nonprofit organization that makes campaign contributions,
expenditures, or independent expenditures in California.
This would better enable voters to know who, if not the
candidate or ballot measure committee, is paying for
campaigns. By requiring this disclosure, the bill enhances
transparency in the electoral process as well as detection
and deterrence of Political Reform Act violations. The
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bill also includes important protections so as to maintain
anonymity of donors if their donations are restricted to
purposes unrelated to elections, as well as to shield
donors to qualifying nonprofits from public disclosure if
it would cause undue harm, threats, harassment, or
reprisal.
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
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
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required to disclose the names of its 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
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 requiring such organizations that have
significant involvement in California campaigns to file
periodic reports disclosing the contributions and expenditures
they make. To help ensure that multipurpose organizations are
not being used to conceal the true source of contributions or
expenditures, this bill requires reports filed by
organizations that spend more than a nominal amount of their
budgets on making such contributions and expenditures to
include detailed information about the larger donors to the
organization. Detailed information about donors could be
withheld only if the multipurpose organization or a donor to
that organization can demonstrate either that the donor did
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not know or have reason to know that his or her donation would
be used for political purposes, or that the disclosure of
donor information would cause undue harm, threats,
harassments, or reprisals to the donor.
3)$11 Million Donation : This bill appears to be a response, at
least 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 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. 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.
4)Existing Charitable Organization Regulation and Reporting
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Requirements : Under existing law, pursuant to the Uniform
Supervision of Trustees and Fundraisers for Charitable
Purposes Act (Act), the AG has supervisory and enforcement
powers over certain charitable corporations, trustees,
commercial fundraisers, fundraising counsel, and commercial
coventurers who solicit or hold property for charitable
purposes. The Act requires a commercial fundraiser to
register with the AG's Registry of Charitable Trusts, and to
file an annual financial report of funds solicited on behalf
of each charitable purpose or organization. Charitable
corporations and trustees subject to the Act additionally are
required to register and file periodic written reports with
the AG. The AG is authorized to refuse to register, or revoke
or suspend the registration of, a charitable organization or
trustee, commercial fundraiser, fundraising counsel, or
coventurer upon finding that the person has been violating the
law.
For charitable entities that are subject to the Act, and thus
who already file certain disclosure reports with the AG, the
filing requirements imposed by this bill would be combined
with the entities' existing filings that are made with the AG.
In order to ensure that this bill captures all multipurpose
organizations that make a significant amount of campaign
contributions or expenditures in California, however, this
bill also establishes a new reporting requirement for
multipurpose organizations that are not subject to the Act.
Those entities would file their disclosure reports required by
this bill with the FPPC.
5)Arguments in Support : According to the sponsor of this bill,
the FPPC:
This bill would provide the public with much needed
disclosure that in some cases can be nonexistent.
Since the Supreme Court decided Citizens United in
2010, there has been an unprecedented amount of
campaign activity conducted by nonprofit
organizations. Many of these organizations receive
large sums of money from individuals and corporations
and, under Federal law, are not required to disclose
their donors?.This legislation would simply require
nonprofits to know who their donors are and to
disclose who is actually funding their campaign
activities. This basic disclosure also would provide
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the public and other government agencies with valuable
information regarding the amount of campaign activity
conducted by the nonprofit in relation to its
activities as whole.
6)Related Legislation : AB 45 (Dickinson), which is also being
heard in this committee today, and SB 27 (Correa), which is
pending in the Senate Elections & Constitutional Amendments
Committee, both revise the disclosure rules that apply to
multipurpose organizations that make contributions and
expenditures in California elections, among other provisions.
7)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.
8)Double-Referral : This bill has been double-referred to the
Assembly Judiciary Committee.
REGISTERED SUPPORT / OPPOSITION :
Support Opposition
Fair Political Practices Commission (sponsor)None on file.
Analysis Prepared by : Ethan Jones / E. & R. / (916) 319-2094