BILL ANALYSIS �
AB 914
Page 1
Date of Hearing: April 30, 2013
ASSEMBLY COMMITTEE ON JUDICIARY
Bob Wieckowski, Chair
AB 914 (Gordon) - As Amended: April 15, 2013
SUBJECT : POLITICAL REFORM ACT: CAMPAIGN DISCLOSURES
KEY ISSUE : SHOULD NONPROFIT ORGANIZATIONS THAT MAKE LARGE
POLITICAL DONATIONS BE REQUIRED TO TIMELY DISCLOSE THOSE
DONATIONS?
FISCAL EFFECT : As currently in print this bill is keyed fiscal.
SYNOPSIS
This bill, sponsored by the Fair Political Practices Commission
(FPPC), creates new disclosure rules for nonprofit organizations
that make large campaign contributions or expenditures in
California. Currently these nonprofits are not required to
disclose contributions or expenditures until after the first
year that the organization makes a contribution, apparently to
prevent the organizations' donors from being surprised about any
required disclosure. This bill provides for greater
transparency by requiring reporting when the nonprofit makes
aggregate campaign contributions or expenditures of $50,000 or
more in a fiscal year, thus eliminating the first year donation
reporting exemption. To help protect certain donors, the bill
provides a mechanism for individual donors or the reporting
entity to petition to keep donor information confidential if
public disclosure will either cause undue harm, threats,
harassment, or reprisals to the donor; or the donor did not know
that his or her donation would be used to make a political
contribution or expenditure in California. This bill passed out
of the Assembly Elections and Redistricting Committee last week
on a party-line 5-2 vote. It has no reported opposition.
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
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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 to develop
the NMODS form. Provides that the form must 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
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, as specified;
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, address
and, if known, employer of the donor.
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), as an attachment to that
periodic report for any year in which the entity meets the
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$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, with
the FPPC for any year in which the entity meets the $50,000
threshold for combined aggregate contributions,
expenditures, and independent expenditures. 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
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 with which
the entity is required to file its NMODS form (either the AG
or the FPPC). 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,
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expenditure, or independent expenditure in California.
7)Requires the AG or the FPPC, as appropriate, to inform a
petitioner, in writing, whether the petition to maintain
confidentiality has been granted or denied. Requires the
grant or denial determination to include a statement of
findings and conclusions, and the reasons or basis for the
determination. Requires the AG or the FPPC, as appropriate,
when it grants a petition to maintain the confidentiality of
donor information, to redact the donor and donation
information from any documents that are made available to the
public.
8)Requires an entity that files a NMODS form with the AG to file
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. If the AG approves the petition, requires the FPPC to
also keep the information confidential.
EXISTING LAW :
1)Creates the FPPC, and makes it responsible for the impartial,
effective administration and implementation of the PRA.
(Government Code Section 83000 et seq. Unless stated
otherwise, all further references are to that code.)
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. (Section 12586.)
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
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years, in California. (Sections 82013, 84211.)
COMMENTS : This bill, sponsored by the Fair Political Practices
Commission (FPPC), creates new disclosure rules for nonprofit
organizations that make large campaign contributions or
expenditures in California. Currently these nonprofits are not
required to disclose contributions or expenditures until after
the first year that the organization makes a contribution,
apparently to prevent the organizations' donors from being
surprised about any required disclosure. This bill provides for
greater transparency by requiring reporting when the nonprofit
makes aggregate campaign contributions or expenditures of
$50,000 or more in a fiscal year, thus eliminating the first
year donation reporting exemption. To help protect certain
donors, the bill provides a mechanism for individual donors or
the reporting entity to petition to keep donor information
confidential if public disclosure will either cause undue harm,
threats, harassment, or reprisals to the donor; or the donor did
not know that his or her donation would be used to make a
political contribution or expenditure in California.
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
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. . . . AB 914 strikes a balance between campaign
related disclosure in order to enable a fully informed
electorate and privacy of donor information.
Multipurpose Organizations, Campaign Disclosure, & the "One
Bite" Rule : Under existing law, when a multipurpose
organization makes contributions or expenditures of specified
amounts in connection with an election in California, that
organization must file a report disclosing that it made the
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contributions or expenditures. In some cases, the organization
is required to report only the fact that it made a contribution
or 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 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 its donors only
if those donors knew, or had reason to know, that their 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 its donors 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 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 had
not previously taken 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
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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 in order
that the voters may be fully informed and improper practices may
be inhibited.
This bill is intended to address the challenge to ensure
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 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.
$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 was opposing Proposition 30 and supporting Proposition 32 at
the time the contribution was received. It reported that the
$11 million contribution was made by Americans for Responsible
Leadership (ARL), an Arizona-based nonprofit 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
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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 "one bite at the apple."
After receiving a complaint regarding the $11 million
contribution, the FPPC asked 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, the FPPC sued ARL
seeking an order to compel ARL to produce those records. A
Sacramento trial court ultimately granted the FPPC's request.
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 yet disclosed its donors.
Bill Limits Reporting to Large Donors Only : This bill is
limited to only large donors -- both organizations and
individual donors. First, it only applies to nonprofit
organizations that make aggregate contributions or expenditures
of $50,000 or more in a fiscal year. Even in California, that
is still a significant expenditure. Second, greater reporting
requirements, including reporting of individual donors, is only
mandated for organizations whose campaign expenditures are more
than a minor part of the organization's activities. Finally,
individual donors must only be reported if they made donations
of $10,000 or more in the reporting period. This prevents the
reporting of small donors. Additionally, to further protect
donors, the bill provides that if the nonprofit maintains
segregated bank accounts for the purpose of making
election-related contributions or expenditures, the entity is
only required to report information with respect to donations
deposited into the segregated election-related accounts.
New Reporting Requirements Work in Conjunction With Existing
Charitable Organization Reporting Requirements : Under existing
law, pursuant to the Uniform Supervision of Trustees and
Fundraisers for Charitable Purposes Act (Act), the AG has
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supervisory and enforcement powers over certain charitable
entities and fundraisers 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 entities
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 entity or fundraiser upon finding that the person
or entity 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 with the FPPC.
Related Legislation : AB 45 (Dickinson) and SB 27 (Correa) both,
among other provisions, revise the disclosure rules that apply
to multipurpose organizations that make contributions and
expenditures in California elections.
Two-Thirds Floor Vote Requirement for Bills Amending the
Political Reform Act of 1974 : In 1974, California voters passed
Proposition 9, which created the PRA and the FPPC and codified
significant restrictions and prohibitions on candidates,
officeholders and lobbyists. 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.
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
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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
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.
REGISTERED SUPPORT / OPPOSITION :
Support
Fair Political Practices Commission (sponsor)
Opposition
None on file
Analysis Prepared by : Leora Gershenzon / JUD. / (916) 319-2334