BILL ANALYSIS �
SENATE COMMITTEE ON ELECTIONS
AND CONSTITUTIONAL AMENDMENTS
Senator Norma J. Torres, Chair
BILL NO: AB 914 HEARING DATE: 7/2/13
AUTHOR: GORDON ANALYSIS BY: Darren Chesin
AMENDED: 6/25/13
FISCAL: YES
SUBJECT
Political Reform Act: campaign disclosures
DESCRIPTION
Existing law provides that the Fair Political Practices
Commission (FPPC) is responsible for the impartial, effective
administration and implementation of the Political Reform Act
(PRA).
Existing law requires certain entities, including charitable
corporations, unincorporated associations, and trustees, to file
periodic written reports with the Attorney General (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.
Existing law 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.
This bill imposes new disclosure requirements under the PRA for
nonprofit corporations, as defined in Section 501(c) of the
Internal Revenue Code provided they make in California
contributions, expenditures, or independent expenditures, as
defined, in support of or opposition to a candidate, political
party, or ballot measure, or any combination thereof in the
aggregate totaling $50,000 or more during a fiscal year of the
nonprofit corporation.
This bill requires the FPPC to develop and make publicly
available a Nonprofit and Multipurpose Organization Disclosure
Statement form that provides for the disclosure of information
relative to the contributions, expenditures, and independent
expenditures made by a nonprofit corporation in support of or
opposition to a candidate, political party, or ballot measure,
including:
The aggregate combined dollar amount of contributions,
expenditures, and independent expenditures that are made
during the reporting period.
The amount of expenses attributable to contributions,
expenditures, and independent expenditures as a percentage of
the nonprofit corporation's total expenses that are made
during the reporting period.
This bill requires additional information be disclosed for
nonprofit corporations where the combined amounts of
contributions, expenditures, and independent expenditures made
during the reporting period exceed 10% of the nonprofit
corporation's total expenses. These nonprofit corporations
would have to provide, among other things, 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, or ballot measure.
They would also have to provide information related to each
donor who made donations in an aggregate amount of $10,000 or
more to the nonprofit corporation during the reporting period,
including:
The name and address of the donor.
The name of the employer of the donor, if available.
The date and amount of each donation from that donor during
the reporting period.
This bill provides that a nonprofit corporation is not required
to disclose specified information if that information has been
previously disclosed by the nonprofit corporation in any other
campaign statement or report required by the PRA.
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This bill provides that a nonprofit corporation or a donor to a
nonprofit corporation that is subject to the reporting
requirements of this bill may petition the FPPC, no later than
45 days prior to the date on which the Nonprofit and
Multipurpose Organization Disclosure Statement must be filed, to
maintain the confidentiality of donor information that is
disclosed on the statement. If a petitioner demonstrates by
clear and convincing evidence that the public disclosure of
donor information reported on the Nonprofit and Multipurpose
Organization Disclosure Statement will cause undue harm,
threats, harassment, or reprisals to the donor or that 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, the FPPC must treat the
donor and donation information as confidential and must redact
the donor and donation information from any documents that are
made available to the public.
BACKGROUND
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
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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 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
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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, 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
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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.
Existing Charitable Organization Regulation and Reporting
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 co-venturers
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 co-venturer 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.
COMMENTS
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1.According to the Author : AB 914 strikes a balance between
campaign related disclosure necessary for a fully informed
electorate and privacy of donor information. By requiring
additional disclosure, the bill enhances transparency in the
electoral process as well as detection and deterrence of PRA
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
creating a safe harbor for donors to qualifying nonprofits
from public disclosure if such disclosure would cause undue
harm, threats, harassment, or reprisal.
2.Related Legislation : AB 45 (Dickinson) which is pending referral
in the Senate Rules Committee and SB 27 (Correa), which is
pending in the Assembly Elections & Redistricting Committee,
both revise the disclosure rules that apply to multipurpose
organizations that make contributions and expenditures in
California elections, among other provisions.
PRIOR ACTION
Assembly Elections and Redistricting Committee: 5-2
Assembly Judiciary Committee: 8-2
Assembly Appropriations Committee: 12-5
Assembly Floor: 55-18
POSITIONS
Sponsor: Fair Political Practices Commission
Support: None received
Oppose: None received
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