BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                    AB 1494


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          Date of Hearing:  April 15, 2015 


                  ASSEMBLY COMMITTEE ON ELECTIONS AND REDISTRICTING


                           Sebastian Ridley-Thomas, Chair


          AB 1494  
          (Levine) - As Amended April 7, 2015


          SUBJECT:  Political Reform Act of 1974:  independent expenditure  
          tax.


          SUMMARY:  Imposes a 10 percent tax on specified independent  
          expenditures made in connection with candidates for elective  
          state office or state measures.  Specifically, this bill:  


          1)Requires any committee that is required to file campaign  
            reports online or electronically, and that makes independent  
            expenditures of $1,000 or more in the last 90 days before an  
            election in connection with a candidate for elective state  
            office or a state ballot measure, to pay a tax at the rate of  
            10 percent of the amount of each such independent expenditure.  
             Requires the tax to be paid to the Secretary of State (SOS)  
            within five days of filing the report disclosing the  
            expenditure.


          2)Provides that the funds derived from the independent  
            expenditure tax imposed by this bill shall be deposited in a  
            fund created by the SOS for the purpose of increasing  
            transparency in political campaigns, civic engagement, and  









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            voter registration and turnout.  Requires the SOS, upon  
            appropriation by the Legislature, to allocate those funds to  
            the Fair Political Practices Commission (FPPC) for the  
            purposes of increasing transparency in political campaigns and  
            to local elections offices, through a competitive grant  
            program, to increase voter registration and turnout.  Requires  
            the SOS to report to the Legislature and the Department of  
            Finance by March 31 of every year on the allocation and use of  
            these funds, and requires the SOS to post that information on  
            his or her website.


          EXISTING LAW:  


          1)Creates the FPPC, and makes it responsible for the impartial,  
            effective administration and implementation of the Political  
            Reform Act (PRA).

          2)Defines the term "committee," for the purposes of the PRA, to  
            include any person or combination of persons who directly or  
            indirectly makes independent expenditures totaling $1,000 or  
            more in a calendar year.



          3)Defines the term "independent expenditure," for the purposes  
            of the PRA, as an expenditure made by any person in connection  
            with a communication which expressly advocates the election or  
            defeat of a clearly identified candidate, or the  
            qualification, passage, or defeat of a clearly identified  
            measure, or taken as a whole and in context, unambiguously  
            urges a particular result in an election, but which is not  
            made to or at the behest of the affected candidate or  
            committee.











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          4)Requires all candidates and committees who are required to  
            file campaign reports in connection with a state elective  
            office or state measure to file those reports online or  
            electronically if the cumulative amount of contributions  
            received, expenditures made, loans made, or loans received is  
            $25,000 or more.

          5)Requires general purpose committees, including political party  
            committees and small contributor committees, that cumulatively  
            receive contributions or make expenditures of $25,000 or more  
            to support or oppose candidates for any elective state office  
            or state measures, to file campaign reports online or  
            electronically.

          6)Allows any committee or other person who is required to file a  
            campaign report to file that report online or electronically,  
            even if he or she is not required to do so. Provides that once  
            a person or entity files a campaign report or lobbying  
            disclosure report online or electronically, that person or  
            entity shall file all subsequent reports online or  
            electronically.

          FISCAL EFFECT:  Unknown. State-mandated local program; contains  
          a crimes and infractions disclaimer.


          COMMENTS:  


          1)Purpose of the Bill:  According to the author:


               This bill is intended to create a tax on expenditures  
               by independent expenditure committees for the purpose  
               of funding programs that will increase civic  
               engagement, voter registration, and voter turnout.  










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               The turnout for eligible voters in the 2014 General  
               Election was the lowest in California's history.  
               According to the United States Elections Project,  
               California had the fourth lowest turnout in the  
               nation.  California has 24.4 million eligible voters,  
               yet only 7.5 million Californians cast a ballot.   
               Approximately 7 million eligible California voters are  
               not even registered.  





               There are several reasons for this.  One is the  
               dramatic increase in independent expenditure committee  
               spending.  Several reports from regulatory agencies,  
               academic researchers, and nonprofit watchdogs have  
               been highly critical of independent expenditure  
               committees.





               According to California Common Sense, independent  
               expenditure committees spent more than $220 million on  
               candidate races in California between 2000 and 2012.    
               Additionally, in just the top 20 2014 legislative  
               races, independent expenditure committees spent a  
               staggering $44 million.












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               This has resulted in a deluge of mail that voters  
               receive from independent expenditure committees.   
               Additionally, much of the mail is negative and there  
               is no doubt that independent expenditure committee  
               mailers often disenfranchise voters.  This bill will  
               require that the committees pay some of the cost of  
               reengaging voters.  


          2)Constitutional Issues: This measure could be interpreted as a  
            violation of the United States and California Constitutions'  
            guarantees to free speech.  While the right to freedom of  
            speech is not absolute, when a law burdens core political  
            speech, the restrictions on speech generally must be "narrowly  
            tailored to serve an overriding state interest," McIntyre v.  
            Ohio Elections Commission (1995), 514 US 334.



          State and federal courts have repeatedly held that the giving  
            and spending of campaign money involves the exercise of free  
            speech.  The United States Supreme Court found in Buckley v.  
            Valeo (1976), 424 US 1, that any "restriction on the amount of  
            money a person or group can spend on political communication  
            during a campaign necessarily reduces the quantity of  
            expression by restricting the number of issues discussed, the  
            depth of their exploration, and the size of the audience  
            reached."  The Supreme Court in  Buckley  ruled that expenditure  
            limits during a campaign were unconstitutional for this  
            reason.  In the same case, however, the court upheld campaign  
            contribution limits, noting that "[b]y contrast with a  
            limitation on expenditures for political expression, a  
            limitation upon the amount that any one person or group may  
            contribute to a candidate or political committee entails only  
            a marginal restriction upon the contributor's ability to  









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            engage in free communication." 

          One of the restrictions considered by the Buckley court was a  
            provision that prohibited any person from making expenditures  
            exceeding $1,000 relative to a clearly identified candidate in  
            a calendar year.  The court noted that the effect of the  
            provision was to "prohibit all individuals, who are neither  
            candidates nor owners of institutional press facilities, and  
            all groups, except political parties and campaign  
            organizations, from voicing their views 'relative to a clearly  
            identified candidate' through means that entail aggregate  
            expenditures of more than $1,000 during a calendar year."  The  
            court found that restriction to be unconstitutional, finding  
            that the restriction on independent expenditures "fails to  
            serve any substantial governmental interest in stemming the  
            reality or appearance of corruption in the electoral process,"  
            while "heavily burden[ing] core First Amendment expression."

          This bill does not prohibit independent expenditures, nor does  
            it limit the amount of money that a person or committee can  
            spend on independent expenditures.  Nonetheless, by imposing a  
            tax on independent expenditures, this bill may nonetheless  
            heavily burden First Amendment rights, and thus may be  
            susceptible to a constitutional challenge.  While the Supreme  
            Court has held that a "generally nondiscriminatory tax" on  
            activity protected by the First Amendment is permissible (see,  
            for example, Arkansas Writers' Project, Inc. v. Ragland  
            (1987), 481 U.S. 221), it seems unlikely that the tax proposed  
            by this bill would be considered to be nondiscriminatory,  
            since it is applicable only to independent expenditures, and  
            not to all advertising, or even to all campaign spending.
          3)Proposition 34 and the Growth of Independent Expenditures: In  
            2000, the Legislature passed and Governor Davis signed SB 1223  
            (Burton), Chapter 102, Statutes of 2000, which became  
            Proposition 34 on the November 2000 general election ballot.   
            The proposition, which passed with 60 percent of the vote,  
            made numerous substantive changes to the PRA, including  









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            enacting new campaign disclosure requirements and establishing  
            new campaign contribution limits, limiting the amount that  
            individuals could contribute to state campaigns (ranging from  
            $3,000 to $20,000 per election at the time, depending on the  
            office).  





            A study done by this committee in 2006 and a subsequent report  
            by the FPPC in 2010 found that since campaign contribution  
            limits went into effect in California with the passage of  
            Proposition 34, the amount of campaign spending done through  
            independent expenditures increased by more than 6,000 percent  
            in Legislative elections, and more than 5,500 percent in  
            statewide elections.  In hotly contested campaigns for seats  
            in the Legislature, it is not uncommon for spending through  
            independent expenditures to exceed the total amount of  
            spending by all candidates in the race.  On the other hand,  
            prior to the enactment of contribution limits as a part of  
            Proposition 34, independent expenditures were relatively rare.  
             In the March 2000 and November 2000 elections, the last two  
            elections that were not subject to the Proposition 34 campaign  
            contribution limits, the total amount of money spent on  
            independent expenditures for all legislative races was less  
            than $500,000.  By comparison, more than $47 million was spent  
            on independent expenditures for legislative races in 2014.


          4)Independent Expenditures and Turnout: The author of this bill  
            contends that the increase in independent expenditures in  
            California elections is partially responsible for low voter  
            turnout in recent elections. The degree to which independent  
            expenditures affect voter turnout, however, is unclear. While  
            some academic research has suggested that negative campaign  
            advertising can depress turnout, other research has found that  









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            negative advertising has no effect, or even a positive effect,  
            on voter turnout. Furthermore, not all independent  
            expenditures are negative, and some academic research has  
            found that messages designed to mobilize voters can have a  
            small, positive effect on voter turnout.


          5)Tax Applies to Certain Independent Expenditures Only: The  
            independent expenditure tax imposed by this bill would not  
            apply to all independent expenditures, but instead applies  
            only to independent expenditures that are required to be  
            reported pursuant to a specified provision of law. That  
            disclosure requirement applies only to independent  
            expenditures of $1,000 or more that are made (1) in connection  
            with a candidate for state office or a state ballot measure,  
            (2) in the last 90 days before the election, and (3) by a  
            committee that is required to file campaign reports online or  
            electronically. Independent expenditures of less than $1,000,  
            that are made in connection with local candidates or ballot  
            measures, that are made more than 90 days before the election,  
            or that are made by committee that is not required to file  
            campaign reports online or electronically would not be subject  
            to the tax imposed by this bill. 


          6)Arguments in Opposition:  In opposition to this bill, the  
            American Federation of State, County and Municipal Employees  
            (AFSCME), AFL-CIO, writes:


               AFSCME appreciates Assembly Member Levine's endeavor  
               to engage the electorate given the abysmal voter  
               turnout in the past few elections. However, we oppose  
               AB 1494. Though this bill is a creative attempt to  
               engage the electorate, it does not address voter  
               turnout because it limits the resources of those who  
               communicate with voters in marginalized and  









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               disadvantaged communities while unintentionally,  
               giving an advantage to the business interests and  
               billionaires who have the resources to pay a tax on  
               the money they spend in independent expenditure  
               campaigns.  AB 1494 would establish a regressive tax  
               that will harm the organizations, like organized  
               labor, who advocate for greater participation in  
               low-income and minority communities, and would  
               continue to shift political power away from average  
               working men and women to the business elites.


          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 is double-referred to the Assembly  
            Revenue & Taxation Committee.


          REGISTERED SUPPORT / OPPOSITION:




          Support


          None on file.











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          Opposition


          American Federation of State, County and Municipal Employees,  
          AFL-CIO


          California Labor Federation


          California School Employees Association, AFL-CIO


          California Taxpayers Association


          Howard Jarvis Taxpayers Association


          Service Employees International Union, California State Council




          Analysis Prepared by:Ethan Jones / E. & R. / (916) 319-2094



















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