California Legislature—2015–16 Regular Session

Assembly Bill No. 2318

Introduced by Assembly Member Low

February 18, 2016

An act to amend Sections 54964.5 and 54964.6 of the Government Code, relating to campaign activity.

LEGISLATIVE COUNSEL’S DIGEST

AB 2318, as introduced, Low. Fair Political Practices Commission: enforcement: use of public resources.

(1) Existing law prohibits the use of public funds for campaign activities. Existing law prohibits a nonprofit organization or an officer, employee, or agent of a nonprofit organization from using, or permitting another to use public resources received from a local agency for campaign activity, as defined, and not authorized by law. Existing law defines, among other terms, “public resources” to mean any property or asset owned by a local agency and funds received by a nonprofit organization which have been generated from any activities related to conduit bond financing by those entities subject to specified conduit financing and transparency and accountability provisions, and “nonprofit organization” to mean an entity incorporated under the Nonprofit Corporation Law or a nonprofit organization that qualifies for exempt status under the federal Internal Revenue Code of 1986, except as specified. Existing law authorizes a civil cause of action for a violation of these prohibitions and damages that include, but are not limited to, 3 times the value of the unlawful use of the public resources. Existing law authorizes the Attorney General, a district attorney, and a city attorney of a city having a population in excess of 750,000 to seek these civil remedies.

This bill additionally would authorize the Fair Political Practices Commission to bring a civil action or to commence an administrative action for violation of these provisions.

(2) Existing law requires qualifying individuals and political organizations to report specified information, including, but not limited to, political contributions, in statements filed with the Fair Political Practices Commission. Existing law requires a reporting nonprofit organization that engages in campaign activity to deposit into a separate bank account all “specific source or sources of funds” it receives and to pay for all campaign activity from that separate bank account. Existing law defines, among other terms, “reporting nonprofit organization” to mean a nonprofit organization for which public resources from one or more local agencies account for more than 20% of the nonprofit organization’s annual gross revenue, as specified, and “specific source or sources of funds” to mean any funds received by the reporting nonprofit organization that have been designated for campaign activity use or any other funds received by the nonprofit organization.

Existing law requires a reporting nonprofit organization that engages in campaign activity of specified amounts or more to periodically disclose to the Franchise Tax Board, and post on its Internet Web site in a certain manner, the identity and amount of each specific source or sources of funds it receives for campaign activity, a description of the campaign activity, and the identity and amount of payments the organization makes from the required separate bank account. Existing law authorizes the Franchise Tax Board to conduct an audit of any reporting nonprofit organization and requires the board to conduct an audit of any reporting nonprofit organization that engages in campaign activity in excess of $500,000 in a calendar year. Existing law requires the board to issue a written audit report and to transmit the report to the Attorney General and the district attorney for the county in which the reporting nonprofit organization is domiciled. Existing law authorizes the Attorney General or the district attorney for the county in which the reporting nonprofit organization is domiciled to assess a monetary civil penalty of up to $10,000 against a reporting nonprofit organization for each violation of these disclosure requirements.

This bill would change the term “reporting nonprofit organization” to “publicly funded multipurpose organization,” described as a multipurpose organization as defined in the Political Reform Act for which public resources from one or more local agencies account for more than 20% of the multipurpose organization’s annual gross revenue, as specified. This bill would redefine “specific source or sources of funds” to mean payments or funds that meet specified criteria received by the publicly funded multipurpose organization from donors that are for, or may be used for, contributions or expenditures, as specified, or any other funds received by the publicly funded multipurpose organization within a two-year period that are used for campaign activity. This bill would shift the Franchise Tax Board’s duties under these provisions to the Fair Political Practices Commission and would authorize the Fair Political Practices Commission, in addition to the Attorney General or the district attorney, to impose the civil penalty of up to $10,000 against a publicly funded multipurpose organization for each violation.

The Political Reform Act of 1974, an initiative measure, provides that the Legislature may amend the act to further the act’s purposes upon a 2⁄3 vote of each house and compliance with specified procedural requirements.

This bill would declare that it furthers the purposes of the act.

Vote: ²⁄₃. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

SECTION 1.  

Section 54964.5 of the Government Code is
amended to read:

54964.5.  

(a) A nonprofit organization or an officer, employee,
or agent of a nonprofit organization shall not use, or permit another
to use, public resources, received from any local agency for any
campaign activity not authorized by law.

(b) As used in this section and Section 54964.6, the following
terms shall have the following meanings:

(1) “Ballot measure” means a state or local initiative,
referendum, or recall measure certified to appear on a regular or
special election ballot or other measure submitted to the voters by
the Legislature or the governing body of a local agency at a regular
or special election.

(2) “Campaign activity” means a payment that is used for
communications that expressly advocate for or against the
qualification of a clearly identified ballot measure, the approval
or rejection of a clearly identified ballot measure, or the election
or defeat of a clearly identified candidate by the voters, or that
constitutes a campaign contribution.

(A) “Campaign activity” does not include the costs of adopting
a position or a resolution supporting or opposing a clearly identified
ballot measure or candidate, including, but not limited to, posting
the position or resolution on the nonprofit organization’s Internet
Web site, communicating the position or resolution to members
of the nonprofit organization, or issuing a press statement.

(B) “Campaign activity” does not include incidental or minimal
use of public resources.

(C) “Campaign activity” does not include incidental costs related
to the establishment or administration of a sponsored committee
as defined in Section 82048.7. A reasonable accounting method
may be used to determine the use of nonpublic resources to pay
for that cost. “Establishment and administration” means the cost
of office space, telephones, salaries, utilities, supplies, legal and
accounting fees, and other expenses incurred in establishing and
operating a sponsored committee.

(3) “Candidate” means an individual who has qualified to have
his or her name listed on the ballot, or who has qualified to have
write-in votes on his or her behalf counted by elections officials,
for nomination or election to an elective office at any regular or
special primary or general election, and includes any officeholder
who is the subject of a recall election.

(4) “Expenditure” means a payment used for communications
that expressly advocate the approval or rejection of a clearly
identified ballot measure, or the election or defeat of a clearly
identified candidate, by the voters or that constitutes a campaign
contribution.

(5) “Local agency” shall have the same meaning as that term is
defined in paragraph (4) of subdivision (b) of Section 54964 and
shall also include a public entity created pursuant to the Joint
Exercise of Powers Act (Chapter 5 (commencing with Section
6500) of Division 7 of Title 1) by one or more entities described
in Section 54964.

(6) “Nonprofit organization” means any entity incorporated
under the Nonprofit Corporation Law (Division 2 (commencing
with Section 5000) of Title 1 of the Corporations Code) or a
nonprofit organization that qualifies for exempt status under
Section 115 or 501(c) of the Internal Revenue Code, provided,
however, that “nonprofit organization” does not include any
nonprofit organization that qualifies for tax-exempt status under
Section 501(c)(3) of the Internal Revenue Code.

(7) “Public resources” means the following:

(A) Any property or asset owned by a local agency, including,
but not limited to, cash, land, buildings, facilities, funds, equipment,
supplies, telephones, computers, vehicles, travel, and local
government compensated work time that is provided to a nonprofit
organization, except funds received in exchange for consideration
for goods or services.

(B) Funds received by a nonprofit organization which have been
generated from any activities related to conduit bond financing by
those entities subject to the conduit financing and transparency
and accountability provisions of Chapter 10.7 (commencing with
Section 5870) of Division 6 of Title 1, whether or not those funds
are received by the nonprofit in exchange for consideration for
goods or services.

(8) “Use” means a use of public resources from one or more
local agencies that is substantial enough to result in a gain or
advantage to the user or a loss to any local agency for which any
monetary value may be estimated.

(c) This section does not prohibit the use of public resources
for providing information to the public about the possible effects
of any ballot measure on the activities, operations, or policies of
the state or a local agency, provided that the informational activities
meet both of the following conditions:

(1) The informational activities are not otherwise prohibited by
the California Constitution or the laws of this state.

(2) The information provided constitutes an accurate, fair, and
impartial presentation of relevant facts to aid the electorate in
reaching an informed judgment regarding the ballot measure.

(d) (1) Any person who intentionally or negligently violates
this section is liable for a civil penalty not to exceed one thousand
dollars ($1,000) for each day on which a violation occurs, plus
three times the value of the unlawful use of public resources. The
penalty shall be assessed and recovered in a civil action brought
in the name of the people of the State of California by the begin delete Attorney
General end delete begin insert Fair Political Practices Commission, the Attorney
General, end insert or by any district attorney or any city attorney of a city
having a population in excess of 750,000. If two or more persons
are responsible for any violation, they shall be jointly and severally
liable for the penalty. If the action is brought by the begin insert Fair Political
Practices Commission or the end insert Attorney General, the moneys
recovered shall be paid into the General Fund. If the action is
brought by a district attorney, the moneys recovered shall be paid
to the treasurer of the county in which the judgment was entered.
If the action is brought by a city attorney, the moneys recovered
shall be paid to the treasury of that city. begin insert No more than one judgment
on the merits with respect to any violation may be obtained under
this paragraph. end insert

(2) A civil action alleging a violation of this section shall not
be commenced more than four years after the date of the alleged
violation.

begin insert

(3) The Fair Political Practices Commission shall have the
jurisdiction to commence an investigation for a violation of this
section in the manner described in Section 83115. No civil action
may be filed or prosecuted under paragraph (1) with regard to
any person for any violation of this section after the Fair Political
Practices Commission has issued an order in the manner described
in Section 83116 against that person for the same violation.

end insert

SEC. 2.  

Section 54964.6 of the Government Code is amended
to read:

54964.6.  

(a) A begin delete reporting nonprofit end delete begin insert publicly funded
multipurpose end insert organization that engages in campaign activity, either
directly or through the control of another entity, shall deposit into
a separate bank account all specific source or sources of funds
received and shall pay for all campaign activity from that separate
bank account.

(b) As used in this section, the following terms shall have the
following meanings:

(1)  begin delete “Reporting nonprofit organization” means a nonprofit
organization for which public resources end delete begin insert “Publicly funded
multipurpose organization” means a multipurpose organization,
as defined in subdivision (a) of Section 84222, for which public
resources, as defined in paragraph (7) or subdivision (b) of Section
54964.5, end insert from one or more local agencies account for more than
20 percent of the begin delete nonprofit end delete begin insert multipurpose end insert organization’s annual
gross revenue in the current fiscal year or either of the previous
two fiscal years. A begin delete reporting nonprofit end delete begin insert publicly funded
multipurpose end insert organization shall not include a begin delete nonprofit end delete
begin insert multipurpose end insert organization that sponsors a committee, as defined
in Section begin delete 82048.7 of the Government Code, end delete begin insert 82048.7, end insert if the
begin delete nonprofit end delete begin insert multipurpose end insert organization reports all begin delete contributions it end delete
begin insert specific sources of funds end insert received and all begin delete expenditures it made end delete
begin insert campaign activities end insert on campaign disclosure statements filed by
the sponsored committee and the begin delete nonprofit end delete begin insert multipurpose end insert
organization makes no payments from its general treasury to the
sponsored committee other than payments for contributions by
donors earmarked for the sponsored committee. For purposes of
this subdivision, “earmarked” means a payment by a donor to a
begin delete nonprofit end delete begin insert multipurpose end insert organization subject to a condition,
agreement, or understanding that the payment will be used for
making contributions or independent expenditures by the sponsored
committee of the sponsoring begin delete nonprofit end delete begin insert multipurpose end insert organization.

(2) “Specific source or sources of funds” shall mean any begin delete funds
received by the reporting nonprofit organization that have been
designated for campaign activity use or any other funds received
by the nonprofit organization that are used, in whole or in part,
within a two-year period from receipt for campaign activity. end delete begin insert of the
following: end insert

begin insert

(A) Payments the publicly funded multipurpose organization
solicits and receives from donors in an amount equal to or greater
than the amount identified in subdivision (a) of Section 82013 for
the purpose of making contributions or expenditures.

end insert begin insert

(B) Payments the publicly funded multipurpose organization
receives from donors in an amount equal to or greater than the
amount identified in subdivision (a) of Section 82013 subject to a
condition, agreement, or understanding with the donor that all or
a portion of the payments may be used for making contributions
or expenditures.

end insert begin insert

(C) Existing funds of the publicly funded multipurpose
organization from a donor and a subsequent agreement or
understanding is reached with the donor that all or a portion of
the funds may be used for making contributions or expenditures
in an amount equal to or greater than the amount identified in
subdivision (a) of Section 82013. The date of the subsequent
agreement or understanding is deemed to be the date of receipt of
the payment.

end insert begin insert

(D) Any other funds received by the publicly funded
multipurpose organization within a two-year period that are used
for campaign activity.

end insert

(3) Unless otherwise defined herein, the definitions found in
subdivision (b) of Section 54964.5 shall apply to this section.

(c) Thirty days after the end of each quarter, a begin delete reporting
nonprofit end delete begin insert publicly funded multipurpose end insert organization that engages
in campaign activity of fifty thousand dollars ($50,000) or more
related to statewide candidates or ballot measures or engages in
campaign activity of two thousand five hundred dollars ($2,500)
or more related to local candidates or ballot measures, either
directly or through the control of another entity, at any point during
that quarter shall disclose the following information for that
quarter:

(1) The name and amount of each specific source or sources of
funds used for campaign activity, provided that the aggregate
amount of funds received since January 1 of the most recent odd
year by a begin delete reporting nonprofit end delete begin insert publicly funded multipurpose end insert
organization from that specific source or sources of funds is at
least begin delete two hundred fifty dollars ($250). end delete begin insert one thousand dollars
($1,000). end insert begin insert The publicly funded multipurpose organization shall
report all sources of funds that satisfy the criteria of paragraph
(2) of subdivision (b) and for the balance of its campaign activities
paid from the separate bank account. The publicly funded
multipurpose organization shall report sources of funds based on
a last in, first out accounting method. For purposes of this section,
“last in, first out accounting method” means an accounting method
by which contributions and expenditures are attributed to the
multipurpose organization’s contributors in reverse chronological
order beginning with the most recent of its contributors or, if there
are any prior contributions or expenditures, beginning with the
most recent contributor for which unattributed contributions
remain. end insert

(2) The name of the payee and amount of all payments
aggregating two hundred fifty dollars ($250) or more made from
the single bank account required under subdivision (a).

(3) A description of each campaign activity.

(d)  begin delete Thirty days after end delete begin insert By January 31 following end insert the end of each
even year, a begin delete reporting nonprofit end delete begin insert publicly funded multipurpose end insert
organization that engages in campaign activity of one hundred
thousand ($100,000) or more related to statewide candidates or
ballot measures or engages in campaign activity of ten thousand
dollars ($10,000) or more related to local candidates or ballot
measures, either directly or through the control of another entity,
at any point during that even year or the prior odd year shall
disclose all the following information for those two calendar years:

(1) The name and amount of any specific source or sources of
funds used for campaign activity, provided that the aggregate
amount of funds received since January 1 of the most recent odd
year by a begin delete reporting nonprofit end delete begin insert publicly funded multipurpose end insert
organization from that specific source or sources of funds is at
least begin delete two hundred fifty dollars ($250). end delete begin insert one thousand dollars
($1,000). end insert

(2) The name of the payee and amount of all payments
begin insert aggregating two hundred fifty dollars ($250) or more end insert made from
the single bank account required under subdivision (a).

(3) A description of each campaign activity.

(e) Each begin delete reporting nonprofit end delete begin insert publicly funded multipurpose end insert
organization that engages in campaign activity, either directly or
through the control of another entity, shall provide to the begin delete Franchise
Tax Board end delete begin insert Fair Political Practices Commission end insert and display on its
Internet Web site the information it is required to disclose under
this section. The information shall be clearly described and
identified on a separate Internet Web page, which shall be linked
from the homepage of the organization’s Internet Web site. The
link to this Internet Web page from the homepage shall be as visible
as all similar links.

(f) The begin delete Franchise Tax Board end delete begin insert Fair Political Practices
Commission end insert may begin delete conduct end delete begin insert require end insert an audit of any begin delete reporting
nonprofit end delete begin insert publicly funded multipurpose end insert organization that is required
to provide records to the begin delete board end delete begin insert Fair Political Practices Commission end insert
pursuant to this section. The begin delete Franchise Tax Board end delete begin insert Fair Political
Practices Commission end insert shall begin delete conduct end delete begin insert require end insert an audit of any
begin delete reporting nonprofit end delete begin insert publicly funded multipurpose end insert organization that
engages in campaign activity in excess of five hundred thousand
dollars ($500,000) in a calendar year. The begin delete reporting nonprofit end delete
begin insert publicly funded multipurpose end insert organization shall provide records
to the begin delete Franchise Tax Board end delete begin insert Fair Political Practices Commission end insert
that substantiate the information required to be disclosed by this
section. The begin delete Franchise Tax Board end delete begin insert Fair Political Practices
Commission end insert shall determine whether the organization complied
with the requirements of Section 54964.5 and this section, issue a
written audit report, and transmit the written audit report to the
Attorney General and the district attorney for the county in which
the begin delete reporting nonprofit end delete begin insert publicly funded multipurpose end insert organization
is domiciled.

(g) If the begin delete Franchise Tax Board end delete begin insert Fair Political Practices
Commission end insert determines at the conclusion of an audit that a
begin delete reporting nonprofit end delete begin insert publicly funded multipurpose end insert organization has
violated Section 54964.5 or this section, the begin delete Attorney General end delete begin insert Fair
Political Practices Commission, the Attorney General, end insert or the
district attorney for the county in which the begin delete reporting nonprofit end delete
begin insert publicly funded multipurpose end insert organization is domiciled may impose
a civil fine upon the begin delete reporting nonprofit end delete begin insert publicly funded
multipurpose end insert organization in an amount up to ten thousand dollars
($10,000) for each violation.

SEC. 3.  

The Legislature finds and declares that this bill furthers
the purposes of the Political Reform Act of 1974 within the
meaning of subdivision (a) of Section 81012 of the Government
Code.