Amended in Senate August 15, 2016

Amended in Assembly May 18, 2016

Amended in Assembly March 28, 2016

California Legislature—2015–16 Regular Session

Assembly Bill No. 2318

Introduced by Assembly Member Low

February 18, 2016

An act begin insert to amend Section 54964.5 of, end insert to add begin delete Sections 84222.1 and 84222.2 end delete begin insert Section 84222.5 end insert to, and to repeal begin delete Sections 54964.5 and end delete begin insert Section end insert 54964.6 of, the Government Code, relating to begin delete the Political Reform Act of 1974. end delete begin insert nonprofit organizations. end insert

LEGISLATIVE COUNSEL’S DIGEST

AB 2318, as amended, Low. begin delete Political Reform Act of 1974: Fair Political Practices Commission: enforcement: end delete begin insert Nonprofit organizations: end insert use of public resources.

(1) 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 any campaign activity not authorized by law. Existing law authorizes the Attorney General, any district attorney, or any city attorney of a city with a population over 750,000 to bring a civil action to recover a civil penalty against any person who intentionally or negligently violates that prohibition.

begin delete

The Political Reform Act of 1974 regulates contributions to public officials and also regulates conflicts of interests on the part of public officials while carrying out their respective duties. The act establishes the Fair Political Practices Commission as the agency responsible for administering and enforcing the act. The act authorizes the Commission to seek and impose administrative and civil penalties against persons who violate the act, as prescribed. The act makes a willful violation of its provisions a misdemeanor subject to specified penalties.

end delete

This bill would begin delete recast and relocate the prohibition on the use of public resources described above within the Political Reform Act of 1974 and would also authorize the Commission, in addition to the Attorney General or district attorney, to bring a civil action to recover the civil penalty, as described above. The bill would authorize the Commission to investigate, hold an administrative hearing on, and issue an order against a violator of the prohibition on the use of public resources for campaign activity, instead of commencing a civil action. end delete begin insert clarify that the prohibition applies to making contributions or expenditures not authorized by law, and would specify certain expenditures authorized by law that are not subject to the prohibition. end insert

(2)  begin delete Existing law requires qualifying individuals and political organizations to report specified information, including, but not limited to, political contributions, in statements filed with the Commission. end delete Existing law requires a reporting nonprofit organization that engages in campaign activity to deposit into a separate bank account all specific sources of funds it receives and to pay for all campaign activity from that separate bank account. Existing law defines “reporting nonprofit organization” as 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.

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, and in some instances requires, the Franchise Tax Board to audit a reporting nonprofit organization, requires the board to issue a written audit report, and requires the board to transmit the audit 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 impose a monetary civil penalty of up to $10,000 against a reporting nonprofit organization for misusing public resources received from a local agency, as described in (1), for failing to maintain the separate bank account, or for not complying with the disclosure requirements described above.

This bill would recast and relocate those provisions within the Political Reform Act of 1974, thereby making the begin insert Fair Political Practices end insert Commission responsible for their administration and enforcement, except as specified. The bill would change the term “reporting nonprofit organization” to “publicly funded nonprofit organization,” defined as 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. begin delete This end delete begin insert The end insert bill would require certain publicly funded nonprofit organizations to register as recipient committees and file the campaign statements that those committees are required to file under the act. This bill would shift the Franchise Tax Board’s authority and duties under these provisions to the Commission and would authorize the Commission, in addition to the Attorney General or the district attorney, to impose the monetary civil penalty of up to $10,000 against a publicly funded nonprofit organization.

begin insert The Political Reform Act of 1974 makes a willful violation of its provisions a misdemeanor. end insert By expanding the scope of an existing crime, this bill would impose a state-mandated local program.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

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: yes.

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

begin delete

SECTION 1.  

Section 54964.5 of the Government Code is
repealed.

end delete

begin insert

begin insert SECTION 1. end insert   

end insert

begin insert Section 54964.5 of the end insert begin insert Government Code end insert begin insert is
amended to read: end insert

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 begin delete resources, end delete begin insert resources end insert received from any local agency
begin delete for any campaign activity end delete begin insert to make a contribution or expenditure end insert
not authorized by law.

(b) As used in this section and Section begin delete 54964.6, end delete begin insert 84222.5, end insert the
following terms begin delete shall end delete have the following meanings:

begin delete

(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.

end delete begin delete

(5)

end delete

begin insert (1) end insert  “Local agency” begin delete shall have end delete begin insert has end insert 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.

begin delete

(6)

end delete

begin insert (2) end insert  “Nonprofit organization” means begin delete any end delete begin insert an end insert 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 begin delete exempt end delete begin insert tax-exempt end insert status
under Section 115 or 501(c) of the begin insert federal end insert Internal Revenue begin delete Code,
provided, however, that “nonprofit end delete begin insert Code. “Nonprofit end insert organization”
does not include begin delete any end delete begin insert a end insert nonprofit organization that qualifies for
tax-exempt status under Section 501(c)(3) of the begin insert federal end insert Internal
Revenue Code.

begin delete

(7)

end delete

begin insert (3) end insert  “Public resources” means begin insert either of end insert 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 begin delete which end delete begin insert that end insert 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 begin insert organization end insert in
exchange for consideration for goods or services.

begin insert

(4) “Publicly funded nonprofit organization” means a nonprofit
organization for which public resources from one or more local
agencies account for more than 20 percent of the nonprofit
organization’s annual gross revenue in the current fiscal year or
either of the previous two fiscal years.

end insert begin delete

(8)

end delete

begin insert (5) end insert  “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 begin delete any end delete begin insert a end insert local agency for which begin delete any end delete
begin insert a end insert monetary value may be estimated.

(c) This section does not prohibit the use of public resources
for begin delete 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: end delete begin insert expenditures authorized by
law, including all of the following: end insert

begin insert

(1) The costs of adopting a position or resolution supporting
or opposing a clearly identified ballot measure or candidate,
including 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.

end insert begin insert

(2) Incidental or minimal use of public resources.

end insert begin insert

(3) 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. For
purposes of this paragraph, “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.

end insert begin insert

(4) Providing information to the public about the possible effects
of a ballot measure on the activities, operations, or policies of the
state or a local agency if the informational activities meet both of
the following conditions:

end insert begin delete

(1)

end delete

begin insert (A) end insert  The informational activities are not otherwise prohibited by
the California Constitution or the laws of this state.

begin delete

(2)

end delete

begin insert (B) end insert  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 Attorney
General 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 begin delete any end delete begin insert a end insert violation, they shall be jointly and
severally liable for the penalty. If the action is brought by the
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.

(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.

SEC. 2.  

Section 54964.6 of the Government Code is repealed.

begin delete

SEC. 3.  

Section 84222.1 is added to the Government Code, to
read:

84222.1.  

(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 to make
a contribution or expenditure not authorized by law.

(b) As used in this section and Section 84222.2, the following
terms have the following meanings:

(1) “Local agency” has 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.

(2) “Nonprofit organization” means an 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 federal Internal Revenue Code. “Nonprofit
organization” does not include a nonprofit organization that
qualifies for tax-exempt status under Section 501(c)(3) of the
federal Internal Revenue Code.

(3) “Public resources” means either of 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 that 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 organization in exchange for
consideration for goods or services.

(4) “Publicly funded nonprofit organization” means a nonprofit
organization for which public resources from one or more local
agencies account for more than 20 percent of the nonprofit
organization’s annual gross revenue in the current fiscal year or
either of the previous two fiscal years.

(5) “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 a local agency from which a
monetary value may be estimated.

(c) This section does not prohibit the use of public resources
for expenditures authorized by law, including:

(1) The costs of adopting a position or 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.

(2) Incidental or minimal use of public resources.

(3) 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. For purposes of this
subparagraph, “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.

(4) Providing information to the public about the possible effects
of a ballot measure on the activities, operations, or policies of the
state or a local agency if the informational activities meet both of
the following conditions:

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

(B) 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) A 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 by the Attorney General, the district
attorney for the county in which the organization is domiciled, or
the Commission. If two or more persons are responsible for a
violation, they shall be jointly and severally liable for the penalty.
Any moneys recovered by the Commission shall be paid into the
General Fund.

(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.

(3) The Commission has jurisdiction to commence an
investigation for a violation of this section in the manner described
in Section 83115 and issue an order under Section 83116. A civil
action shall not be filed or prosecuted under paragraph (1) with
regard to a person for a violation of this section after the
Commission has issued an order in the manner described in Section
83116 against that person for the same violation.

end delete

begin delete SEC. 4. end delete

begin insert SEC. 3. end insert   

Section begin delete 84222.2 end delete begin insert 84222.5 end insert is added to the Government
Code, to read:

begin delete 84222.2. end delete

begin insert 84222.5. end insert   

(a) A publicly funded nonprofit organization that
makes contributions or expenditures, either directly or through the
control of another entity, shall establish and deposit into a separate
bank account all funds that will be used to make contributions and
expenditures, and those contributions and expenditures shall come
from that separate bank account.

(b) In addition to subdivisions (b) and (c) of Section 84222, a
publicly funded nonprofit organization is a recipient committee
within the meaning of subdivision (a) of Section 82013 if any of
the following occur:

(1) It makes contributions or expenditures totaling fifty thousand
dollars ($50,000) or more related to statewide candidates or ballot
measures or makes contributions or expenditures totaling 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, during the prior quarter.

(2) By January 31 of each odd-numbered year, it makes
contributions or expenditures totaling one hundred thousand dollars
($100,000) or more related to statewide candidates or ballot
measures or makes contributions or expenditures totaling ten
thousand dollars ($10,000) or more related to local candidates or
ballot measures, either directly or through the control of another
entity, during the previous two years.

(c) If a publicly funded nonprofit organization qualifies as a
recipient committee pursuant to subdivision (b), it shall comply
with the registration and reporting requirements of Section 84222.

(d) Each publicly funded nonprofit organization that makes
contributions or expenditures, either directly or through the control
of another entity, shall provide to the Commission, and display on
the organization’s 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 that is
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.

(e) The Commission may require an audit of a publicly funded
nonprofit organization that is required to provide records to the
Commission pursuant to this section. The Commission shall require
an audit of any publicly funded nonprofit organization that makes
contributions or expenditures in excess of five hundred thousand
dollars ($500,000) in a calendar year. The publicly funded
nonprofit organization shall provide records to the Commission
to substantiate the information required to be disclosed by this
section.

(f) If the Commission determines at the conclusion of an audit
that a publicly funded nonprofit organization has violated this
section, the Commission, the Attorney General, or the district
attorney for the county in which the organization is domiciled may
impose a civil fine upon the organization in an amount up to ten
thousand dollars ($10,000) for each violation.

(g) The definitions in subdivision (b) of Section begin delete 84222.1 end delete begin insert 54964.5 end insert
apply to this section.

begin delete SEC. 5. end delete

begin insert SEC. 4. end insert   

No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of
the Government Code, or changes the definition of a crime within
the meaning of Section 6 of Article XIII B of the California
Constitution.

begin delete SEC. 6. end delete

begin insert SEC. 5. end insert   

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.