BILL ANALYSIS Ó
SENATE COMMITTEE ON
ELECTIONS AND CONSTITUTIONAL AMENDMENTS
Senator Ben Allen, Chair
2015 - 2016 Regular
Bill No: AB 2318 Hearing Date: 6/21/16
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|Author: |Low |
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|Version: |5/18/16 |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant:|Darren Chesin |
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Subject: Political Reform Act of 1974: Fair Political
Practices Commission: enforcement: use of public resources
DIGEST
This bill gives the Fair Political Practices Commission (FPPC)
jurisdiction over specified state laws that restrict nonprofit
organizations from using certain resources for campaign purposes
and that require specified nonprofit organizations to disclose
the sources of funds used for campaign activity.
ANALYSIS
Existing law:
1)Creates the FPPC, and makes it responsible for the impartial,
effective administration and implementation of the Political
Reform Act (PRA).
2)Makes it unlawful for an elected state or local officer,
appointee, employee, or consultant to use, or permit others to
use, public resources for a campaign activity.
3)Makes it unlawful for a nonprofit organization or an officer,
employee, or agent of a nonprofit organization to use or
permit others to use public resources that are from any local
agency for any campaign activity not authorized by law, as
specified.
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a) Defines "public resources," for the purposes of this
restriction, to include funds received by a nonprofit
organization which have been generated from any activities
related to conduit bond financing by conduit financing
providers, as specified. Provides that these funds are
public resources even if they are received in exchange for
consideration.
b) Provides that an unauthorized use of public resources
pursuant to this provision is punishable by civil penalties
of up to $1,000 for each day on which a violation occurs,
plus three times the value of the unlawful use of public
resources, as specified.
1)Requires a "reporting nonprofit organization," defined as a
nonprofit organization for which public resources from local
agencies (including funds generated from activities related to
conduit bond financing) account for more than 20% of the
organization's gross revenues in the current fiscal year or
either of the previous two fiscal years, to deposit funds
designated for campaign use into a separate account and to
prepare periodic reports disclosing their campaign activities.
a) Provides that the term nonprofit organization, for the
purposes of these requirements, means any entity
incorporated under the Nonprofit Corporation Law or a
nonprofit organization that qualifies for exempt status
under Section 115 or 501(c) of the Internal Revenue Code,
except for organizations that qualify for tax-exempt status
under Section 501(c)(3) of the Internal Revenue Code.
b) Requires a reporting nonprofit organization to disclose
the following information if it engages in campaign
activity of $50,000 or more related to statewide candidates
or ballot measures, or $2,500 or more related to local
candidates or ballot measures at any point during a
calendar quarter; or if it engages in campaign activity of
$100,000 or more related to statewide candidates or ballot
measures, or $10,000 or more related to local candidates or
ballot measures, at any point during a two-year period, as
specified:
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i. The name and amount of the 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 the nonprofit organization from that
specific source or sources of funds is at least $250;
ii. The name of the payee and amount of all payments
aggregating $250 or more made from the single bank
account it is required to use to pay for campaign
activity; and,
iii. A description of each campaign activity.
a) Requires each reporting nonprofit organization that
engages in campaign activity to display the information
required to be disclosed pursuant to b) on its Web site and
provide that information to the Franchise Tax Board (FTB),
as specified.
b) Permits the FTB to audit a reporting nonprofit
organization that provides records to the FTB pursuant b),
and requires the FTB to audit any reporting nonprofit
organization that engages in campaign activity in excess of
$500,000 in a calendar year. Requires a nonprofit
organization that is being audited to provide records to
the FTB that substantiate the information required to be
disclosed.
c) Provides that if an audit by the FTB of a nonprofit
organization determines that the organization violated
specified state laws, the Attorney General (AG) or the
district attorney for the county in which the organization
is domiciled may impose a civil fine on the organization in
an amount up to $10,000 for each violation.
1)Establishes conditions under which Multipurpose Organizations
(MPOs) make campaign contributions or expenditures is required
to disclose names of its donors. Defines an MPO, for the
purposes of this provision, as an organization described in
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Sections 501(c)(3) through (10) of the Internal Revenue Code
that is exempt from taxation under Section 501(a) of the
Internal Revenue Code; a federal or out-of-state political
organization, as specified; a trade or professional
association; a civic or religious organization; a fraternal
society; an educational institution; or any other association
or group of persons acting in concert; that is operating for
purposes other than making contributions or expenditures.
2)Permits the FPPC to impose administrative penalties in
situations where it determines that a violation of the PRA has
occurred. Permits the FPPC, through this administrative
enforcement procedure, to require the person who violated the
PRA to do any of the following:
a. Cease and desist violation of the PRA;
b. File any reports, statements, or other documents or
information required by the PRA; and,
c. Pay a monetary penalty of up to $5,000 per violation,
payable to the General Fund of the state.
This bill:
1)Allows the FPPC to enforce the state law that prohibits a
nonprofit organization, as defined, or an officer, employee,
or agent of such an organization, from using public resources
that are received from a local agency, as specified, for
campaign activity not authorized by law. Provides that
enforcement by the FPPC may be brought as a civil action or
through an administrative action. Eliminates the potential
for enforcement by city attorneys or by any district attorney
other than the district attorney of the county in which the
organization is domiciled. Recodifies this law so that it is
part of the PRA.
2)Allows the FPPC to enforce the state law that requires a
nonprofit organization that receives more than 20% of its
revenues from one or more local agencies to use a separate
bank account for campaign activity and to publicly report
campaign activity, including disclosing the sources of funds
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used for that activity, if certain thresholds are met.
Transfers the responsibility for administering this law from
the FTB to the FPPC. Conforms this law to another law within
the PRA that regulates political spending by specified
nonprofit organizations. Recodifies this law so that it is
part of the PRA.
3)Requires disclosures made under this law to be made in the
same manner as reports filed by MPOs that are subject to
another provision of the PRA that establishes the conditions
under which MPOs are required to disclose their donors.
4)Transfers the following responsibilities under this law from
the FTB to the FPPC:
a) Deciding whether to require an audit of reports filed by
nonprofit organizations; and,
b) Determining, as part of an audit or at the conclusion of
an audit, whether a nonprofit organization has complied
with specified provisions of state law.
1)Makes minor, technical, and corresponding changes.
BACKGROUND
Previous Legislation & Conflicting Reporting Requirements for
Nonprofits . SB 594 (Hill, Chapter 773, Statutes of 2013), was
enacted in response to concerns that public resources were being
used indirectly for campaign purposes. In particular, the
author of SB 594 indicated that the bill was necessary because
there was "credible reason to believe" that nonprofit
organizations were making campaign expenditures from accounts
that were "financed in whole or in part by public dollars."
Specifically, the author of SB 594 expressed concern about the
possibility that revenues from a Joint Powers Authority (JPA)
that provides tax-exempt bond financing were being used for
campaign purposes. The author of SB 594 argued that because the
JPA is a public entity, and because the bonds it issues are tax
exempt, any profits earned as a result of bond sales belong to
the taxpayers, and should not be used for campaign purposes.
SB 594 contained three key provisions. First, even though
California law already contained strict prohibitions against the
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use of public resources for campaign activity, SB 594 expanded
those provisions by providing that funds received by a nonprofit
organization that were generated from activities related to
conduit bond financing were considered public resources "whether
or not those funds [were] received by the nonprofit in exchange
for consideration for goods or services." Accordingly, SB 594
prohibited funds generated from conduit bond financing from
being used for campaign purposes. This bill gives the FPPC the
authority to enforce that provision and codifies it within the
PRA, but otherwise generally does not change the restriction on
the use of resources derived from conduit bond financing.
SB 594 also contained two provisions that were targeted at
nonprofit organizations that receive more than 20% of their
revenues from local agencies. One provision required those
organizations -- to the extent that they engage in campaign
activity -- to have a separate bank account for all campaign
activities. The other provision required the nonprofit
organizations to publicly report their campaign activities and
the sources of their campaign funds if certain thresholds were
met.
Subsequent to the passage of SB 594, SB 27 (Correa, Chapter 16,
Statutes of 2014), established conditions under which an MPO
that makes campaign contributions or expenditures is required to
disclose names of its donors. SB 27 was enacted in response to
situations where nonprofit organizations made significant
campaign contributions and expenditures, but were not required
to disclose the source of their donors. Although SB 594 and SB
27 were intended to address two different situations, both bills
regulate political activity by certain nonprofit organizations
and, as a result, nonprofit organizations can be required to
comply with the requirements of both bills under certain
circumstances.
This bill changes the reporting requirements of SB 594 so that
the same rules and standards generally apply as to reports filed
pursuant to SB 27. By establishing greater consistency in the
reporting rules for nonprofit organizations, this bill should
help streamline compliance and enforcement of these two laws.
Additionally, this bill moves the reporting and separate bank
account rules from SB 594 into the PRA and gives the FPPC the
authority to enforce and the responsibility to administer those
rules.
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According to the FTB, since SB 594 went into effect on January
1, 2014, only two nonprofit organizations have filed reports in
accordance with that bill, though it appears that those reports
may have been filed in error, since neither organization reached
the reporting thresholds. As a result, the FTB has not
conducted any audits pursuant to SB 594. The low number of
reports filed pursuant to SB 594 does not necessarily mean that
nonprofit organizations are failing to comply with the
provisions of the law, but instead may reflect the very narrow
circumstances under which an organization is required to file a
report, as detailed above.
COMMENTS
According to the author : AB 2318 modifies the definition of a
reporting nonprofit organization and shifts the current
enforcement authority from the FTB to the FPPC.
This bill improves upon the existing accountability and
transparency provisions by providing enforcement authority to
the FPPC. The FPPC is the appropriate oversight body to promote
and foster the public's trust in our state's political system.
As such, AB 2318 is necessary to streamline the disclosure and
reporting rules, while also synchronizing their reporting
threshold requirements in an effort to reduce redundancy and
maximize transparency.
RELATED/PRIOR LEGISLATION
SB 594 (Hill, Chapter 773, Statutes of 2013), which enacted the
law that this bill expands upon and moves into the PRA.
PRIOR ACTION
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|Assembly Floor: |80 - 0 |
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|Assembly Appropriations Committee: |20 - 0 |
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|Assembly Judiciary Committee |10 - 0 |
|Assembly Elections and Redistricting | 7 - 0 |
|Committee: | |
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POSITIONS
Sponsor: California Professional Firefighters
Support: California Labor Federation
California School Employees Association
California State Council of the Service Employees
International Union
Oppose: None received
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