BILL ANALYSIS �
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UNFINISHED BUSINESS
Bill No: SB 27
Author: Correa (D), et al.
Amended: 1/17/14
Vote: 27 - Urgency
SENATE ELECTIONS & CONST. AMENDMENTS COMM. : 4-1, 4/30/13
AYES: Correa, Hancock, Padilla, Yee
NOES: Anderson
SENATE APPROPRIATIONS COMMITTEE : 5-2, 5/23/13
AYES: De Le�n, Hill, Lara, Padilla, Steinberg
NOES: Walters, Gaines
SENATE FLOOR : 28-8, 5/28/13
AYES: Beall, Block, Calderon, Corbett, Correa, De Le�n,
DeSaulnier, Evans, Galgiani, Hancock, Hernandez, Hill, Hueso,
Jackson, Lara, Leno, Lieu, Liu, Monning, Padilla, Pavley,
Price, Roth, Steinberg, Torres, Wolk, Wright, Yee
NOES: Anderson, Berryhill, Fuller, Gaines, Knight, Nielsen,
Walters, Wyland
NO VOTE RECORDED: Cannella, Emmerson, Huff, Vacancy
ASSEMBLY FLOOR : 58-18, 2/20/14 - See last page for vote
SUBJECT : Political Reform Act of 1974
SOURCE : Fair Political Practices Commission
DIGEST : This bill establishes conditions under which a
multipurpose organization (MPO) that makes campaign
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contributions or expenditures is required to disclose names of
its donors. This bill requires the Fair Political Practices
Commission's (FPPC) Web site to include a list of the largest
contributors to committees that support or oppose state ballot
measures or candidates, as specified.
Assembly Amendments: 1) add coauthors; 2) add an urgency
clause; 3) state that this bill takes effect on July 1, 2014; 4)
require an MPO that meet specified criteria to comply with the
registration and campaign reporting requirements of the act, as
specified, including the disclosure of information relating to
the organization's donors; 5) require that the candidate or
committee inform the contributor within one week for a
contribution of $10,000 or more received during the period in
which late contribution reports must be filed; 6) require the
notifications to reference the reporting requirements for MPO;
7) revise the definition of "contribution"; and 8) make other
clarifying and technical changes.
ANALYSIS :
Existing law:
1.Provides, under the Political Reform Act of 1974 (Act), for
the comprehensive regulation of campaign financing, including
requiring the reporting of campaign contributions and
expenditures, as defined, and imposing other reporting and
recordkeeping requirements on campaign committees, as defined.
2.Defines "contribution" as a payment for political purposes for
which full and adequate consideration is not received. FPPC
regulations further define "contribution" to include certain
payments to nonprofit organizations and federal or
out-of-state political organizations active in California
elections, as specified.
This bill:
1.Requires MPOs that make contributions or expenditures in
California campaigns to file campaign disclosure reports
pursuant to the following:
A. Defines an MPO as an organization, as described, a
federal or out-of-state political organization, as
specified; a trade or professional association; a civic or
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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.
B. Provides that an MPO is a recipient committee, for the
purposes of the Political Reform Act (PRA), only under one
or more of the following circumstances:
1) The MPO is a political committee registered with
another state or with the Federal Elections Commission,
except as specified, and it makes contributions or
expenditures in this state of at least $1,000;
2) The MPO solicits and receives payments from donors
totaling $1,000 or more for the purpose of making
contributions or expenditures, or subject to an
understanding that the payments may be used for making
contributions or expenditures;
3) The MPO has funds from a donor and a subsequent
understanding is reached that the funds may be used for
making contributions or expenditures of $1,000 or more;
or
4) The MPO makes contributions or expenditures totaling
more than $50,000 in 12 months, or more than $100,000 in
four consecutive years. Provides that such an MPO is not
a recipient committee if it uses only nondonor funds, as
specified, to make contributions and expenditures, and it
identifies the source of the nondonor funds.
A. Provides that an MPO that is a recipient committee and a
federal or out-of-state political committee is not required
to itemize federal or out-of-state contributions and
expenditures. Provides that a committee registered with the
Federal Elections Commission is not required to provide
detailed information about contributors of $100 or more.
B. Provides that an MPO that is a recipient committee must
disclose donors as follows:
1) The committee must provide detailed information
about donors of $100 or more where those donations were
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solicited for the purposes of making contributions or
expenditures in California, or where there was an
understanding or agreement that the donations may be used
for making contributions or expenditures in California;
2) The total amount of contributions received that are
disclosed by the MPO on its campaign disclosure reports
must equal the total amount of contributions and
expenditures made by the MPO in California; and
3) If the total contributions disclosed pursuant to 1)
is not sufficient to account for all the contributions
and expenditures made by the MPO during the reporting
period, the MPO must disclose the identities of other
donors of $1,000 or more, using a last-in, first-out
accounting method, until the MPO has disclosed a total
amount of contributions received to equal the total
amount of contributions and expenditures made by the MPO
in California. Provides that a donor is not subject to
disclosure if the donor prohibits the MPO from using the
donation for contributions or expenditures, or if the
donation is a grant from a private foundation, as
specified.
A. Provides that an MPO that is a recipient committee by
virtue of making contributions or expenditures totaling
more than $50,000 in 12 months or more than $100,000 in a
four year period is not required to disclose the donors for
contributions and expenditures made in a prior calendar
year in which the MPO did not qualify as a committee.
B. Permits an MPO that is a membership organization, is a
sponsor of a committee, and makes all of its contributions
and expenditures from funds derived from dues, assessments,
fees, and similar payments that do not exceed $10,000 per
calendar year from a single source, to report contributions
or expenditures made from the sponsor's treasury funds on
the campaign statements of the sponsored committee, as
specified.
1.Requires a committee that is primarily formed to support or
oppose a state ballot measure or candidate, and that raises $1
million or more for an election, to maintain an accurate list
of the committee's top 10 contributors of $10,000 or more, as
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specified by the FPPC. Requires a current list of the top 10
contributors to be disclosed on the FPPC's Web site, as
specified. Requires the committee to update the top 10
contributor list whenever it changes. Requires the FPPC to
post or update the top contributor list within five business
days, or within 48 hours during the last 16 days before the
election.
2.Requires a committee to use reasonable efforts to identify the
individuals or corporations that are the true source of
contributions made to the committee when listing the top
contributors.
3.Requires the FPPC to compile, maintain, and display on its Web
site a current list of the top contributors supporting and
opposing each state ballot measure.
4.Requires the state ballot pamphlet to contain a written
explanation of the top contributor lists described above,
including a description of the Web sites where the lists are
available.
5.Provides that this bill takes effect on July 1, 2014.
Background
Nonprofits, etc. and the One Bite Rule . In California nonprofit
and other multi-purpose organizations spending on state and
local elections must report the donors who are the sources of
their funds. Multi-purpose groups that must disclose sources of
funds if they are spending on California elections include:
Nonprofit organizations.
Federal and out-of-state political action committees.
Local clubs focusing on educational and social activities.
These organizations typically receive donations or other
payments (e.g., membership dues) for purposes other than making
political expenditures in California. They nevertheless may, at
times, use some of these funds to make political expenditures to
support or oppose California state or local candidates or ballot
measures.
Under existing law, when a multipurpose organization makes
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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 Internal Revenue Code Section 501,
since those entities typically are not otherwise required to
publicly disclose their donors.
Pursuant to FPPC regulations, 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/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 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 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
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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.
The $11 million Americans for Responsible Leadership (ARL)
contribution . The Small Business Action Committee Political
Action Committee, which was a primarily formed committee that
was opposing Proposition 30 and supporting Proposition 32 on the
November, 2012 General Election ballot, reported receiving an
$11 million contribution made by ARL, an Arizona-based
non-profit organization. ARL, in turn, initially refused to
disclose the names of its contributors, 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.'"
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. ARL opposed that request on a
variety of grounds, including arguing that the FPPC was
prohibited from conducting an audit or an investigation prior to
the election. The Court ultimately granted the FPPC's request
for an order for ARL to produce the requested records, finding
that the statutory prohibition against pre-election audits and
investigations applied only to candidates and certain types of
committees, and was not applicable to ARL. 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, and that the contribution was then passed through a
second intermediary (and another nonprofit organization), the
Center to Protect Patient Rights. The Center, in turn, made the
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contribution to ARL. Americans for Job Security has not
disclosed its donors. This matter is still the subject of an
ongoing FPPC investigation.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
According to the Assembly Appropriations Committee:
Any costs to the FPPC will be minor and absorbable. No
additional penalty revenues, as the penalty provisions are
consistent with existing commission regulations.
Annual general fund printing costs of $55,000 to the Secretary
of State for one additional page in the state ballot pamphlet
to include a written explanation of the top 10 contributor
lists, as specified.
SUPPORT : (Verified 2/21/14)
Fair Political Practices Commission (source)
California Clean Money Campaign
California Common Cause
California Voter Foundation
Communication Workers of America AFL-CIO, CLC Local 9003
Common Cause
Courage Campaign
Fix Our America
League of Women Voters of California
ARGUMENTS IN SUPPORT : According to the author, "Everyone is
aware of the now-infamous $11 million contribution from an
Arizona non-profit organization to a committee that was opposing
Proposition 30 and supporting Proposition 32 last November.
After a court battle with the FPPC, this nonprofit group
revealed that it was not the true source of the $11 million
contribution but merely an intermediary. They disclosed that
the actual source of the $11 million was another nonprofit
organization who had received it from yet another nonprofit
organization. The true, original source of this campaign money
is still unknown to the public?
"In light of this, I introduced SB 27 which is a simple measure
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that will accomplish two important goals. First, it will enact a
series of tests and presumptions in the law so that campaign
funds can no longer be laundered through nonprofit corporations
without them disclosing the true source of the money. Second, it
will require ballot measure committees that raise one million
dollars or more to give the FPPC a current list of the
committee's top ten contributors of ten thousand dollars or
more. The FPPC and the committee will be required to post the
list on their Internet web sites."
This bill is intended to address some of the challenges with
ensuring thorough campaign disclosure by specifying
circumstances in which an MPO is required to disclose its donors
when it makes contributions or expenditures. Some of these
provisions are similar to regulations adopted by the FPPC. This
bill also establishes a new situation in which an MPO is
required to disclose the identities of donors when it makes
contributions or expenditures of more than $50,000 in a 12 month
period, or more than $100,000 in a four year period.
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.
ASSEMBLY FLOOR : 58-18, 2/20/14
AYES: Achadjian, Alejo, Ammiano, Atkins, Bloom, Bocanegra,
Bonilla, Bonta, Bradford, Brown, Buchanan, Ian Calderon,
Campos, Chau, Chesbro, Cooley, Dababneh, Daly, Dickinson,
Eggman, Fong, Fox, Frazier, Garcia, Gatto, Gomez, Gonzalez,
Gordon, Gorell, Gray, Hall, Roger Hern�ndez, Holden,
Jones-Sawyer, Levine, Lowenthal, Medina, Mullin, Muratsuchi,
Nazarian, Olsen, Pan, Perea, V. Manuel P�rez, Quirk,
Quirk-Silva, Rendon, Ridley-Thomas, Rodriguez, Salas, Skinner,
Stone, Ting, Weber, Wieckowski, Williams, Yamada, John A.
P�rez
NOES: Allen, Ch�vez, Conway, Dahle, Donnelly, Beth Gaines,
Hagman, Jones, Linder, Logue, Mansoor, Melendez, Morrell,
Nestande, Patterson, Wagner, Waldron, Wilk
NO VOTE RECORDED: Bigelow, Grove, Harkey, Maienschein
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RM:n:k 2/21/14 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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