Amended in Assembly August 7, 2014

Amended in Assembly July 1, 2014

Amended in Assembly June 18, 2014

Amended in Senate May 27, 2014

Amended in Senate May 14, 2014

Amended in Senate April 10, 2014

Amended in Senate March 20, 2014

Senate Bill No. 831

Introduced by Senator Hill

(Principal coauthor: Senator Beall)

(Principal coauthors: Assembly Members Garcia and Levine)

January 6, 2014

An act to amend Sections 87207, 89506, 89513, 89515, 89516, and 89517 of, and to add Sections 87106 and 89515.5 to, the Government Code, relating to the Political Reform Act of 1974.

LEGISLATIVE COUNSEL’S DIGEST

SB 831, as amended, Hill. Political Reform Act of 1974.

(1) The Political Reform Act of 1974 provides for the comprehensive regulation of campaign financing and related matters, including the reporting of campaign contributions, as defined. Under existing law, a payment made at the behest of a candidate for elective office is considered a contribution unless the payment is made for purposes unrelated to the candidate’s candidacy, and a payment is presumed to be unrelated to a candidate’s candidacy if it is made principally for legislative, governmental, or charitable purposes.

The bill would prohibit an elected officer from requesting that a payment be made, or a person from making a payment, at the behest of the elected officer to a nonprofit organization that begin insert is exempt from taxation under Section 501(c)(4) of the Internal Revenue Code and that end insert the elected officer knows or has reason to know is owned or controlled by that officer or specified family members of the officer, except as specified. The bill would provide that an elected officer is deemed to have complied with that requirement if the Commission determines that the elected officer has made a reasonable effort to ascertain whether a nonprofit organization is owned or controlled by any of the specified persons.

(2) The act prohibits specified officers from receiving gifts, as defined, in excess of $440 in value from a single source in a calendar year. The act exempts gift payments for the actual costs of specified types of travel that are reasonably related to a legislative or governmental purpose, or to an issue of state, national, or international public policy, from the annual limit on the value of gifts from a single source.

This bill would require a nonprofit organization that pays for these types of travel begin insert for an elected state officer or local elected officeholder end insert to disclose the names of donors responsible for funding the payments, as specified. The bill would require a person who receives a gift of a travel payment to report the travel destination on his or her statement of economic interests.

(3) The act requires that contributions deposited into a campaign account be held in trust for expenses associated with the election of the candidate or for expenses associated with holding office. The act provides that an expenditure to seek office is within the lawful execution of this trust if it is reasonably related to a political purpose and an expenditure associated with holding office is within the lawful execution of this trust if it is reasonably related to a legislative or governmental purpose. Expenditures that confer a substantial personal benefit must be directly related to a political, legislative, or governmental purpose. The act authorizes the use of campaign funds to make donations or loans to bona fide charitable, educational, civic, religious, or similar tax-exempt nonprofit organizations. The act imposes additional limitations on certain expenditures, including those relating to automotive expenses, travel expenses, tickets for entertainment or sporting events, personal gifts, and real property expenses.

The bill would prohibit an elected officer or a committee controlled by the elected officer from making an expenditure of campaign funds to a nonprofit organization begin insert that is exempt from taxation under Section 501(c)(4) of the Internal Revenue Code and that is end insert owned or controlled by the officer or specified family members of the officer, as specified.

This bill would also limit the expenditure of campaign funds for other purposes, as specified, including personal vacations, payments for membership dues for a country club, health club, or other recreational facility, specified tuition payments, utility payments, vehicle use that is not directly related to an election campaign, and certain gifts for specified family members of a candidate, elected officer, or other individuals with the authority to approve the expenditure of campaign funds held by a committee.

(4) A violation of the act’s provisions is punishable as a misdemeanor. 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.

(5) 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:

SECTION 1.  

Section 87106 is added to the Government Code,
to read:

87106.  

(a) An elected officer shall not request that a payment
be made, and a person shall not make a payment at the behest of
the elected officer, as described in Section 82015, to a nonprofit
organization that the elected officer knows or has reason to know
is owned or controlled by that officer or a family member of the
elected officer.

(b) An elected officer is deemed to have complied with the
requirements of subdivision (a) if the Commission determines that
the elected officer has made a reasonable effort to ascertain whether
a nonprofit organization is owned or controlled by any individual
described in subdivision (a).

(c) For purposes of this section, a nonprofit organization is
owned or controlled by an elected officer or family member of the
elected officer if the elected officer or family member of the elected
officer, or a member of that person’s immediate family, is a
director, officer, partner, or trustee of, or holds any position of
management with, the nonprofit organization, and is paid for his
or her services.

(d) For purposes of this section, begin delete “family end delete begin insert the following terms
have the following meanings: end insert

begin insert (1) end insert begin insert   end insert begin insert “Family end insert member of the elected officer” means the spouse,
child, sibling, or parent of an elected officer.

begin insert

(2) “Nonprofit organization” means an organization that is
exempt from taxation under Section 501(c)(4) of the Internal
Revenue Code.

end insert

(e) This section shall not apply to behested payments made to
a nonprofit organization that is formed for the purpose of
coordinating or performing disaster relief services.

SEC. 2.  

Section 87207 of the Government Code is amended
to read:

87207.  

(a) If income is required to be reported under this
article, the statement shall contain, except as provided in
subdivision (b):

(1) The name and address of each source of income aggregating
five hundred dollars ($500) or more in value, or fifty dollars ($50)
or more in value if the income was a gift, and a general description
of the business activity, if any, of each source.

(2) A statement whether the aggregate value of income from
each source, or in the case of a loan, the highest amount owed to
each source, was at least five hundred dollars ($500) but did not
exceed one thousand dollars ($1,000), whether it was in excess of
one thousand dollars ($1,000) but was not greater than ten thousand
dollars ($10,000), whether it was greater than ten thousand dollars
($10,000) but not greater than one hundred thousand dollars
($100,000), or whether it was greater than one hundred thousand
dollars ($100,000).

(3) A description of the consideration, if any, for which the
income was received.

(4) In the case of a gift, the amount and the date on which the
gift was received, and the travel destination for purposes of a gift
that is a travel payment, advance, or reimbursement.

(5) In the case of a loan, the annual interest rate, the security,
if any, given for the loan, and the term of the loan.

(b) If the filer’s pro rata share of income to a business entity,
including income to a sole proprietorship, is required to be reported
under this article, the statement shall contain:

(1) The name, address, and a general description of the business
activity of the business entity.

(2) The name of every person from whom the business entity
received payments if the filer’s pro rata share of gross receipts
from that person was equal to or greater than ten thousand dollars
($10,000) during a calendar year.

(c) If a payment, including an advance or reimbursement, for
travel is required to be reported pursuant to this section, it may be
reported on a separate travel reimbursement schedule which shall
be included in the filer’s statement of economic interest. A filer
who chooses not to use the travel schedule shall disclose payments
for travel as a gift, unless it is clear from all surrounding
circumstances that the services provided were equal to or greater
in value than the payments for the travel, in which case the travel
may be reported as income.

SEC. 3.  

Section 89506 of the Government Code is amended
to read:

89506.  

(a) Payments, advances, or reimbursements for travel,
including actual transportation and related lodging and subsistence
that is reasonably related to a legislative or governmental purpose,
or to an issue of state, national, or international public policy, are
not prohibited or limited by this chapter if either of the following
applies:

(1) The travel is in connection with a speech given by the elected
state officer, local elected officeholder, candidate for elective state
office or local elective office, an individual specified in Section
87200, member of a state board or commission, or designated
employee of a state or local government agency, the lodging and
subsistence expenses are limited to the day immediately preceding,
the day of, and the day immediately following the speech, and the
travel is within the United States.

(2) The travel is provided by a government, a governmental
agency, a foreign government, a governmental authority, a bona
fide public or private educational institution, as defined in Section
203 of the Revenue and Taxation Code, a nonprofit organization
that is exempt from taxation under Section 501(c)(3) of the Internal
Revenue Code, or by a person domiciled outside the United States
who substantially satisfies the requirements for tax-exempt status
under Section 501(c)(3) of the Internal Revenue Code.

(b) Gifts of travel not described in subdivision (a) are subject
to the limits in Section 89503.

(c) Subdivision (a) applies only to travel that is reported on the
recipient’s statement of economic interests.

(d) For purposes of this section, a gift of travel does not include
any of the following:

(1) Travel that is paid for from campaign funds, as permitted
by Article 4 (commencing with Section 89510), or that is a
contribution.

(2) Travel that is provided by the agency of a local elected
officeholder, an elected state officer, member of a state board or
commission, an individual specified in Section 87200, or a
designated employee.

(3) Travel that is reasonably necessary in connection with a
bona fide business, trade, or profession and that satisfies the criteria
for federal income tax deduction for business expenses in Sections
162 and 274 of the Internal Revenue Code, unless the sole or
predominant activity of the business, trade, or profession is making
speeches.

(4) Travel that is excluded from the definition of a gift by any
other provision of this title.

(e) This section does not apply to payments, advances, or
reimbursements for travel and related lodging and subsistence
permitted or limited by Section 170.9 of the Code of Civil
Procedure.

(f) (1) A nonprofit organization that makes payments, advances,
or reimbursements that total more than ten thousand dollars
($10,000) in a calendar year, or that total more than five thousand
dollars ($5,000) in a calendar year for a single person, for travel
begin insert by an elected state officer or local elected officeholder as end insert described
in subdivision (a) shall disclose to the Commission the names of
the donors responsible for funding those payments, advances, or
reimbursements. The disclosure of donor names shall be limited
to donors who donated one thousand dollars ($1,000) or more to
the nonprofit organization in a calendar year and who knew or had
reason to know that the donation would be used for a payment,
advance, or reimbursement for travel begin insert by an elected state officer
or local elected officeholder as end insert described in subdivision (a).

(2) A donor knows or has reason to know that his or her donation
will be used in the manner described in paragraph (1) under any
of the following conditions:

(A) The donor directed the nonprofit organization to use the
donation to make a payment, advance, or reimbursement for travel
begin insert by an elected state officer or local elected officeholder as end insert described
in subdivision (a).

(B) The donor made the donation in response to a message or
solicitation for donations for the stated purpose of making a
payment, advance, or reimbursement for travel begin insert by an elected state
officer or local elected officeholder as end insert described in subdivision
(a).

begin delete

(C) The nonprofit organization made payments, advances, or
reimbursements that totaled more than ten thousand dollars
($10,000) in a calendar year, or that totaled more than five thousand
dollars ($5,000) in a calendar year for a single person, for travel
described in subdivision (a) in the current calendar year or any of
the immediately preceding four calendar years. The nonprofit
organization shall disclose donors identified pursuant to this
subparagraph only to the extent that donations made pursuant to
subparagraphs (A) and (B) are less than the amount of the
payments, advances, or reimbursements made by the organization.
The nonprofit organization shall not report a donor identified
pursuant to this subparagraph if the organization has evidence
indicating that the donor restricted or otherwise did not intend the
donation to be used for a payment, advance, or reimbursement for
travel described in subdivision (a).

end delete begin insert

(C) The donor, or an agent, employee, or representative of the
donor, accompanied an elected state officer or local elected
officeholder for any portion of travel as described in subdivision
(a).

end insert begin insert

(3) For purposes of Sections 87103, 87207, and 89503, a
nonprofit organization that makes payments, advances, or
reimbursements for travel by an elected state officer or local
elected officeholder as described in subdivision (a) is the source
of the gift unless the nonprofit organization is acting as an
intermediary or agent of the donor. If the nonprofit organization
is acting as an intermediary or agent of the donor, all of the
following apply:

end insert begin insert

(A) The donor to the nonprofit organization is the source of the
gift.

end insert begin insert

(B) The donor shall be identified as a financial interest under
Section 87103.

end insert begin insert

(C) The gift shall be reported as required by Section 87207.

end insert begin insert

(D) The gift shall be subject to the limitations on gifts specified
in Section 89503.

end insert

SEC. 4.  

Section 89513 of the Government Code is amended
to read:

89513.  

This section governs the use of campaign funds for the
specific expenditures set forth in this section. It is the intent of the
Legislature that this section guide the interpretation of the standard
imposed by Section 89512 as applied to other expenditures not
specifically set forth in this section.

(a) (1) Campaign funds shall not be used to pay or reimburse
a candidate, elected officer, or any individual or individuals with
authority to approve the expenditure of campaign funds held by a
committee, or employees or staff of the committee or the elected
officer’s governmental agency, for travel expenses and necessary
accommodations, except when these expenditures are directly
related to a political, legislative, or governmental purpose.

(2) For purposes of this section, payments or reimbursements
for travel and necessary accommodations shall be considered
directly related to a political, legislative, or governmental purpose
if the payments would meet standards similar to the standards of
the Internal Revenue Service pursuant to Sections 162 and 274 of
the Internal Revenue Code for deductions of travel expenses under
the federal income tax law.

(3) For purposes of this section, payments or reimbursement
for travel by the household of a candidate or elected officer when
traveling to the same destination in order to accompany the
candidate or elected officer shall be considered for the same
purpose as the candidate’s or elected officer’s travel.

(4) If campaign funds are used to pay or reimburse a candidate,
elected officer, his or her representative, or a member of the
candidate’s household for travel expenses and necessary
accommodations, the expenditure shall be reported as required by
Section 84211.

(5) If campaign funds are used to pay or reimburse for travel
expenses and necessary accommodations, any mileage credit that
is earned or awarded pursuant to an airline bonus mileage program
shall be deemed personally earned by or awarded to the individual
traveler. Neither the earning or awarding of mileage credit, nor
the redeeming of credit for actual travel, shall be subject to
reporting pursuant to Section 84211.

(6) Campaign funds shall not be used to make a payment for a
personal vacation for a candidate; elected officer; immediate family
member of a candidate or elected officer; or an officer, director,
employee, or member of the staff of a candidate, elected officer,
or committee.

(b) (1) Campaign funds shall not be used to pay for or reimburse
the cost of professional services unless the services are directly
related to a political, legislative, or governmental purpose.

(2) Expenditures by a committee to pay for professional services
reasonably required by the committee to assist it in the performance
of its administrative functions are directly related to a political,
legislative, or governmental purpose.

(3) Campaign funds shall not be used to pay health-related
expenses for a candidate, elected officer, or any individual or
individuals with authority to approve the expenditure of campaign
funds held by a committee, or members of his or her household.
“Health-related expenses” includes, but is not limited to,
examinations by physicians, dentists, psychiatrists, psychologists,
or counselors; expenses for medications, treatments, or medical
equipment; and expenses for hospitalization and special dietary
foods. However, campaign funds may be used to pay employer
costs of health care benefits of a bona fide employee or independent
contractor of the committee.

(4) Campaign funds shall not be used to make a payment for
membership dues for a country club, health club, or other
recreational facility.

(5) Campaign funds shall not be used to make tuition payments,
unless the payments are directly related to a political, legislative,
or governmental purpose.

(c) Campaign funds shall not be used to pay or reimburse fines,
penalties, judgments, or settlements, except those resulting from
either of the following:

(1) Parking citations incurred in the performance of an activity
that was directly related to a political, legislative, or governmental
purpose.

(2) Any other action for which payment of attorney’s fees from
contributions would be permitted pursuant to this title.

(d) Campaign funds shall not be used to purchase clothing to
be worn by a candidate or elected officer.

(e) (1) Except where otherwise prohibited by law, campaign
funds may be used to purchase or reimburse for the costs of
purchase of tickets to political fundraising events for the attendance
of a candidate, elected officer, or his or her immediate family, or
an officer, director, employee, or staff of the committee or the
elected officer’s governmental agency.

(2) Campaign funds shall not be used to pay for or reimburse
for the costs of begin delete admission to a sporting event, concert, theater, or
other form of entertainment end delete begin insert tickets for entertainment or sporting
events end insert for the candidate, elected officer, or members of his or her
immediate family, or an officer, director, employee, or staff of the
committee, unless their attendance at the event is directly related
to begin delete the election campaign of the candidate or elected officer. end delete begin insert a
political, legislative, or governmental purpose. end insert

(3) The purchase of tickets for entertainment or sporting events
for the benefit of persons other than the candidate, elected officer,
or his or her immediate family are governed by subdivision (f).

(f) (1) Campaign funds shall not be used to make a gift to a
spouse, child, sibling, or parent of a candidate, elected officer, or
other individual with authority to approve the expenditure of
campaign funds held by a committee, except for a gift of nominal
value that is substantially similar to a gift made to other persons
and that is directly related to a political, legislative, or
governmental purpose. Campaign funds shall not be used to make
personal gifts to any other person not described in this paragraph
unless the gift is directly related to a political, legislative, or
governmental purpose. The refund of a campaign contribution
does not constitute the making of a gift.

(2) This section does not prohibit the use of campaign funds to
reimburse or otherwise compensate a public employee for services
rendered to a candidate or committee while on vacation, leave, or
otherwise outside of compensated public time.

(3) An election victory celebration or similar campaign event,
or gifts with a total cumulative value of less than two hundred fifty
dollars ($250) in a single year made to an individual employee, a
committee worker, or an employee of the elected officer’s agency,
are considered to be directly related to a political, legislative, or
governmental purpose. For purposes of this paragraph, a gift to a
member of a person’s immediate family shall be deemed to be a
gift to that person.

(g) Campaign funds shall not be used to make loans other than
to organizations pursuant to Section 89515, or, unless otherwise
prohibited, to a candidate for elective office, political party, or
committee.

SEC. 5.  

Section 89515 of the Government Code is amended
to read:

89515.  

Campaign funds may be used to make donations or
loans to bona fide charitable, educational, civic, religious, or similar
tax-exempt, nonprofit organizations, if no substantial part of the
proceeds will have a material financial effect on the candidate,
campaign treasurer, or any individual or individuals with authority
to approve the expenditure of campaign funds held by a committee,
or member of his or her immediate family, and if the donation or
loan bears a reasonable relation to a political, legislative, or
governmental purpose, except as prohibited by Section 89515.5.

SEC. 6.  

Section 89515.5 is added to the Government Code, to
read:

89515.5.  

(a) An expenditure of campaign funds by an elected
officer or committee controlled by the elected officer to a nonprofit
organization that the elected officer knows or has reason to know
is owned or controlled by the elected officer or a family member
of the elected officer is deemed to serve the primary purpose of
conferring a personal financial benefit on the recipient and is
prohibited as being unrelated to a political, legislative, or
governmental purpose and inconsistent with the trust imposed by
Section 89510.

(b) An elected officer is deemed to have complied with the
requirements of subdivision (a) if the Commission determines that
the elected officer has made a reasonable effort to ascertain whether
a nonprofit organization is owned or controlled by any individual
described in subdivision (a).

(c) For purposes of this section, a nonprofit organization is
owned or controlled by an elected officer or family member of the
elected officer if the elected officer or family member of the elected
officer, or a member of that person’s immediate family, is a
director, officer, partner, or trustee of, or holds any position of
management with, the nonprofit organization and is paid for his
or her services.

(d) For purposes of this section, begin delete “family end delete begin insert the following terms
have the following meanings: end insert

begin insert (1) end insert begin insert   end insert begin insert “Family end insert member of the elected officer” means the spouse,
child, sibling, or parent of an elected officer.

begin insert

(2) “Nonprofit organization” means an organization that is
exempt from taxation under Section 501(c)(4) of the Internal
Revenue Code.

end insert

SEC. 7.  

Section 89516 of the Government Code is amended
to read:

89516.  

Notwithstanding Sections 89512 and 89513, this section
governs the use of campaign funds for vehicle expenses.

(a) Campaign funds shall not be used to purchase a vehicle
unless both of the following apply:

(1) Title to the vehicle is held by the committee and not the
candidate, elected officer, campaign treasurer, or any other
individual or individuals with authority to approve the expenditure
of campaign funds held by a committee, or a member of his or her
immediate family.

(2) The use of the vehicle is directly related to an election
campaign.

(b) Campaign funds shall not be used to lease a vehicle unless
both of the following apply:

(1) The lessee is the committee, or a state or local government
agency, and not the candidate, elected officer, or a member of his
or her immediate family; or the lessor is a state or local government
agency.

(2) The use of the vehicle is directly related to an election
campaign.

(c) Campaign funds may be used to pay for or reimburse the
operating costs, including, but not limited to, insurance,
maintenance, and repairs, for any vehicle for which campaign
funds may be spent pursuant to this section.

(d) Campaign funds may be used to reimburse a candidate,
elected officer, his or her immediate family, or any individual or
individuals with authority to approve the expenditure of campaign
funds held by a committee, or an employee or member of the staff
of the committee or of the elected officer’s governmental agency,
for the use of his or her vehicle at the rate approved by the Internal
Revenue Service pursuant to Section 162 of the Internal Revenue
Code in connection with deductible mileage expenses under the
federal income tax law, if both of the following requirements are
met:

(1) The vehicle use for which reimbursement is sought is directly
related to an election campaign.

(2) The specific purpose and mileage in connection with each
expenditure is documented in a manner approved by the Internal
Revenue Service in connection with deductible mileage expenses.

(e) For purposes of this section, use of a vehicle is considered
to be directly related to an election campaign as long as its use for
other purposes is only incidental to its use for an election campaign.

SEC. 8.  

Section 89517 of the Government Code is amended
to read:

89517.  

(a) Campaign funds shall not be used for payment or
reimbursement for the lease of real property, for a utility bill for
real property, or for the purchase, lease, or refurbishment of any
appliance or equipment, where the lessee or sublessor is, or the
legal title resides in, in whole or in part, a candidate, elected officer,
campaign treasurer, or any individual or individuals with authority
to approve the expenditure of campaign funds, or member of his
or her immediate family.

(b) Campaign funds shall not be used to purchase real property.
Except as prohibited by subdivision (a), campaign funds may be
used to lease real property for up to one year at a time if the use
of that property is directly related to political, legislative, or
governmental purposes and the lessee or sublessor is not, or the
legal title does not reside in, in whole or in part, a candidate, elected
officer, campaign treasurer, or any individual or individuals with
authority to approve the expenditure of campaign funds, or a
member of his or her immediate family.

(c) For purposes of this section, real property, appliance, or
equipment is considered to be directly related to a political,
legislative, or governmental purpose if its use for other purposes
is only incidental to its use for political, legislative, or
governmental purposes and the lessee or sublessor of the real
property is not, or the legal title for the real property does not reside
in, in whole or in part, a candidate, elected officer, campaign
treasurer, or any individual or individuals with authority to approve
the expenditure of campaign funds, or a member of his or her
immediate family.

SEC. 9.  

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.

SEC. 10.  

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.