Friday, October 17, 2008, 2:34 PM

Political GPS: FEC TO REVISIT RULES FOR CORPORATE-SPONSORED ISSUE ADS

The Federal Election Commission is scheduled next week to consider a request for an advisory opinion by the National Right to Life Committee (NRLC) that may clarify the rules for issue-based ads financed by corporations – including incorporated associations – during the political season.

NRLC is a non-profit corporation – a 501(c)(4) – that wants to use treasury funds to air radio ads across the country. The ads will accuse Senator Barack Obama of opposing a bill to provide health care for “babies who are born alive after abortions,” and “later misrepresent[ing] the bill’s content.”

The request cites last year’s Supreme Court ruling in FEC v. Wisconsin Right to Life, where the Court curbed the McCain-Feingold law’s ban on pre-election ads financed by corporations or unions that merely refer to a federal candidate. A bare majority of the Court concluded that the ban may only be Constitutionally applied to ads that contain “express advocacy – phrases such as “vote for,” “defeat,” or “elect” – or its “functional equivalent.”

New FEC rules now provide a safe harbor for ads that meet three tests: (1) they do not mention any election, candidacy, political party, opposing candidate, or voting by the public; (2) they do not take a position on a candidate’s character, qualifications, or fitness for office; and (3) they focus on an issue and urge the public to take a position on it or contact the candidate. Ads that don’t qualify for the safe harbor will be dealt with on a case-by-case basis.

This is the first case to reach the FEC involving the application of the Court’s decision and the new Commission rules. The Supreme Court’s ruling has already had a major impact on political advertising in the 2008 election, especially in House and Senate races. According to the Center for Public Integrity, in September and early October, the Chamber of Commerce spent $8.8 million on issue ads that mention candidate names, while the union-sponsored American Rights at Work spent $2.3 million over a similar period.

JANUARY RULING EXPECTED IN CONNECTICUT PAY-TO-PLAY CHALLENGE

A federal judge in Connecticut has indicated that he will rule in January 2009 on a case brought by the Green Party, the Association of Connecticut Lobbyists, and others, challenging the constitutionality of the state’s 2005 pay-to-play restrictions.

Connecticut's strict pay-to-play law prohibits contractors, prospective contractors, their "principals," and their immediate family members from making campaign contributions to, or soliciting them for, covered state officials. (Lobbyists are also prohibited from making certain contributions.) "Principals" of a contractor include the company's directors, President, Treasurer, Executive VPs, shareholders with 5% stakes or greater, employees who negotiate state contracts, and dependent children residing in the parent's household. Violations of this law can result in contracts being voided and debarment from future contracting.

All types of contracts are covered by the law, including competitive and sole source awards. In addition, an individual who makes contributions to state candidates that in the aggregate exceed $50 must certify that that he or she is not a principal of a state contractor or prospective state contractor.

In the wake of this law, many companies have shut down their Connecticut PACs, limited their state-level political activity, and cautioned employees about personal political contributions. Political GPS will follow the developments in this important case, which is sure to impact challenges to other pay-to-play laws around the country.

SO HLOGA WAS JUST THE FIRST STEP?

The chief lobbyist for Public Citizen, a consumer advocacy organization, has urged that a mandatory code of conduct for lobbyists be added to the federal Lobbying Disclosure Act, according to Ken Doyle, at BNA’s Money & Politics Report. This proposal is a significant departure from the approach taken in Section 214 of last year’s Honest Leadership and Open Government Act, in which Congress encouraged the lobbying community to exercise greater self-regulation and develop its own standards for lobbyists’ conduct. A mandatory code of conduct would undoubtedly draw a legal challenge on First Amendment grounds. Given the many pressing issues on the agenda for the new Congress, we’ll have to see if Members want to address government ethics so soon after 2007’s sweeping reforms.

PAC AND LOBBYING POINTERS

Pre-General Reports. Treasurers should keep in mind that certain PACs have to file a pre-general report. While monthly filers must file these reports, quarterly filers have to file only if the committee made contributions or expenditures in connection with the general election between October 1 and October 15. The pre-general report has to be filed on October 23.

PAC Filing Frequency. PAC filers should also remember that they are allowed to change their filing frequency only once in a calendar year. That means that a monthly filer can switch to semiannual reporting in 2009. To do so, the Committee has to notify the FEC in writing, and then it must follow the new reporting schedule for the year. Such a change could be a real time-saver in an off-year.

Reporting Lobbying Expenses. Lobbying Disclosure Act registrants should keep in mind that they can change the method that they use to report lobbying activity expenses (Line 14 of the LD-2), though they must use one method for an entire calendar year. Registrants can use either LDA definitions of lobbying contacts and activities (Method A) or Internal Revenue Code definitions of lobbying (Method B or C). Caution should be exercised because the tax definitions of lobbying are broader with respect to legislative activity, but narrower with respect to the universe of executive branch officials who are considered covered officials. Also, using Method B or C to calculate expenses can lead to confusion because other obligations in the law are still tied to LDA definitions.

If you have any questions or would like more information, please feel free to contact Larry (LNorton@wcsr.com, (202) 857-4429) or Jim (JKahl@wcsr.com, (202) 857-4417).
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