IMPLICATIONS OF THE NEW CAMPAIGN FINANCE LAW

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2 IMPLICATIONS OF THE NEW CAMPAIGN FINANCE LAW IMPLEMENTATION AMCA 2016 Fall Training Monday, November 14, 2016 Christina Estes-Werther General Counsel League of Arizona Cities and Towns

3 2016 LEGISLATION Campaign Finance Repeal & Rewrite Three Bills: SB 1516 (Laws 2016, Ch. 79), HB 2296 (Laws 2016, Ch. 346), & HB 2297 (Laws 2016, Ch. 347) According to testimony, the intent of the legislation is to streamline campaign finance law and make it easier to understand. There are many unanswered questions about its implementation the law is untested and no practical experience with this new set of laws in an election cycle and no case law to rely upon. The next year will be a work in progress. Guidance should be issued from the Secretary of State. Look for more updates as instructions are provided.

4 OVERVIEW Candidate Packet Calculating Reporting Deadlines Campaign Finance Reporting Independent Expenditure/Ballot Measure Reporting Recall Election Committee Registration Definitions Contribution Limits Advertising & Fund-Raising Disclosures Termination & Surplus Monies Enforcement Campaign Finance System

5 WHAT IS IN A CANDIDATE PACKET? A basic packet contains the following documents: A Candidate Checklist Non-Partisan Nomination Petitions in English and Spanish Nonpartisan Nomination Paper Nomination Paper for Write-In Candidate Financial Disclosure Statement Form in English and Spanish Political Committee Statement of Organization Campaign Finance Report Forms (Includes Cover Sheet) Political Committee Termination Statement Campaign Finance and Reporting Guide (prescribed by the SOS) The packet no longer contains: Large Contribution Notice Annual No Activity Statement Political Committee No Activity Statement Threshold Exemption Statement

6 WHAT IS IN A CANDIDATE PACKET? Candidate Checklist Non-Partisan Nomination Petitions (same) Nonpartisan Nomination Paper (same) Nomination Paper for Write-In Candidate (same) Financial Disclosure Statement Form (new) Political Committee Statement of Organization (new) Campaign Finance Report Forms (new) Political Committee Termination Statement (new) Campaign Finance and Reporting Guide (pending)

7 WHAT IS IN A CANDIDATE PACKET? Financial Disclosure Statement Form H.B (Laws 2016, Ch. 196) local financial disclosure; electronic filings (Stevens) Beginning January 1, 2017, any financial disclosure statements that must be filed by a local public officer pursuant to an ordinance, rule, resolution or regulation adopted in A.R.S may be filed in an electronic format as prescribed by the Secretary of State. Electronic format is not defined; will likely be fillable pdf and posted on State or city website

8 WHAT IS IN A CANDIDATE PACKET? Financial Disclosure Statement Form A public officer no longer has to disclose the spouse or child s name on the statement but can refer to spouse or minor child. The statement includes a new category for the name of each meeting, conference of other event where the public officer is participating in his or her official capacity if travel-related expenses of $1,000 or more were incurred on behalf of the officer and the travel-related expenses are not paid by the public officer (exempt from gift if reported). Political campaign contributions are not a gift if the contributions are publicly reported under campaign finance laws.

9 WHAT IS IN A CANDIDATE PACKET? Financial Disclosure Statement Form

10 WHAT IS IN A CANDIDATE PACKET? Statement of Organization - A.R.S (B) A statement of organization shall include the following committee information: The committee name; Candidate s first or last name, Office sought Mailing address, address, website, if any, Telephone number, if any, Type of committee Sponsor information if applicable: Name, Mailing address, address, website, if any, Telephone number

11 WHAT IS IN A CANDIDATE PACKET? Statement of Organization - A.R.S (B) A statement of organization shall include the following committee information: Committee Chairperson Information (candidate can be Chair) Name, Physical location or street address, address, Telephone number, Occupation, Employer Treasurer Information (candidate can be Treasurer) Name, Physical location or street address, address, Telephone number, Occupation, Employer A listing of all banks or other financial institutions used by the committee A statement that includes the following: The Chair and Treasurer have read the filing officer s campaign finance and reporting guide, Agree to comply with campaign finance laws, and Agree to accept all notifications and service of process via the address provided by the committee.

12 WHAT IS IN A CANDIDATE PACKET? Political Committee Termination Statement - A.R.S A committee may terminate only when the committee treasurer files a termination statement with the filing officer with whom the committee s statement of organization was filed. In the termination statement, the committee treasurer shall certify under penalty of perjury that all of the following apply: The committee will no longer receive any contributions or make any disbursements. The committee either: Has no outstanding debts or obligations or has outstanding debts or obligations, or both, that are all more than 5 years old, and that the committee s creditors have agreed to discharge the debts and obligations and have agreed to the termination of the committee. Any surplus monies have been disposed of and that the committee has no cash on hand. All contributions and expenditures have been reported, including any disposal of surplus monies.

13 WHAT IS IN A CANDIDATE PACKET? Political Committee Termination Statement - A.R.S A filing officer may reject the termination statement if it appears to the filing officer that the requirements certified under penalty of perjury have not been satisfied. (We strongly encourage discussion with your attorney about this process prior to rejecting a termination statement.) After a termination statement is filed, a committee: Is not required to file any subsequent campaign finance reports. Shall have no further receipts and disbursements without filing a new statement of organization. A standing committee may terminate its activities in a particular reporting jurisdiction, and remain active in other reporting jurisdiction, by filing a statement of that intent with the filing officer in each reporting jurisdiction.

14 WHAT IS IN A CANDIDATE PACKET? Campaign Finance Report Forms

15 WHAT IS IN A CANDIDATE PACKET? Campaign Finance Report Forms Change start date Begin reporting on 10/28/16

16 WHAT IS IN A CANDIDATE PACKET? Campaign Finance Report Forms Use for special election

17 CALCULATING REPORTING DEADLINES Reporting Schedule - A.R.S , In a calendar quarter without an election, the political committee or political party must file a quarterly report not later than the 15 th day after the calendar quarter: REPORT DUE DATES COVERED January 15 Oct 1- Dec 31 April 15 Jan 1 Mar 31 July 15 Apr 1 Jun 30 October 15 Jul 1 Sep 30

18 CALCULATING REPORTING DEADLINES Reporting Schedule - A.R.S In a calendar quarter with an election, the committee or political party must file: A pre-election report due 10 days before the election and complete from the 1 st day of the applicable calendar quarter through the 17 th day before the election. A post-election report due the 15 th day after the applicable calendar quarter and complete from the 16 th day before the election through the last day of the applicable calendar quarter.

19 CALCULATING REPORTING DEADLINES Reporting Schedule - A.R.S S.B was effective on Nov 5, 2016, the day after the pre-election filing period for the primary election in the middle of the postelection reporting period. We are caught between two laws. Committees filed a pre-election report on November 4, 2016 covering through 12 days prior to the election: September 20-October 27. The new law requires a post-election report due on January 15, 2017 covering 16 days before the election through the end of the quarter: October 23 December 31, There is an overlap of four days October 23-October 27.

20 CALCULATING REPORTING DEADLINES Reporting Schedule - A.R.S Former Law ELECTION DATE PRE- ELECTION REPORT DUE DATES COVERED Nov 8, 2016 Nov 4 Sep 20 Oct 27 EFFECTIVE DATE OF SB 1516 POST- ELECTION REPORT DUE DATES COVERE D Nov 5 Dec 8 Oct 28 - Nov 28 SB 1516 Jan 15, 2017 Oct 23 Dec 31, 2016 In order to reconcile reports, not double-reporting the days of Oct 23 Oct 27. The January 15, 2017 report will cover Oct 28 Dec 31.

21 CALCULATING REPORTING DEADLINES Reporting Schedule - A.R.S (B) A candidate committee shall file a campaign finance report only during the four calendar quarters comprising the 12 month period preceding the general election for which the candidate is seeking election, or for cities and towns, the city s or town s second, runoff or general election, however designated by the city or town. The reporting period for a candidate committee s first campaign finance report for the election cycle shall include the entire election cycle to date.

22 CALCULATING REPORTING DEADLINES CANDIDATE REPORT INSTRUCTIONS EXAMPLE Determine Primary Election Date August 29, 2017 Identify Runoff/Second Election Date November 7, 2017 Identify 12 months prior Nov 2016 Nov 2017 Quarterly Report Start Date Oct-Dec 2016 (Due January 15, 2017) In this example, the candidate s final report is due January 15, 2018, which covers October December 2017, the time period covering the November 2017 election.

23 CALCULATING REPORTING DEADLINES CANDIDATE REPORT Awaiting Guidance from SOS: What if there is no runoff election? Does the candidate need to file a quarterly report for the second election time frame? If so, is it a pre- and post-election report or only one quarterly report? Revised reports will be available once the guidance is issued.

24 CALCULATING REPORTING DEADLINES SPECIAL ELECTION INSTRUCTIONS EXAMPLE Determine Election Date March 13, 2018 Identify Runoff/Second Election Date May 15, 2018 Identify 12 months prior May 2017 May 2018 Quarterly Report Start Date Apr Jun 2017 (Due July 15, 2017)

25 CAMPAIGN FINANCE REPORTING A.R.S The Secretary of State shall prescribe the format for all reports and statements in the Election Procedures Manual. Campaign finance reports must itemize all disbursements in excess of $250 during the reporting period for operating expenses, contributions to candidate committees, contributions to PACs, contributions to political parties, contributions to partnerships, etc. For purposes of reporting, a contribution is deemed to be received on the date the committee knowingly takes possession or the date of the check or credit card payment (for in-kind contribution, it is when the services are performed or when the committee receives the services).

26 CAMPAIGN FINANCE REPORTING A.R.S For purpose of reporting, an expenditure or disbursement is deemed made either on the date the committee authorizes the monies to be spent or the date the monies are withdrawn from the account. Check Date the committee signs the check. Credit card transaction on paper Date the committee signs the authorization to charge the credit card. Electronic transmission Date the committee electronically authorizes the charge. Agreement to purchase goods or services Either on date the parties enter into the agreement or the date the purchase order is issued. A committee may record its transactions in any of the authorized methods must use a consistent method of recording transactions throughout the election cycle.

27 INDEPENDENT EXPENDITURE & BALLOT MEASURE REPORTING Campaign finance reports must itemize all disbursements in excess of $250 during the reporting period including IEs that are made to advocate the election or defeat of a candidate, including identification of the candidate, office sought by the candidate, election date, mode of advertising and distribution or publication date. A.R.S (B)(3). An entity that makes IEs or ballot measure expenditures in excess of $1,000 during a reporting period shall file an expenditure report with the filing officer for the applicable reporting period. Expenditure reports shall identify the candidate or ballot measure supported or opposed, office sought by the candidate, if any, election date, mode of advertising and first date of publication, display, delivery or broadcast of the advertisement. A.R.S (H).

28 RECALL ELECTIONS A candidate committee can be used for recall but the money needs to be in separate bank accounts and recall contributions/expenditures can only be used for the recall. A.R.S (B)(5). Contributions for recall cannot be used to influence another election. For election cycle definition, recall is the period between issuance of a recall petition serial number and the last of the following dates: The recall election; When the resignation is accepted; or When the filing officer provides notice if the number of signatures is insufficient. A.R.S Repealed the requirement that a Statement of Org was required prior to circulating recall petitions and that signatures were void if not registered prior to circulating. A.R.S

29 COMMITTEE REGISTRATION Candidate Filing A.R.S The affidavit of eligibility has been changed to a declaration notarization no longer required for nomination paper or financial disclosure statement. The Statement of Org is no longer required when filing nomination paper registration is required when the committee criteria is met. No Threshold Exemption Statement.

30 COMMITTEE REGISTRATION Candidate Committee Registration - A.R.S (A), (F) Statement of Org to form a political committee is only required if candidate spends/receives, in any combination, $1,000 in connection with that candidacy. If a candidate receives $600 and spends $401, the total amount is over $1,000 and the candidate is required to register as a committee. New requirement: Committee must agree to accept process via address provided. service of

31 COMMITTEE REGISTRATION Candidate Committee Registration - A.R.S (A), (F) Statement of Org to form a political committee is only required if candidate spends/receives, in any combination, $1,000 in connection with that candidacy. If a candidate receives $600 and spends $401, the total amount is over $1,000 and the candidate is required to register as a committee. Candidate Committee Threshold - A.R.S (G), This threshold amount increases every January 1 in odd-numbered years. As of January 1, 2017, a candidate must spend or receive, in any combination, $1,100. In 2019: Registration is triggered at $1,200 (Published by Sec of State) The Threshold Exemption Statement has been repealed.

32 COMMITTEE REGISTRATION Candidate Committee Registration - A.R.S (A) What happens if a candidate does not reach the $1,000 threshold? No threshold exemption statement and no registration requirement. If the candidate reaches the threshold amount during the election cycle, the candidate has ten days to register as a committee.

33 COMMITTEE REGISTRATION Political Committee Registration - A.R.S , Political action committees (PACs) must register if spend/receive $1,000 during a calendar year AND primary purpose is influencing elections. PAC Threshold - A.R.S (G), This threshold amount increases every January 1 in oddnumbered years. As of January 1, 2017, a PAC must spend or receive, in any combination, $1,100.

34 COMMITTEE REGISTRATION Political Committee Registration - A.R.S , Primary purpose means an entity s predominant purpose. Notwithstanding any other law or rule, an entity is not organized for the primary purpose of influencing an election if all of the following apply at the time the contribution or expenditure is made: The entity has tax exempt status under Section 501(a); The entity has properly filed Form 1023 or Form 1024 with the IRS (this does not apply to a religious organization, assembly or institution); The entity s tax exempt status has not been denied or revoked by the IRS; The entity remains in good standing with the Arizona Corporation Commission; and The entity has properly filed Form 990 with the IRS in compliance with the most recent filing deadline.

35 COMMITTEE REGISTRATION Political Committee Registration - A.R.S , The filing officer or enforcement officer makes a rebuttable presumption that an entity IS organized for the primary purpose of influencing an election if the entity: Has failed to file an IRS Form 1023 or 1024 (except for religious organization, assembly or institution); Made a contribution or expenditure when tax exempt status was revoked by IRS; Made a contribution or expenditure and failed to file Form 990 with IRS; At the time of making a contribution or expenditure the entity was not registered with Arizona Corporation Commission; or At the time of making a contribution or expenditure the entity was not in good standing at Arizona Corporation Commission.

36 COMMITTEE REGISTRATION Is a Statement of Org required if 1. A candidate receives $800 and spends $300 in connection with his candidacy for council? Yes. 2. A candidate receives/spends $1,000 for his candidacy after January 1, 2017? No. 3. A PAC receives/spends $1,500? It depends. What is the primary purpose? 4. A PAC receives/spends $750 and their primary purpose is to influence the election? No.

37 COMMITTEE REGISTRATION Committee Registration Review For candidates, the only criteria is if the candidate has received/spent the threshold amount or more. Any candidate who spends less than the threshold amount does not have to register or file any reports. For PACs, the criteria is the contributions/expenditures of the threshold amount of more AND if the PAC s primary purpose is to influence elections. If the candidate or PAC meets the criteria to register, the committee has 10 days to file a Statement of Org. A.R.S (A).

38 DEFINITIONS A.R.S Relocated existing definitions from other statutes to the definition section: Best effort, Control, Earmarked Amended definitions: Election cycle (will discuss along with contribution limits) Mega PAC Status (formerly Super PAC) Political Action Committees (known as PACs)

39 DEFINITIONS A.R.S New Definitions Calendar quarter: a period of three consecutive calendar months ending on March 31, June 30, September 30 or December 31. District office: an elected office established or organized pursuant to Title 15 or 48 Excess contributions: a contribution that exceeds the applicable contribution limits for a particular election. Firewall: a written policy that precludes one person from sharing information with another person.

40 DEFINITIONS A.R.S : New Definitions Identification: (a) For an individual, the individual's first and last name, residence location or street address and occupation and the name of the individual's primary employer;(b) For any other person, the person's full name and physical location or street address. Person: an individual or a candidate, nominee, committee, corporation, limited liability company, labor organization, partnership, trust, association, organization, joint venture, cooperative or unincorporated organization or association. Primary Purpose (discussed in detail under committee registration) Social media messages: forms of communication, including internet sites for social networking or blogging, through which users create a personal profile and participate in online communities to share information, ideas and personal messages.

41 CONTRIBUTION LIMITS Campaign Contribution Limits - A.R.S , Contribution limits did not increase. The definition of election cycle was amended to mean two years between the scheduled date of the city s or town s second runoff/ge and the scheduled date of the immediately following second, runoff or GE, however designated by the city or town. A.R.S (18). The cycle is no longer tied to the term of office. Example Four-year term of Office begins November 2016: November 8, 2016 November 6, 2018 = $6,250 from an individual*** November 7, 2018 November 3, 2020 = $6,350 from same individual *** The SOS must increase the contribution limits by $100 every January in oddnumbered years so the amount increases to $6,350 on January 1, A.R.S (A)(2).

42 CONTRIBUTION LIMITS Campaign Contributions Transfers of Candidate Monies Candidates may contribute monies to a person, which includes corporation, LLC, labor union. Candidates cannot contribute to another candidate.

43 CONTRIBUTION LIMITS Campaign Contributions Transfers of Candidate Monies City or town candidates may transfer unlimited contributions to themselves if the candidate transfers contributions to his or her own county candidate committee. City Candidate A County Candidate A But wait!

44 CONTRIBUTION LIMITS Campaign Contributions Transfers of Candidate Monies If the candidate transfers from city to county committee, the candidate is prohibited from transferring the funds from the county committee to the candidate s state committee for 24 months following transfer. And a city or town candidate is prohibited from transferring contributions directly to their state or legislative candidate committee. For 24 months! County Candidate A ($ is from City Candidate A Committee) State Candidate A

45 CONTRIBUTION LIMITS Transfers of Candidate Monies - A.R.S , An excess contribution is a contribution that exceeds the contribution limit a candidate who receives an excess contribution may reattribute to another individual under certain conditions. A candidate committee shall not knowingly accept contributions in excess of the contribution limits. A candidate committee that unknowingly accepts an excess contribution shall refund or reattribute any excess contribution within 60 days after receipt of the contribution.

46 CONTRIBUTION LIMITS Transfers of Candidate Monies - A.R.S , A candidate committee may reattribute an excess contribution only if both of the following apply: The excess contribution was received from an individual to the contributor; The individual contributor authorizes the candidate committee to reattribute the excess amount to another individual who was identified as a joint account holder in the original instrument used to make the excess contribution; A candidate committee may accept contributions only from an individual partnership, a candidate committee, a PAC, or a political party.

47 ADVERTISING & FUND-RAISING DISCLOSURE STATEMENTS A.R.S A person, but not an individual, must disclose an expenditure for an advertisement or fund-raising solicitation with the words paid for by and must list the candidate s name if paid for by the candidate. Person is defined as an individual or a candidate, nominee, committee, corporation, LLC, labor organization, partnership, trust, association, organization, joint venture, cooperative or unincorporated organization or association. Challenge will be distinguishing if the disclosure is by an individual who isn t required to disclose or a committee that has failed to disclose.

48 ADVERTISING & FUND-RAISING DISCLOSURE STATEMENTS A.R.S If a PAC is disclosing the expenditure, the committee must include the names of the three PACs 1) making the largest aggregate contributions to the PAC making the expenditure and 2) that exceed $20,000 during the election cycle, as calculated at the time the advertisement was distributed for publication, display, delivery or broadcast. Exempts compliance from disclosure requirements for: Advertisements that are paid links as long as they are under 200 characters and the link takes the user to a website that contains the disclosure information; Social media messages or text messages; A published book or documentary; More

49 TERMINATION/SURPLUS MONIES A.R.S In addition to the current options to dispose of surplus monies, a committee that intends to terminate is allowed to contribute surplus monies to another candidate if: The nomination paper filing deadline has passed; The candidate contributing the monies has not filed a nomination paper to run for office; The contribution is not made during the legislative session to a legislative candidate (does not apply to city/town candidates); The contribution is within the individual contribution limit.

50 COMMITTEE MONIES 1. Can a candidate transfer $750 of her own money to another candidate? No. 2. Can a city candidate transfer $3,000 to a state committee? No. 3. Can a state candidate committee transfer monies to a city or county committee? Yes. 4. Is it lawful for a candidate to transfer surplus monies to another candidate? Yes, if all the requirements are met.

51 ENFORCEMENT Enforcement - A.R.S Requires, upon the filing of a 3 rd party complaint, the filing officer to initiate investigations and refer if reasonable cause (exclusive original jurisdiction) the clerk cannot initiate the complaint. If the clerk declares a conflict of interest, the law allows the clerk to refer the investigation to any other filing officer in the state who agrees to accept the referral. It is recommended that this course of action be discussed with your attorney prior to any referral. Complaint Process Complaint Filed Person or entity under investigation must be given a reasonable opportunity to respond. If clerk finds reasonable cause, must refer to the city or town attorney. During the investigation phase, the clerk cannot require a person to register as a committee and cannot audit or subpoena the person to compel production of evidence or attendance of witnesses although the clerk may request this information in making a reasonable cause determination.

52 ENFORCEMENT Referral to Attorney Conduct an investigation; Serve the alleged violator with a Notice of Violation that states with reasonable particularity: The nature of the violation; The fine or penalty imposed; Required compliance within 20 days after the date of issuance of the notice. Keep any nonpublic information gathered by the attorney in the course of the committee status investigation confidential until the final disposition of any appeal to the attorney.

53 ENFORCEMENT Violation/Penalties The attorney shall impose a presumptive civil penalty equal to the value or amount of money that has been received, spent or promised in violation of the campaign finance laws. A Finding of Special Circumstance by the attorney allows a penalty of up to three times the amount of the presumptive civil penalty based on the severity, extent or willful nature of the alleged violation. If the Notice of Violation requires a person to file campaign finance reports, the reports are not required to be filed until the attorney s Notice of Violation has been upheld after any timely appeal.

54 ENFORCEMENT The city or town attorney has the sole and exclusive authority to initiate any applicable administrative or judicial proceedings to enforce an alleged violation of campaign finance laws that have been referred by the clerk. If the alleged violator takes corrective action within 20 days after the date of the issuance of the Notice of Violation by the attorney, the alleged violator is not subject to any penalty. If the alleged violator does not take corrective action within 20 days after the date of issuance of the Notice of Violation by the attorney, the attorney shall impose the penalty set forth in the Notice and shall provide formal notice that the imposition of the penalty is an appealable decision. Within 30 days after receiving the Notice of Violation from the city or town attorney, the alleged violator may request a hearing. After the conclusion of the administrative appeal process, the alleged violator may appeal to the superior court for judicial review of the final administrative decision.

55 ENFORCEMENT Administrative - A.R.S , Secretary s Office is required to prescribe the format for campaign finance reports and statements and establish procedures, timelines and other processes that apply to campaign finance investigations.

56 CAMPAIGN FINANCE SYSTEM A.R.S Filing officer must provide the option of electronic filing and make all statements and reports available online. Compliance can be met by opting into the SOS system, which is at no cost to jurisdictions until January 1, Jurisdictions that opted-in to the SOS campaign finance system will receive notice from the SOS of the anticipated maintenance costs one-year prior to payment due date. The system is not yet available for cities and towns expected availability is mid-to-late 2017; until then use SOS fillable pdfs and post forms online.

57 TRANSITION FROM OLD CAMPAIGN FINANCE SYSTEM TO NEW SYSTEM Session Law Any committees in existence on Nov. 8, 2016 are prohibited from conducting any activity except to wind down operations and requires termination of the committee by June 30, Wind down is not defined. If a committee has not terminated by June 30, 2017, the filing officer may administratively terminate the committee and convert the committee into a candidate committee, political committee or political party as appropriate. For cities and towns with March 2017 elections, the session law provides flexibility for the city or town to reasonably adjust campaign finance filing deadlines if adhering to the new campaign finance filing requirements would create a substantial hardship.

58 QUESTIONS?

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