Practical Legal Tips for Ballot Measures. May 8, 2018
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1 Practical Legal Tips for Ballot Measures May 8, 2018 Presented By: Anita Drummond, Assistant General Counsel, American Cancer Society Susan Hamsher, Senior Attorney, The Nature Conservancy
2 Considerations Tax Treatment Initiatives Once on the Ballot: Independent Expenditure vs. Ballot Committee Contributions Ballot Committee Independent Expenditures
3 Ballot Measure Tax Treatment Federal tax law classifies a tax exempt organization s efforts to support or oppose a ballot measure as lobbying. For instance, a charity must track expenses toward its lobbying cap (either a no substantial part test or a 501(h) electing organization). A 501(c)(4) or 501(c)(6) organization would calculate it for disclosure of non deductible membership payments or calculation of its proxy tax. In addition to federal tax law, organizations should be aware that state laws also regulate most ballot measure activity, and the rules are different from state to state. This basic legal review focuses on state legal compliance.
4 Getting on the Ballot: Referendum or Initiative A referendum is a measure placed on the ballot by a state legislature or local legislative body. An initiative is a voter effort to draft a petition and collect signatures to place a measure on the ballot. Generally, compliance for an initiative involves state campaign finance and election laws. In the case of a petition amending the constitution, state constitutional law principles will apply and additional compliance requirements may apply. Once a measure is placed on the ballot, the primary legal issues are focused on compliance with state campaign finance laws, involving committee registrations, independent expenditures, campaign material disclosures, and filings.
5 Participating in an Initiative Various legal considerations apply for circulating a petition for signatures attempting to place an initiative on the ballot. Typically, the law addresses the definition of an authorized petitioner, the form the petition takes, the process for approval of a petition to be presented to potential voters by the state attorney general or other government officials (sometimes a state legislative body), the method for presenting and collecting the signatures (e.g., rules that only residents of the state can collect signatures or how signature gatherers are paid), and deadlines with the percentage and method for counting signatures (e.g., county or senate district level minimums). If a petition is for an initiative in a local jurisdiction, additional laws may apply.
6 Questions for the in house attorney to consider: Is this a constitutional amendment or other initiative? What work, such as polling and language drafting, will be completed before the petition is filed? Is it covered by campaign finance law? Is the person drafting the petition language experienced in the state s statutory form and history to decrease the chance of legal challenges to the proposed language, especially in cases of constitutional changes? What value could an experienced, outside counsel bring to managing the legal compliance for the initiative effort, including a history of working with the state regulators? What individual(s) will be the petitioner or sponsor of the petition? there a petition sponsor committee? What form is the petition sponsor committee taking? What organizations are steering the effort? What government authority, if any, will approve the petition language for circulation?
7 Can the petition sponsor committee transform to a ballot measure committee or will the ballot committee take a different form? Who or what entity will be authorized to manage the signature collection and compliance (e.g., a law firm, an experienced campaign company, or independent campaign contractor?) What type of funding sources can be used to make a contribution to the committee? What is the funding plan? What is total budget and what portion is your organization providing? Who or what organizations, such as nonprofits or for profit corporations, will fund the signature gathering? What firm is hiring and managing individual signature gatherers? Do they have experience with signature gathering in this jurisdiction?
8 Will volunteers be used for signature gathering? Who is managing training and compliance? Who or what firm is managing campaign finance compliance? How will your organization or the lead organizations keep them accountable? What government authority, such as the attorney general, will certify the petition for placement on the ballot and what is the appeals process? Who is the opposition? How strong is the opposition? What rights do they have to challenge a petition? If your organization is opposed to a petition, what are the campaign finance law obligations?
9 Once on the Ballot: Independent Expenditures vs. Ballot Committee Campaign finance law requires that contributions to and expenditures for ballot measure campaigns are disclosed to the appropriate authority in each jurisdiction, often the Secretary of State. An organization s reporting obligations for any campaign hinge on whether it is spending money in support of or opposition to a campaign with or without coordinating such activities with any other person or organization.
10 Contributing to a Ballot Committee: A ballot committee is not a legal entity; it is a creation of state law. Each state will have its own terms and definitions for different types of committees, which an attorney should study, but it often is referred to as a political committee. Generally, a ballot committee is created when an individual or organization raises funds or spends money to support or oppose a ballot measure in coordination with other individuals or organizations. While a treasurer is appointed, no fiduciary committee of individuals is identified.
11 Questions for the in house attorney to consider: What type of committee is used in the state or local level to support or oppose a ballot measure? What individuals must be appointed as fiduciaries, such as treasurer or chairperson? What value could an experienced, outside counsel bring to managing the legal compliance for the campaign, including a history of working with the state regulators? Should you set up or use an existing nonprofit corporation (e.g., Sec. 501(c)(4) or Sec. 527) to operate the committee to insulate the steering committee nonprofit organizations from liability? Is a separate bank account required for the committee? If so, who has authority over it?
12 What is the method for assuring compliance with disclosures in fundraising and communications? Who has authority and responsibility for filings? Do contributor organizations have separate filings? How will campaign decisions be made among the organizations supporting the ballot committee? What type of funding sources can be used to make a contribution to the committee? Can an organization make a contribution without disclosing its donors, members, or other funders? Are there different disclosures among nonprofit types? How will your organization track time and expenses for the campaign? Who will manage timely reporting to the committee (e.g., 24 hour reporting periods)? What public disclosures are required for the committee and in kind communications for a committee? Are there some types of communications that are not considered reportable?
13 What is the funding plan? What is total budget and what portion is your organization providing? Who or what other organizations are funding the effort? What requirements will you put in place for fundraising by your organization for the committee? Who is the opposition? How strong is the opposition? What rights do they have to call for a review or audit of your committee? How will the committee react to candidates supporting the measuring and wanting to coordinate messages? What disclosures will the committee make to donors about sharing their information with the steering committee organizations? Will the brand of your organization be used in the campaign? Do you need a license agreement? How will final committee close out be confirmed? Who is responsible for final filings of any nonprofit corporation, such as filing Form 990 and state corporation registration closing?
14 Making Independent Expenditures As the term implies, an organization makes an independent expenditure if it spends money in support of or opposition to a campaign without coordinating with other individuals, organizations, or political committees. Independent expenditures may be an option permitted in state law for ballot measures. (Beware the term is limited to candidate campaigns in many states). State requirements vary from making a short filing to the extreme of treating the independent expenditure as a ballot committee activity.
15 Questions for the in house attorney to consider: What is the definition of an independent expenditure under the law? Does the definition include ballot measures? Is the law limited to disclosure for communications to the public only? Are there exceptions for communication to members of the organization? What type of funding sources can be used to pay for the independent expenditure? Must the organization disclose donor names in any form? Are there differences between nonprofit types? How will your organization track time and expenses for the reporting requirements? Who will manage timely reporting to the state or local election authority (e.g., 24 hour reporting periods)? What public disclosures are required on campaign communications? Are there some types of communications that are not considered reportable?
16 Contact Information Anita Drummond rofitexpert/ Susan Hamsher hamsher/
17 Thank You!
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