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DC Circuit Court of Appeals Provides Major Support For the Constitutionality of Pay-to-Play Laws . . . And Probably Makes an Executive Order Mandating Contractor Disclosure of Political Spending Likely

Ever since the US Supreme Court’s landmark rulings in Citizens United and McCutcheon, significant questions have been raised (mostly by real scholars but also by agitators and pot-stirrers such as myself) as to whether pay-to-play laws – based as they are on appearances of potential corruption and not direct bribery – are constitutional.   The DC Circuit has now weighed in to provide significant legal and factual justification for the constitutionality of laws limiting personal campaign activity in order to prevent the appearance of corruption and to promote the “merit-based administration” of our government (which is only a GRADE 3 oxymoron, falling as it does on the scale between “pretty ugly” and “jumbo shrimp”).

The case in question is Wagner v. FEC in which a number of federal contractors brought free speech and associational challenges to a federal law prohibiting their planned contributions to federal candidates and political parties.  Federal law (2 USC 441c) prohibits government contractors from making campaign contributions to candidates, political committees, or political parties. 2 USC 441b imposes similar restrictions on corporations, national banks, and labor unions.  Of most importance to those of us tasked with pay-to-play compliance is not that 2USC 441c was upheld, that law has been on the books a long time and really only impacts individuals who directly contract with the federal government (in contrast with the myriad of people who work as employees of government contractors).  The Court also did not examine the issue of whether federal contractors may give to independent expenditure groups (SuperPACs).  What is significant about Wagner is the fact that the DC Circuit appears to contravene the US Supreme Court’s analysis in McCutcheon to hold that federal and state governments may enact pay-to-play laws admittedly abridging speech and associational rights in order to assure the public believes that government servants are not corruptible and are fulfilling their public duties “effectively and fairly”, free of “improper influence or corruption”.  (Wagner, Slip Op. 12-15).

Other federal courts have not agreed with the DC Circuit’s reading of McCutcheon to allow such latitude:

Our Supreme Court has made clear that only certain contribution limits comport with the First Amendment. Since contributing money is a form of speech, preventing quid pro quo corruption or its appearance is the only governmental interest strong enough to justify restrictions on political speech. Citizens United v. FEC, 558 U.S. 310, 357-61 (2010). More recently in McCutcheon, the Court concluded that “the possibility that an individual who spends large sums may garner influence over or access to elected officials or political parties . . . does not give rise to such quid pro quo corruption.” Id. at 1438. In effect, it is only direct bribery—not influence—that the Court views as crossing the line into quid pro quo corruption.

New York Progress and Protection PAC v. James Walsh, 13 Civ. 6769, S.D.N.Y, April 24, 2014, Slip Op. 3.

It will be interesting to see whether the Supreme Court reads its own opinion in McCutcheon as the DC Circuit does.  Recent reversal statistics of DC Circuit cases might indicate that the DC Circuit’s reading is not a slam dunk.

One civil servant who might not be inclined to wait for additional guidance from the Supreme Court on the issue is the one who resides at 1600 Pennsylvania Avenue.  As we have written previously, the White House is very serious about mandating contribution and issue advocacy disclosure obligations on federal contractors.  There are many who now believe that the Wagner decision will encourage President Obama to issue a long-awaited Executive Order mandating contractor disclosure of all political spending.  Recent reports by The Brennan Center that in the 2014 cycle, the top 25 federal contractors all made disclosed contributions through their PACs and, in total, gave more than $30 million are sure to spur additional calls for mandatory contractor disclosure.

DC Circuit Court of Appeals Provides Major Support For the Constitutionality of Pay-to-Play Laws . . . And Probably Makes an Executive Order Mandating Contractor Disclosure of Political Spending Likely

SEC Promotes Pay-to-Play Compliance with a Friendly Reminder – and a Wells Notice

With a friendly reminder and notice of an investigation, the Securities and Exchange Commission has reminded us all, yet again, that it is moving forward with pay-to-play enforcement whether the regulated community is ready or not. This is a theme that has played out for some time now as the SEC has done a good job of signaling their punches. The Commission is, however, starting to throw punches.cops

On the “Good Cop” side of promoting pay-to-play compliance, the SEC issued a friendly reminder yesterday that the compliance date for Rule 206(4)-5’s prohibition against investment advisers and their covered associates from providing payments to unregulated third-parties to solicit advisory business from any government entity is almost upon us (July 31, 2015).

As a bit of a history lesson, Rule 206(4)-5 became effective way back in September 13, 2010 and included the third-party solicitor ban. At that time, the SEC set the compliance date for that ban to September of 2011 but later added municipal advisors to the definition of “regulated persons”. Because of this, the Commission also extended the third-party solicitor ban’s compliance date to June 13, 2012. In the absence of a final municipal advisor registration rule, the Commission then extended the third-party solicitor ban’s compliance date from June 13, 2012 to nine months after the compliance date of the final rule. When the final rule was released with a final registration date of October 31, 2014 (see Section V), the compliance date for everyone, including municipal advisors, to comply with the third-party solicitor ban was known to be July 31, 2015.

In short, this compliance date is absolutely not a surprise to the regulated community but rather reflects execution on a regulatory scheme the SEC has been telegraphing for some time now. It is still a nice gesture to send out a reminder, however.

On the other side of the coin, it has recently been reported that SEC staff has made clear, via a “Wells” notice that it intends to ask the Commission for authorization to initiate a civil inquiry into allegations that State Street Corporation improperly used third party consultants and lobbyists (and possibly campaign contributions) to influence a public bidding process. This little tidbit was contained within State Street’s Form 8-K filing of June 18, 2015 which read:

On June 18, 2015, State Street Corporation announced that the enforcement staff of the U.S. Securities and Exchange Commission has provided it with a “Wells” notice. The notice relates to a previously disclosed SEC investigation into our solicitation of asset servicing business for public retirement plans and, specifically, our relationships with particular clients in two states during a period ending in 2011. As previously reported, the investigation includes our use of consultants and lobbyists and, in at least one instance, political contributions by one of our consultants during and after a public bidding process. The Wells notice informs State Street that the SEC staff intends to ask the Commission for permission to bring a civil enforcement action that would allege violations of the securities laws (i.e., Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder). The issuance of a Wells notice provides State Street with the opportunity to make a submission to the Commission in response to the SEC staff’s position. State Street intends to submit such a response.

Some are more motivated by the misfortunes of others than friendly reminders from our public servants. Either way, the SEC is signaling, yet again, that painful pay-to-play enforcement is here to stay.

SEC Promotes Pay-to-Play Compliance with a Friendly Reminder – and a Wells Notice

Ninth Circuit Upholds Constitutionality of Hawaii Pay-to-Play Ban

As we advised back in 2010, Hawaii is among an ever-expanding list of states which have seen their pay-to-play laws challenged on constitutional grounds. Just this week, however, the United States Court of Appeals for the Ninth Circuit dismissed those concerns.  At issue was Hawaii’s prohibition against campaign contributions by government contractors until “completion of the contract.” In challenging the law, the plaintiffs’ complaint highlighted a little-discussed, unintended consequence of such laws that result in exorbitant expenditures of compliance time and resources (mostly in the form of legal fees): “Hawaii’s ban on candidate and non-candidate committees receiving contributions from government contractors means [contractors] must constantly keep track not only of whether it has government-construction jobs but also of whether a single . . . service technician is somewhere providing some minor service on a previous . . . job”. Complaint, p. 10-11.  The law, however, is premised on the need to prevent bribery or “quid pro quo” corruption regardless of the burden it places on the regulated.

Back in 2010 we wrote:

Bribery laws may be “fundamental to prevent corruption in government”
— even narrowly tailored prohibitions against contractor contributions to politicians with authority to award future contracts may be “fundamental to prevent corruption in government” — but Hawaii’s law in its current incarnation may be a Bridge Too Far to make such a claim.

Then again, no president has ever seen fit to nominate me to serve on the Ninth Circuit either. Those who have received such a nomination did not see it the same way.

In its 58-page order, the Ninth Circuit found that Hawaii’s contractor-contribution ban is an important and constitutional government tool to combat “quid pro quo corruption” and “serves sufficiently important governmental interests by combating both actual and the appearance of quid pro quo corruption”:

And as in Connecticut, Hawaii’s decision to adopt an outright ban rather than mere restrictions on how much contractors could contribute was justified in light of past “pay to play” scandals and the widespread appearance of corruption that existed at the time of the legislature’s actions. See Yamada III, 872 F. Supp. 2d at1058–59 nn. 26–27 (summarizing the evidence of past scandals and the perception of corruption). Thus, as a general matter, Hawaii’s ban on contributions by government contractors satisfies closely drawn scrutiny.

A-1’s narrower argument that the contractor contribution ban is unconstitutional as applied to its contributions to lawmakers and candidates who neither award nor oversee its contracts is also without merit. Hawaii’s interest in preventing actual or the appearance of quid pro quo corruption is no less potent as applied to A-1’s proposed contributions because the Hawaii legislature as a whole considers all bills concerning procurement. Thus, although an individual legislator may not be closely involved in awarding or overseeing a particular contract, state money can be spent only with an appropriation by the entire legislature.  See Haw. Const. art. VII, §§ 5, 9. Hawaii reasonably concluded that contributions to any legislator could give rise to the appearance of corruption.

Yamada v. Snipes, 1:10-cv-00497-JMS-RLP (9th Cir. 2015), slip op. 49-50 (link to this blog’s past post on Connecticut ruling added – unfortunately).

The court also upheld the state’s law requiring political action committees to register with the state after spending more than $1,000 to influence an election, something officials said is necessary to follow the money during campaign season.

The Ninth Circuit and the US Supreme Court—as currently constituted—don’t always read the First Amendment the same way when it comes to government regulation.  This round, however, without a doubt, has gone to the regulators.

Ninth Circuit Upholds Constitutionality of Hawaii Pay-to-Play Ban

Big Bond Firms Test the MSRB’s Compliance Line

Readers of this blog know that MSRB Rule G-37 regulates the political contribution activities of banks and other entities which initiate the principal sales of municipal bonds. Specifically, Rule G-37 provides that any broker, dealer or municipal securities dealer which makes a contribution to those who oversee the issuance of such bonds is subject to a two-year “Time Out” for bad behavior.

around-circumventThis prohibition extends beyond the activities of individual brokers and dealers. Rule G-37 specifically provides that its prohibition applies equally to “any political action committee (PAC) controlled by the broker, dealer or municipal securities dealer or by any municipal finance professional”. For further clarity regarding its intentions, the Rule mandates against circumvention of these restrictions via the wily ways of Legal Loophole Exploiters:

(d) Circumvention of Rule. No broker, dealer or municipal securities dealer or any municipal finance professional shall, directly or indirectly, through or by any other person or means, do any act which would result in a violation of sections (b) or (c) of this rule.

To demonstrate its seriousness about this prohibition, the Municipal Securities Rulemaking Board has decreed that the proper punishment for violation of its rule is that “no broker, dealer or municipal securities dealer shall engage in municipal securities business with an issuer within two years after any contribution to an official of such issuer”.

You’re still with me, right? Seems pretty clear: “Securities dealers should not use political action committees or other vehicles to circumvent the prohibition against campaign contributions to municipal bond issuers.” Some of us have been warning our friends for years that the MSRB views PAC activities as an improper vehicle to circumvent G-37. Others, it might appear, see this as a line ripe for testing.

Last week, David Sirota and Matthew Cunningham-Cook of the International Business Times (two of the best reporters in the business when it comes to ferreting out potential links between contributions to those in power and official action) broke a story detailing contributions to New York Governor Andrew Cuomo by three PACs associated with NY bond issuers. Political Action Committees associated with these banks, it would appear, contributed more than $131,000 to the Governor prior to being selected by his administration to manage state bond work. The banks do not dispute the contributions by their PACs but rather challenge the premise that these PACs represent contributions by the individual bond dealers or a PAC that they control:

“Citi has two separate PACs, a state and a federal,” said Citigroup spokeswoman Molly Meiners. “To the extent anyone on our Muni team donates money, they are required to give to our Federal PAC only, which has never given to Cuomo.”

Ultimately, the determination surrounding this situation will be factual in nature and this blog is never one to cast the first stone when it comes to the challenges of applying well-intentioned regulation in the real world. As we warned back in 2010, however, this factual inquiry is informed by specific guidance issued by the MSRB in August of that year, which clearly establishes that this is not an area where winks and nods will be tolerated:

Indirect Contributions Through Bank PACs or Other Affiliated PACs

As noted above, if an affiliated PAC is determined not to be a dealer-controlled PAC, a dealer must still consider whether payments made by the dealer or its MFPs to such affiliated PAC could be viewed as an indirect contribution that would become subject to Rule G-37 pursuant to section (d) thereof. The MSRB has provided extensive guidance on such indirect contributions, noting in 1996 that, depending on the facts and circumstances, contributions to a non-dealer associated PAC that is soliciting funds for the purpose of supporting a limited number of issuer officials might result in the same prohibition on municipal securities business as would contributions made directly to the issuer official. The MSRB also noted that dealers should make inquiries of a non-dealer associated PAC that is soliciting contributions in order to ensure that contributions to such a PAC would not be treated as an indirect contribution.

The MSRB also has previously provided guidance in 2005 with regard to supervisory procedures that dealers should have in place in connection with payments to a non-dealer associated PAC or a political party to avoid indirect rule violations of Rule G-37(d). In such guidance, the MSRB stated that, in order to ensure compliance with Rule G-27(c) as it relates to payments to political parties or PACs and Rule G-37(d), each dealer must adopt, maintain and enforce written supervisory procedures reasonably designed to ensure that neither the dealer nor its MFPs are using payments to political parties or non-dealer controlled PACs to contribute indirectly to an official of an issuer. Among other things, dealers might seek to establish procedures requiring that, prior to the making of any contribution to a PAC, the dealer undertake certain due diligence inquiries regarding the intended use of such contributions, the motive for making the contribution and whether the contribution was solicited. Further, in order to ensure compliance with Rule G-37(d), dealers could consider establishing certain information barriers between any affiliated PACs and the dealer and its MFPs. Dealers that have established such information barriers should review their adequacy to ensure that the affiliated entities’ contributions, payments or PAC disbursement decisions are neither influenced by the dealer or its MFPs, nor communicated to the dealers and the MFPs.

Big Bond Firms Test the MSRB’s Compliance Line

April Showers Bring… Another Round of Pay-to-Play Changes in the State of Maryland

Spring may have sprung in the mid-Atlantic, but those contracting and doing business with the State of Maryland don’t feel like they’re receiving anything close to a flowery reception from the Maryland General Assembly this April. On the heels of a winter of discontent in the Old Line State, where those in the regulated community had to scramble to adjust to a new pay-to-play regime that involved unwieldy online filing obligations, modified contract valuation standards and contribution reporting requirements, and enhanced record retention and certification obligations, another new set of legislative changes has been adopted that will further alter the compliance playing field. You know what they say – when it rains it pours.unnamed

This new round of amendments to Maryland’s pay-to-play framework, contained in House Bill 769, was passed by the state legislature earlier this month and has been sent to new Governor Larry Hogan for his signature. If the bill is signed into law, as anticipated, Maryland state contractors will have until June 1, 2015 to “unlearn” some of what they just learned about Maryland’s comprehensive pay-to-play overhaul on January 1st of this year. Given that we’re currently less than four months into the new framework, at least the regulated community can say it hasn’t had time to get comfortable with the “suddenly-old” regime.

Under the changes proposed by House Bill 769, entities with more than $200,000 in total Maryland contracts as of the end of 2014 will be required to submit semi-annual pay-to-play contribution disclosure reports with the State Board of Elections starting in August of this year. This is the case even if such contractors receive no new government contracts from the state during 2015 – a change from the pay-to-play regime that went into effect on January 1, 2015, which exempted companies with no new 2015 contracts from having to file disclosures.

In addition to closing this potentially-unintended loophole in the recently-enacted pay-to-play regime, the legislative amendments in House Bill 769 also attempt to somewhat ease the existing reporting burden for disclosing contractors. Specifically, the new changes will excuse companies without reportable political contributions (by either the entity or its covered representatives) from having to openly disclose the minute details of all of their existing state contracts. Moving forward, contractors without such reportable contributions will need only indicate the specific government agencies with which they do business, but will no longer need to report the value, start date and termination date of all their state contracts. This will undoubtedly be seen as a small ray of sunshine for those in the reporting community.

Before those doing business with the State of Maryland go getting all giddy, however, they should also take note of how House Bill 769 will alter the traditional pay-to-play reporting schedule for state contractors. As noted above, the next semiannual disclosure filing for contractors will be due in August of this year. The filing deadline for that report, however, has been moved from the customary date of August 5th to a new date of August 31st. The August disclosure will be required to cover reportable contractor activities between February 1, 2015 and July 31, 2015.

Following the completion of that submission, filing parties will be required to submit another pay-to-play report by November 30, 2015 covering reportable activities between August 1st and October 31st. Subsequent to that November 30th filing, all government contractors will face a semi-annual filing schedule for 2016 and beyond. Such reports will be due on May 31st and November 30th of each year, and will cover reportable activities during the preceding six month periods.

Keeping the above amendments in mind, the good news for the regulated community is that these changes will be the only new legislative wrinkles in Maryland pay-to-play law for at least the next 8 months. The bad news is that regulators in Annapolis will have ample time between now and next January (when the General Assembly goes back into session) to weigh in on the changes and unleash their own brand of administrative storm clouds. No matter when the next storm hits, however, you can count on your friendly legal meteorologists here at Pay-to-Play Law Blog to keep you up to date

April Showers Bring… Another Round of Pay-to-Play Changes in the State of Maryland

Pay-to-Play Law Blog Makes The Law Review!

It had to happen eventually.  It was inevitable.  Sooner or later, an intelligent, articulate legal scholar was bound to apply legitimate intellectual rigor and research to this blog’s musings.  That scholar is Allison C. Davis, J.D. candidate and graduate fellow in election law at William & Mary Law School, and her note, “Presupposing Corruption:  Access, Influence, and the Future of the Pay-to-Play Legal Framework, which been accepted for publication in the William & Mary Business Law Review, Vol. 7 (2016), is an excellent contribution to pay-to-play scholarship.

WMMs. Davis’ note takes on a theme, which this blog has attempted to tackle several times previously, to reach the conclusion “that the legal and constitutional framework for much of pay-to-play law as it currently stands rests on shaky ground.” Id., p. 2.  Specifically, Ms. Davis’ note undertakes a thorough analysis of pay-to-play and Supreme Court jurisprudence as articulated through cases such as McCutcheon v. FEC to conclude that the “status crime” represented by many pay-to-play laws is inconsistent with the Court’s thinking on First Amendment protections:

If courts choose to apply the same First Amendment analysis to pay-to-play laws as they do to campaign finance regulation, the compelling state interest behind the pay-to-play legal framework—that is, the presupposition of corruption—may well come into question in the near future.

Id., p. 40.  I couldn’t agree more.

This note, particularly footnote 42, is a very well-written, thoughtful and insightful read.  Soon enough, the opportunity will present itself to see whether the Supreme Court agrees.  Good job, Allison.

Pay-to-Play Law Blog Makes The Law Review!

Dentons & McKenna Long to Merge, Giving Clients a Competitive Edge

Dentons & McKenna partners approve merger. Learn more about how clients inside the US will gain unrivaled access to markets around the world and international clients will enjoy increased strength and reach across the US.

Learn more at http://www.dentons-mckenna-combination.com/

Press release


Dentons & McKenna Long to Merge, Giving Clients a Competitive Edge

State Pay to Play Laws Have Real, Revenue Threatening, Consequences


Like the nagging parent stressing the dangers of a hot stove, unappreciated Chief Compliance Officers and General Counsel everywhere have been on a p5-types-of-burns-and-how-to-treat-themperpetual mission to warn fellow employees of the dangers inherent in mixing contribution activity and state procurement without proper oversight.  Such is the lot of the under-appreciated “Cost Center” compliance personnel.  Like the tear-filled 8 year-old icing red fingers, many of the high flying boys and girls on the “Revenue Center” sales side of those same companies are not paying sufficient attention to pay-to-play compliance warnings until it is too late.

Our most recent example of this cautionary tale comes from Paterson, New Jersey, where the prominent law firm McManimon, Scotland & Baumann, LLC just learned that a mere $500 in contributions upended a 20 year relationship as bond counsel to the cityPaterson’s pay-to-play law debars any contractor from receiving contracts for a full year if ANY of its executives (or partners . . .  or their spouses . . .  or their children . . .  or their subcontractors, etc.) make contributions in excess of $300 to local officials.  Just in case the pain were not sufficient for the firm’s partners who didn’t participate in any way in the offending contribution, Paterson Business Administrator Nellie Pou made a point to emphasize that

the decision not to rehire the firm had nothing to do with the quality of the firm’s work. “They’ve always been first-rate,” she said. “We’ve had nothing but excellent relations with them.”

Edward McManimon did not respond to a phone message seeking his comment for this story.

It is important to note that the initial contract in question was simply to be an extension of a contract awarded two years ago and that the recipient of the offending contribution had recused himself from the vote to approve the extension.  None of this was sufficient to prevent small fingers from getting burned.

We have seen in the past (especially in New Jersey) that pay-to-play violations can result in significant criminal consequences as well as major fines.  Some, like the authors of this blog, have shouted warnings into the wind; largely to no avail.  Hits to bottom line revenues should be enough to get the C Suite to take pay-to-play compliance seriously.

Don’t let it be said that the purpose of your compliance program is only to serve as a warning to others.

State Pay to Play Laws Have Real, Revenue Threatening, Consequences

Amicus Brief Highlights the Massive Reach and Unintended Consequences of SEC Rule 206(4)-5

PL blog

We have been following for some time the legal challenge brought by various political parties to the SEC’s pay-to-play Rule 206(4)-5.  That lawsuit, you will recall, challenges both the constitutionality and administrative jurisdiction of the SEC’s efforts to regulate campaign activity (“protected speech” by another name?) by investment advisors.  Litigation continues to press forward as the parties are set to square off again before the Court of Appeals on March 23. The latest briefing is here and our take on the appellate issues is set forth here in case you were getting popcorn and missed the action.

Now, the ongoing litigation has revealed a new plot line that this blog has written about several times: pay-to-play rules in general (and Rule 206(4)-5 specifically) have a really annoying way of converting well-intentioned policy aspirations into a morass of unintended compliance uncertainty and costs for the regulated community.  Simply stated, it is very easy to say, “Gee, it would be nice for my regulating agency to give the public confidence that government largesse isn’t handed out on the basis of who writes the biggest campaign checks.”  It is very, very hard for the appropriate regulating authority to write restrictions into law that don’t violate constitutional principles of free speech, become unconstitutionally overbroad, or otherwise create a compliance nightmare for the 99.98% of the private sector, who simply want to go about the process of doing business with the government without unknowingly finding themselves subjected to massive liability.

That tension has manifested in the thoughtful – and, quite frankly, scary – amicus brief filed by the Center for Competitive Politics on behalf of the Financial Services Institute.  In that brief, FSI notes that it is a network of independent financial advisors which are each independent broker-dealers operating entirely separately from each other as independent contractors.  Because some of these advisors are registered to provide services to pension funds and other government retirement plans, FSI member firms are subject to Rule 206(4)-5.  Makes sense, right?  Sure, until one contemplates the fact that 206(4)-5 as crafted treats all of these Mom-and-Pop advisers who happen to be performing as independent contractors under the same FSI logo are inter-related “covered associates” for pay-to-play purposes.  They are all responsible for each other’s campaign activity because the SEC chooses to treat “independent contractors” as “employees” for pay-to-play enforcement purposes (Black’s Law Dictionary having no jurisdiction over the Wisdom of the Sovereign).

Think about that.  Part-time FSI advisor Mabel in Topeka can make a political contribution that prevents Reggie in Trenton from being able to get paid under his investment advisory services contract for two years even though the two have never met (or, possibly, Reggie really pissed Mabel off with something he said at the FSI Christmas gathering in Orlando)!  What can FSI do other than what every rational, responsible, compliance-based organization would do?  It simply bans all contribution activity by all agents; regardless of the fact that the contributing agent has no intentions of ever doing business with the recipient politician.  (Amicus Brief, p. 6).

That can’t be the answer mandated by the Constitution.  It is, however, the logical response to the current morass of unintended compliance uncertainty suffered by the FSIs of the world.

Amicus Brief Highlights the Massive Reach and Unintended Consequences of SEC Rule 206(4)-5

FEC Increases Political Contribution Limits, Coordinated Party Expenditure Limits and the Lobbyist Bundling Disclosure Threshold

This week, the Federal Election Commission (“FEC”) published a formal notice in the Federal Register adjusting certain political contribution and expenditure limits and the lobbyist bundling disclosure threshold for inflation in accordance with the Consumer Price Index. In the individual contribution context, the Commission increased the amount a person may contribute to a candidate for federal office from $2,600 per election to $2,700 per election. As a result of this change, an individual may now contribute up to $5,400 per candidate during the 2015-2016 election cycle to any candidate participating in both a primary and general election. The FEC’s adjustment of the contribution limit is retroactive to November 5, 2014, so any 2016 primary contribution given late last year may be legally supplemented by the donor to match the new limits.

In addition to raising the cap on political giving to individual candidates at the federal level, the FEC’s action adjusts the existing annual limit on the amount a donor may give to the general account of the national political party committees – such as the RNC and DNC. In the 2015-2016 cycle, an individual may now contribute up to $33,400 per year to the general account of either party, up from $32,400 in the last cycle. This small uptick in the cap on giving to the national party committee general account also incrementally raises the amount an individual may legally give to the new specialized “convention”, “party headquarter building”, and “legal fund” accounts created by the parties in the wake of last year’s omnibus spending legislation. An individual donor may now give up to $100,200 per year to each of these special accounts, which the national parties can utilize to fund various expenses related to the presidential nominating conventions, upkeep of their party headquarter buildings, and election recounts or other party legal proceedings. For application purposes, the increased limits for giving to a national party, in either the general account or special account context, are retroactive to January 1, 2015.

In conjunction with raising the individual contribution limits for inflation, the FEC also increased the expenditure limitations it places on “coordinated party expenditures” made by national and state party committees in conjunction with general (or special) elections held in the House of Representatives and U.S. Senate. For coordinated expenditures in states with more than one congressional district, the election cycle limit has been raised to $48,000 for 2015 from $47,200 in 2014. The corresponding limit for Senate candidates has also been adjusted for inflation, with the amount of increase varying from state to state, depending on the state’s voting-age population. In Georgia, for example, the coordinated expenditure cap for Senate candidates increased from $708,900 in 2014 to $730,200 for 2015. In high-population states like California and New York, the coordinated expenditure cap increased to $2,847,100 and $1,490,100, respectively.

Another important aspect of the recent FEC notice was the increase in the lobbyist bundling disclosure threshold for political campaign committees. In 2014, a campaign committee was required to disclose to the FEC those contributions it received that were bundled by federal lobbyists/registrants and lobbyist/registrant PACs once such contributions aggregated to $17,300 in value. For 2015, however, the FEC increased this reporting threshold to $17,600 so as to keep up with inflation.

FEC Increases Political Contribution Limits, Coordinated Party Expenditure Limits and the Lobbyist Bundling Disclosure Threshold