So-called “dark money” — political contributions and spending by groups that do not have to disclose their donors — continues to draw the attention of state legislators, with Colorado and New Jersey recently adopting laws that attempt to force some donor disclosure from the groups. They join other states, including Washington and California, that have passed similar laws. We expect this trend to continue.
In Colorado, the “Clean Campaign Act of 2019” requires disclosure by corporations (including nonprofits), labor organizations, and groups making independent expenditures that contribute, donate, or transfer $10,000 or more per year that is earmarked for either:
- making independent expenditures or electioneering communications or
- for the recipient to make a contribution, donation, or transfer to pay for an independent expenditure or electioneering communication.
Nonprofits covered by the law must disclose the name of any person giving the organization $5,000 or more earmarked for making independent expenditures or electioneering communications in the 12 months before either the independent expenditure or electioneering communication is transmitted or the funds are transferred, whichever is earlier. If, in turn, a disclosed donor meets the above criteria, then the disclosure must include the same information about the donor. For-profit companies must disclose ownership and control information.
The law becomes effective August 2, 2019, unless a referendum petition is filed before then. New regulations will likely clarify the meaning and impact of this law. The law also makes changes to political advertisement disclosures; laws against foreign interference in state elections; independent expenditures; and the state’s “small-scale issue committee” rules.
Two law changes in New Jersey increase the disclosure required of some nonprofit organizations operating in the state.
First, a new campaign finance and lobbying disclosure law creates an expansive new category of political committee under state campaign finance law called an “independent expenditure committee,” and then requires disclosure by such committees. An independent expenditure committee is defined as an entity:
- organized under federal tax law as a 527 political organization or § 501(c)(4) social welfare organization;
- that is not otherwise a political committee in the state; and
- that raises or spends $3,000 or more in an attempt to influence an election or the passage or defeat of a public question, legislation, or regulation, without coordinating those activities with a candidate or party. “Coordinating” is defined in great detail.
An independent expenditure committee must file quarterly disclosures of all contributions it receives in excess of $10,000 and all expenditures it makes in excess of $3,000 for influencing elections or influencing a public question, legislation, or regulation. The committee also must file a registration disclosing, among other information, the names of the individuals who control it. Candidates and public officials may not establish or control an independent expenditure committee.
The law is scheduled to take effect October 15, 2019, but this may not be its final form — the governor and legislature have indicated a desire to refine the law, particularly the portions related to influencing legislation or regulations. The law also makes other adjustments to political committee registration and other campaign finance rules.
Second, a rule change by the New Jersey Department of Consumer Affairs will affect IRC § 501(c)(4) organizations and other groups that must register as charitable organizations under the state’s charitable solicitation law. Such groups are now required to disclose to the state every contributor who gave the organization $5,000 or more in the tax year. While the information is not supposed to become public, unintended public disclosure due to lawsuits, leaks, and errors have occurred in other states with similar laws. The U.S. Treasury Department eliminated a similar federal disclosure requirement, with respect to the names of donors, for 501(c)(4)s and some other organizations last year.