New 2016 Campaign Finance Law

1. New 2016Campaign Finance Law For Filing and Enforcement Officers in Cities and Towns Arizona Municipal Clerks Association November 2016

2. Overview • Purpose – Review 2016 Changes • What is gone – What is new • Not covering everything for Clerks (July) • The Law and Resources • New Organization of CF Chapter • Overview of Clerk Responsibilities • Fewer Documents and Duties • Increased Enforcement Responsibility

3. Overview • Political Committees • Simpler with fewer types • Registration of Political Committees • Significantly fewer entities will qualify • Contribution Limitations • Limits unchanged, but more exceptions • Disclosure in Literature & Advertisements • Simpler – mostly same for everyone

4. Overview • Reporting for Organizations Making Independent Expenditures - Repealed! • Reporting Contributions & Expenditures • More reports required (for PACS, not candidates) • Reporting schedule change - simpler • Reports more complex (Committee questions) • Termination of Committees • Simpler from streamlined committees • Simpler for old committees to terminate • Challenge - All existing must terminate by June

5. Overview • Enforcement of Report Filing • Simpler, stricter filing deadline • Need Guidelines from SOS • Enforcement of Campaign Finance Violations • Significantly more Responsibility for Clerks • Role of Clerks presents several Challenges • SOS Guidelines will be Critical (Need!)

6. PURPOSE / CONTENT • Content of Outline • Duties and issues for local filing officers • NOT details on contribution & expenditures • Offered in SOS Workshops for candidates • Reference Summary • Reference Guide to apply law • Only a Summary – does not cover all details • Always refer to statutes – references provided

7. LAW – Legal Counsel • Important to consult with attorney • Campaign Finance regulation increasingly complex • Law and duties unclear in many cases – conflicts exist • Legal opinions differ. Know your attorney’s position. • Responding to Questions • Law is unclear – interpreting is legal advice • Filing Officer role – provide information, not advice • An opponent or public could challenge your advice • Appropriate response - "You need to discuss that with your attorney or campaign advisor."

8. THE LAW • Arizona Constitution, Art VII, Sec 16 “The legislature, at its first session, shall enact a law providing for a general publicity, before and after election, of all campaign contributions to, and expenditures of campaign committees and candidates for public office.”

9. THE LAW • Arizona Revised Statutes - Title 16, Chapter 6 • Campaign Finance (Article I) • §16-901 through 938 • New Organization • Clean Elections (Article II) • §16-940 through 961 • (Not applicable to cities and towns)

10. THE LAW - ORGANIZATION Arizona Revised Statutes - Title 16, Chapter 6 Campaign Finance (Article I) • Article 1 – Definitions, §16-901 • Art. 1.1 – Establishment of Committee, §16-905 - 908 • Art. 1.2 – Contributions, §16-911 - 917 • Art. 1.3 – Expenditures, §16-921 - 922 • Art. 1.4 – Reporting and Disclosure, §16-925 – 928 • Art. 1.5 – Biennial Financial Adjustments, §16-931 • Art. 1.6 – Committee Termination, §16-933 – 934 • Art. 1.7 – Enforcement, §16-937 – 938

11. THE LAW - RESOURCES • Arizona Election Law Pamphlet • Constitution, Titles 16, 19, 38 (Blue Book - Aug 2014) (2015 Supplement) – Need 2016 Supp • Attorney General Opinions (not law) • Secretary of State (materials online) • Campaign Finance Handbook (online system) • Election Procedures Manual (2014) (No 2016) • League of Cities and Towns • Municipal Election Manual (MEM) • Campaign Finance Reports Handbook • League General Counsel Opinions

12. LAW – Purpose & Limits • Purpose of Regulation • Public disclosure of contributions & expenditures • Protect public contributions from misuse • Limit contributions in candidate races (declining) • Limitation on Regulation • First Amendment (political speech) • Supreme Court decisions – Striking restrictions, upholding disclosure – Exploring when anonymity is necessary (no disclosure) • State Response to Decisions – also reducing disclosure

13. LAW - Enforcement • Through Public Disclosure of Information • Public, candidates & media identify issues • Voters enforce by casting ballots • Filing Officers Enforce Report Filing • Ensure that public disclosure occurs • Enforce Other CF Violations • Determine “reasonable cause” • Complaints being used as campaign tactic • Increased Clerk Role – Sole authority to initiate!

14. Overview of Clerk Responsibilities • “Filing Officer” for campaign finance documents for your city or town • Keep old documents for retention period! ($500 TES) • Assign Committee ID numbers & keep Log • Must provide Notice of CF laws and Statement of Org to applicants for Initiative, Referendum & Recall petitions (also Title 19 Pamphlet)

15. Overview of Clerk Responsibilities • Receive Campaign Finance Documents • Campaign Financing & Reporting Statement • Statement they have read campaign finance law • Candidates – with nomination paper (part of form) • Committee officers – with registration (in SO form) • Committee Registration Documents • Statement of Org only – $500 Exemption Repealed • Periodic Reports • Contribution & Expenditure Reports • No Activity Statement – Repealed • Candidate Annual No Activity Statement – Repealed

16. Overview of Clerk Responsibilities • Receive Campaign Finance Documents (Cont) • Candidate Notice of Large Contributions – Repealed • Notices of receipt of $1000 or more from a single source within 20 days before election • “10K” Notices –Repealed • Large contributions / expenditures by Prop & Recall • Termination Statements – Now only SO • Form for existing $500 TE to Terminate by June? (Old?) • Registrations & Notices of Independent Expenditures • By Corporations, LLCs & Labor Organizations • Repealed!

17. Overview of Clerk Responsibilities • Provide Electronic Filing & Posting on Internet • Filing officers must provide electronic filing option • Online database not required (yet) • Comply using fillable pdf forms filed by email or upload • May comply by opting into State System (2017-18) • Who Must Post Documents on Internet? • All filing officers (Previously only if Pop over 2500)

18. Overview of Clerk Responsibilities • Provide Electronic Filing & Posting on Internet • What Documents to Post • ALL campaign finance statements and reports • Statement of Org, Terminations, Reports • A Listof committees that filed $500 ES - Repealed • Posting NOT Required for other documents • Financial Disclosure Statements (Yet) (Some Post) • Where to Post • On city / town site if maintain a site • If no site, probably till may post on League site Not required for May post on city/town site (if have) or League site

19. Overview of Clerk Responsibilities • Enforce Campaign Finance Reporting • Determine Failure to File (on time) • Send Failure to File Notices (By email within 5 days) • Refer to attorney if does not file within 30 days • Enforcement of other CF Violations • Written complaint from 3rd party now required • Filing Officer is Sole officer to initiate investigations • If determine “reasonable cause” to believe someone is violating CF law, must notify attorney • City / Town Attorney is Enforcement Officer • Issues Notices of Violation

20. Overview of Clerk Responsibilities Enforce Filing of Registrations & Notices of Independent Expenditures - Repealed Required for Corps, LLCs and Labor Orgs making independent expenditures in candidate elections Must “Register” for each election cycle Must file Notice of Expenditures Clerk must verify whether entity has registered If Not – categorize “unverified” & contact entity

21. Responsibility Issues • Compliance is ultimately the responsibility of the candidates & committees • Law & scope of duties unclear (New law) • Interpretation and opinions differ • Some actions not required, but are appropriate for the Clerk role and further the purposes of the law • E.g. reminders of filing deadlines

22. Political Committees • No general definition applicable to all committees to identify a committee – Repealed • $250 Threshold before Register – Repealed • Instead – Had definitions for several Types of committees

23. Political Committees • Groups defined as Committees (separately) • Candidates and the committees they designate • Exploratory committee (Repealed Nov 5, 2016) • Separate segregated fund (Corps & Labor Orgs) • Political party • Political organization • Groups that circulate a petition for a ballot measure or recall (but not groups that support or oppose measure) • Separate Definition / Test for Other Groups (Subsection F Committees)

24. Political Committees • Separate Definitions – Repealed 2016! • New Definition – “Committee” means: • A Candidate Committee • A Political Action Committee (PAC) • A Political Party • Entity is a committee if meets tests in 16-905 (Similar to old Subsection F committees)

25. Political Committees Candidate Committee • Candidate must register a committee IF: • The candidate receives contributions or makes expenditures (in any combination) of at least $1000 in connection with that candidacy • Any combination: Receive $500 and spend it! • Candidate may have only 1 for same office during an election cycle (must combine any old) • $1000 increases $100 in Jan odd years - 2017?

26. Political Committees Political Action Committee • An Entity must register as a PAC IF: • Entity is organized for the “primary purpose” of influencing an election; and • Entity knowingly receives contributions or makes expenditures (in any combination) of at least $1000 in connection with any election during a calendar year • “Primary purpose” - excludes many (most) entities • Provision / Test in statute for what is Not (501 Charitable orgs) • Provision / Test for a rebuttable presumption of when primary purpose is influencing elections

27. Political Committees Political Action Committee (Cont) • “Any combination” of spend / receive $1000 • Receive $500 and spend it – required to register • “During calendar year” (not an election cycle) • Entity can receive or spend $999 annually ($1998 for election cycle), even if primary purpose is influencing elections and not be required to register or report. • Amount low for state, significant in small jurisdictions! • $1000 threshold increases $100 in Jan odd years • Increase in Jan 2017? SOS will determine.

28. Political Committees Political Action Committee (Cont) • Separate Segregated Fund • Corporations / Labor orgs cannot contribute to candidates • Establish a Fund to receive voluntary contributions from employees for making contributions to candidates • Fund must register as a PAC • Permitted contributions by Corporation / Labor Org • Contributions / expenditures on ballot measures • Independent Expenditures in candidate elections • Not required to “register” or provide notices for IEs • Instead, IE activity reported in New type of CF report

29. Political Committees? • Specific Situations . . . is it a committee? • A candidate? • Individual (not a candidate) acting alone? • Corporation that makes independent expenditures supporting a candidate? • An entity who files an argument on ballot measure & pays deposit?

30. Political Committees? • Specific Situations . . . is it a committee? • Business / organization involved in a ballot measure? • Business or organization that spends more than $750 to support or oppose a ballot measure? • Public utility spending its own money supporting its franchise measure? • Religious assembly or institution that spends $2500 influencing an election?

31. Political Committees - Definition • When to raise question . . . • Inquiry about candidacy (always upon 1st contact) • Inquiry about making contributions to candidates • Inquiry about initiative, referendum or recall (always on 1st contact) • Upon filing an argument on a ballot measure • Note: not a committee solely for filing argument • Inquiry about making contributions to influence a ballot measure

32. Political Committee Registration When to Register? • Within 10 days of qualifying as a committee • Not required before engaging in "political activity” • Accepting contributions or making expenditures • Distributing campaign literature or ads • Circulating petitions (Not required by CF law) • But, signatures on Initiative and Referendum petitions invalid

33. Political Committee Registration How to Register? • File Statement of Organization with Filing Officer • Stmt Org is now the ONLY registration document • $500 Threshold Exemption Statement - Repealed • Upon registration, PAC may engage in any lawful activity • Not required to establish separate committees for different activities (e.g. circulate petition and support candidates) • Not required to identify activities on registration statement • Note: A person or entity must track activity and report on first report after qualify as a committee

34. Candidate Committees • Candidate may be chairman and treasurer • Committee name must include candidate name (first or last) • Candidate may have only one committee for same office during same election cycle (Eff. Nov 5) • Will have to combine any existing old committees • No longer required to designate a committee for each election (Can only have one!) • Exploratory Committees - Repealed

35. Other Political Committees • Chairman & Treasurer must be different people • Committee name must identify the "sponsoring" organization, if any • Committees registered outside of AZ • Unclear if / how register in AZ (Old provision repealed) • Probably can register in AZ • Unclear if can use money received before register here

36. Ballot Measure Committees • Most special requirements for committees acting to support or oppose a ballot measure Repealed • Committee name not required to include: • The petition serial number (or Prop number) • Whether support or oppose the measure • Now must report activity to support or oppose ballot measures in campaign finance reports • Report must identify the ballot measure to which each transaction relates

37. Recall Committees • Is a Recall committee a ballot measure committee? • AG Opinion: No • Recall is not a ballot measure (results in a candidate election, not a Prop on a ballot) • A recall committee is a committee to influence a candidate election • Contribution limitations would apply to recall committees (and prohibition on corporate $)

38. Standing Political Committees • Eligibility to be “Standing” Committee • Active in more than 1 jurisdiction (“for 1 yr” repealed) • File a Statement of Organization with the SOS and a copy in each jurisdiction in which the committee is active • Registration Statement no longer has to be notarized • Only SOS assigns ID number • Also needs to file copy of amended Stmt of Org in each jurisdiction • Files Reports only with the Secretary of State • Committees cannot sponsor candidate or other committee

39. Penalty for Failure to Register • Civil Penalty • Presumptive penalty of the amount received or expended while not registered • Can be up to 3 times the amount received or expended • Petition signatures invalid • Initiative & Referendum • Sigs invalid if obtained before a Stmt Org filed • Recall • Sigs NOT invalid if obtained before a “Stmt Org” filed • Provision that Recall signatures invalid was Repealed

40. Penalty for Failure to Register • Nomination petition signatures • No statute invalidating nomination signatures (only in Title 19 for Initiative / Referendum, NOT Recall) • Filing officers have no authority to invalidate signatures • Superior Court decisions • Since 2006, Superior Courts have invalidated signatures on nomination petitions if committee not registered • No appellate court decision for legal precedent • Consult with your attorney – count and let Recorder or Court invalidate?

41. Statement of Organization Contents • Type committee, name, address, website, phone • Email address (must agree to receive all notices) • Candidate: Name (first or last) and office sought • PAC: Sponsor name or any common nickname • Sponsor contact information, including email • Officers names, address, occupation, employer • Statement by Chairman and Treasurer that have read all CF laws (part of form) • Designation of financial institutions to hold funds

42. Statement of Organization • Clerk issues ID number • Notarization not required (even for standing) • All filing officers must now post copy on Internet • Amendments • Required for any change in required information • Must file within 10 days after change (was 5) • No specific penalty for failure to amend timely

43. Treasurer Duties • Principal officer – has virtually all duties • Authorize all expenditures, keep records • Track details of all contributions and expenditures and File Reports • Maintain separate segregated bank accounts • Personal money, Recall, Corporate / other contributions • Use best efforts to obtain donor info • At least 1 documented written or oral attempt • Preserve committee records - 2 years • At request of filing or enforcement officer, must produce records required to be kept

44. Contribution Limitations • Limits apply to contributions to Candidates ONLY! • And possibly Recall committees (AG Opinion) • Limit: $6250 per cycle – same as for 2016 • Limits increase $100 in Jan of odd years – 2017? • Apply to an election cycle, not term office (now) • There are again now 2 cycles for a 4 year term • Cycle is 2 yrs – General to General (includes Prim) • For Recall cycle from issue serial # to the end • Contributions for recall can’t be used for other elections

45. Contribution Limitations No Limits Total an individual can give to all candidates Total a candidate can receive from PACs Use of candidate’s own money Foreign Contributions prohibited (Fed law)

46. Contribution Limitations Candidate Committee Limits • Candidate committee can’t give to other candidates • But – can contribute surplus to candidates if terminating • No limit on amount candidate committee can transfer to other committees for same candidate • Except – City / town candidates can’t transfer to state committee! • Transfers are contributions – individual donor limits apply • Candidate committees can contribute to other committees (other than candidate)

47. Contribution Limitations Candidate Committee - Reattribution of Excess Contributions • Candidates can’t knowingly accept more than limit • If unknowingly accept “Excess Contribution”: • Must refund excess within 60 days; or • Reattribute the excess if both the following apply: • The contribution was from an individual, and • The contributor authorizes the committee to reattribute the excess to another individual who is a joint account holder on the instrument used for the contribution

48. Contribution Limitations PAC Contributions • Limit for PAC: $6250 • Limit for Mega PAC (state qualified): $12,500 (Double) • PACs can only contribute to candidates using money received from individuals, partnerships, political committees or political party (not corporations, labor org) Political Party Contributions • Political party can’t give to non-partisan candidates (only to “nominees” of a party)

49. Contribution Limitations Corporations and Labor Organizations • Prohibited • Contributions directly to candidate committees • Permitted • Contributions to support or oppose ballot measures • Contributions to candidates from a segregated fund • Funded by voluntary contributions solicited from employees, shareholders, retirees and families of entity and its affiliates • Contributions for Independent Expenditures • “Independent Expenditures” for candidates (using corporate money, not contributions)

50. Expenditures Expenditure Exemptions • New list of items that are not expenditures • Use of email, Internet activity, or social media message if not paid for by the individual and does not contain a solicitation • Value of volunteer services • Payments for committee accounting & legal services • Others