Pay-to-Play: ELEC Proposes Regulations

The New Jersey Election Law Enforcement Commission recently proposed regulations to implement P.L. 2005, c. 271 (“Chapter 271”). The Commission held a public hearing on November 21, 2006 and accepted written comments on its proposed Chapter 271 regulations up until January 5, 2007; exactly one-year after Chapter 271 was signed into law. Read more for a summary of the proposed regulations. Disclosure Requirements Chapter 271 contains broader disclosure requirements than either of the other statewide pay-to-play laws currently in effect (e.g., P.L. 2004, c. 19 and P.L. 2005, c. 51). In addition to requiring a business entity to disclose certain reportable contributions by the business entity itself, its principals, subsidiaries and political action committees, Chapter 271 also requires a business entity to disclose certain reportable contributions by its partners, officers and directors (regardless of interest) and their spouses. Chapter 271 requires disclosure by a business entity and certain persons and entities associated with that business entity at two junctures: (1) on a pre-contract basis; and (2) as part of an annual disclosure. The first disclosure obligation requires a business entity receiving a “non-fair and open” government contract worth more than $17,500 at the state, county or municipal level to file, not later than ten (10) days before entering the contract, a disclosure statement with the contracting government entity. The second disclosure obligation requires a business entity that has received $50,000 or more in the aggregate during a calendar year through contracts with New Jersey government entities to file an annual disclosure with ELEC. Contributions Deemed to be Made by a Business Entity Chapter 271 contains a broader definition of contributions deemed to be made by a business entity than either of the two other statewide pay-to-play laws currently in effect (e.g., P.L. 2004, c. 19 and P.L. 2005, c. 51). For example, pursuant to Chapter 271, a business entity that is not a natural person must not only disclose reportable contributions by the business entity itself, its principals, subsidiaries and/or political action committees, but a business entity must now also disclose reportable contributions by any partner, officer or director of the business entity (regardless of interest) and their spouses. Based on the proposed definitions of “officer” and “director,” a business entity may now be required, pursuant to Chapter 271, to disclose reportable contributions by hundreds of individuals on its Chapter 271 disclosure forms. Participation in a PAC May Amount to “Direct or Indirect” Control over the PAC In addition to requiring broader disclosure requirements than the requirements already in place, the proposed Chapter 271 regulations also contain an extremely broad definition of what it means to “directly or indirectly” control a political action committee (“PAC”). Pursuant to ELEC’s proposed regulations the criteria for determining whether a business entity “directly or indirectly” controls a PAC and is required to disclose contributions by that PAC shall include, but not be limited to, whether the “business entity” participates: (1) as an organizer of the PAC; (2) in decision-making with regard to specific activities of the PAC; or (3) in the formation of the PAC’s policies. Note: The original form of this article was published in the January 29, 2007 Genova, Burns & Vernoia Corporate Political Activity Law Update.