ELEC Adopts Pay-to-Play Regulations

On March 6, 2007, the New Jersey Election Law Enforcement Commission approved proposed regulations implementing Chapter 271. With the exception of an amendment narrowing the definition of “officer,” ELEC adopted the rules as proposed. Read more for important details on coverage of non-profits and officer and director disclosure. Coverage of Non-Profit Organizations Pursuant to ELEC’s newly passed regulation N.J.A.C. 19:25-26.1, the definition of “business entity” encompasses, amongst other things, non profit entities. Thus, ELEC has included non-profits in the definition of “business entity” despite the fact that such entities are not expressly listed within the statutory definition of a “business entity” set forth in Chapter 271. Indeed, during the commentary period, many non-profit organizations protested their proposed inclusion in the definition of “business entity.” Some non-profit corporations qualify as a charitable organizations under section 501(c)(3) of the Internal Revenue Code, which prohibits such organizations from directly or indirectly participating in, or intervening in, any political campaign on behalf (or in opposition to) any candidate for elective public office. Violation of this prohibition may result in denial or revocation of tax-exempt status and the imposition of certain excise taxes. Disclosure of “Officer” and “Director” Contributions Based on the definitions of “officer” and “director” contained in the regulations, a business entity which may have been required to disclose reportable contributions to New Jersey political recipients by only several individuals associated with the business entity under P.L. 2004, c. 19 and/or P.L. 2005, c. 51 may now be required to disclose reportable contributions by many additional individuals. ELEC’s proposed regulations defined an “officer” as a president, vice president, secretary, treasurer, chief executive officer, or chief financial officer of a corporation, including a nonprofit corporation, or any person routinely performing such functions for a corporation. At its March 6, 2007 meeting, ELEC announced that the definition was narrowed with respect to vice-presidents to include only those vice-presidents who have at least some responsibility for public contracts. Thus, if you are a large corporation with hundreds of people with the title of “vice president,” you will have to identify those who deal with public contracts, survey those people on a regular basis, and disclose all reportable contributions made by those “vice presidents” and their spouses as part of both your pre-contract and annual disclosure obligations. Additionally, the definition of “director” includes any member of the governing board of a corporation, including a nonprofit corporation, whether designated as a director, trustee, manager, governor or by any other title. Accordingly, if you are a for-profit or not-for-profit organization with a large governing board, the new regulations require you to survey that board’s members on a regular basis and to disclose all reportable contributions by those members and their spouses as part of both your pre-contract and annual disclosure obligations. Note: The original form of this article appeared in the March 12, 2007 Genova, Burns & Vernoia Corporate Political Activity Law Update.