Independent Expenditures Collision Course

New York may soon set the record in moving from no regulation to overregulation in a bureaucratic nanosecond. The NY State Board of Elections recently proposed for public comment rules on “Disclosure of Independent Expenditures”, pursuant to last year’s legislative directive. As you may recall, the NYC Campaign Finance Board (CFB) has been wrestling with a similar, albeit different, mandate since a Charter Revision Commission proposal passed in 2010. So, are the two IE disclosure proposals now on the table compatible? In a word, no. While the State proposal sets forth IE disclosure standards for state and local elections across the State, the City proposal overlaps in setting IE disclosure standards for NYC elections. Both proposals would therefore cover independent expenditures by individuals, organizations, corporations and other entities in NYC elections. The first divergence is that the State proposal would require the spender to register and report as a political committee, whereas the City proposal does not maintain that the making of IEs requires registration as a political committee. The reason for the State’s approach is obvious: without registration as a political committee, the current statutory disclosure requirements would be inapplicable.  Ominously for the current City proposal, the proposed State rule establishes that “a political committee is the sole vehicle through which individual(s) or entities disclose an independent expenditure.” Does preemption loom? [Alternatively, does unconstitutionality loom? Individuals, corporations, and unions have a First Amendment right to make unlimited independent expenditures. The Supreme Court in Citizens United frowned upon an argument that it was sufficient to require that right be exercised through a political committee structure and subject to political committee rules.] Another divergence: the State’s proposed definition of IE is quite narrow, express advocacy through “magic words” (the Buckley v. Valeo standard) done without the candidate’s cooperation. The City’s proposed definition is much broader. It expands “express advocacy” to include a subjective “reasonable person” standard and further extends IEs to include “electioneering communications”, a third rail the State refuses to touch. While a news media exemption is likely encompassed by the State proposal, no exemption for member communications is signaled, an ironic development given the grief to which the CFB has been subjected on this subject. Another irony is that the State mandate of political committee reporting implies that its disclosure of contributions to IE spenders may encompass more transactions that what the City’s proposal contemplates. Compliance with the dual requirements will certainly be a headache. Let’s say a group wishes to make two expenditures in the 2013 NYC mayoral election: A billboard that says vote for Candidate X and a radio ad that says Candidate Y will raise your taxes. What reporting obligations would be triggered?

• State proposal: the group must first register as a political committee and then report what it raises and spends for the billboard to the State Board of Elections (if the billboard costs more than $1,000). Even though the radio commercial is not an IE under the State proposal, it might still be subject to disclosure as an expense of a political committee.

• City proposal: regardless whether the group registers as a political committee, it must disclose both expenditures to the CFB if the total cost exceeds $5,000. The contributions the group receives may then also be subject to the City's disclosure.

Even as the content of the reports may diverge, will the timing or the software for the disclosures match? Assuming the CFB proceeds to carry out its local mandate (a good bet), what are the odds the State and City will get together to have a unitary, or at least compatible, disclosure system? Will good government groups work to resolve the unnecessary complexities, or will they be content to declare victory and go home once two incompatible regulatory regimes are adopted? Stay tuned.