Is Political Activity Compliance on Your Company’s New Year’s Resolutions?

As we are all evaluating our New Year’s resolutions, now is also the time for companies to reevaluate their approach to political-activity compliance. Not only is it important to determine whether your company can make political contributions under applicable campaign-finance law, it is also important to get a handle on pay-to-play restrictions to help ensure that your company remains eligible for government-contracting opportunities.

Did you know?

• Not all companies can make political contributions. The law often treats corporations, limited liability companies and partnerships differently. And some companies, such as insurance companies, banks and cable companies, may be prohibited from contributing at all.
• Not all contributions run a calendar year basis. Depending on the recipient type, contributions to political recipients may run on a per-calendar-year or per-election basis. If contributions run on a per-election basis, you need to make sure that you are properly tracking election cycles to avoid contributing over the campaign-finance or pay-to-play limit, as applicable. A primary election cycle may actually be a couple of years long depending on when a candidate declares.
• Disclosure obligations are not the same for all recipient organizations. Whether an organization is required to disclose its donors often depends on how the recipient organization is established under the law and may also vary based upon the activities in which the recipient organization engages.
• Contributions by your officers, certain employees who make more than $100,000, and the spouses and resident children of certain individuals associated with your company may jeopardize eligibility for government contracts. Many states and localities have adopted pay-to-play restrictions that not only cover contributions by the entity, but also cover contributions by individuals who may not necessarily have an equity interest in the company. Getting a handle on whether the political activity of your officers and certain employees is covered is crucial with respect to maintaining eligibility for government-contracting opportunities.
• Certain pay-to-play ordinances prohibit contributions in any amount. You cannot necessarily assume that if your company, its officers or certain covered employees make contributions below a certain threshold that you will be in compliance with applicable pay-to-play restrictions. Some pay-to-play ordinances contain an absolute ban on political contributions in any amount.

In addition to developing and adopting a political activity compliance policy, it is also important to train covered individuals on the scope of the policy. Please keep mind that the law in the area of campaign finance, pay-to-play and political-activity compliance changes frequently. Do not assume that all relevant people within your company are familiar with best practices or that because your company was familiar with applicable law two years ago that you are in compliance today.