The Future of New Jersey’s “Dark Money” Bill Remains Uncertain Amid Constitutional Challenges

Yesterday, a federal judge issued a stay on the implementation of what has become known as New Jersey’s “Dark Money” Bill. The law was scheduled to take effect on October 15, 2019 and would require 501(c)(4) and 527 organizations engaged in issue advocacy, lobbying and independent expenditures in New Jersey to register with and report to the New Jersey Election Law Enforcement Commission on a regular basis. The first reports for these groups would have been due on January 15, 2019.

Enforcement of the law is now on hold as constitutional challenges to the law proceed in the court system. Although disclosure plays an important role in the current political environment, the question remains whether this New Jersey law goes too far under constitutional standards. For example, the new law regulates issue advocacy and requires 501(c)(4)s and 527 groups that are involved in issue-based discussions and communications to disclose their donors–under current law, issue-advocacy communications do not trigger reporting of donors and expenditures. The federal judge expressed concern that such disclosure requirements would chill the exercise of First Amendment right to issue-based communications.

The new law also subjects groups that are engaged in lobbying to additional registration and disclosure requirements. The regulation of lobbying as part of this new law raises questions because individuals and entities engaged in lobbying in New Jersey are already subject to lobbying-specific registration and reporting requirements. So, the question becomes whether these groups will be subject to additional reporting requirements and whether 501(c)(4) and 527 organizations engaged in lobbying will be subject to more stringent reporting requirements than other groups engaged in lobbying.

Finally, the new law places registration and reporting obligations on groups engaged in independent-expenditure activity. Under the current law, many independent-expenditure groups are already registered with and report to ELEC. Thus, if the new law goes into effect, entities engaged in independent-expenditure activity in New Jersey may be subject to different registration and reporting requirements depending on whether they are already registered with and reporting to ELEC.

The bottom line is that, although the intent behind the new law is valid, in its current form, the law appears to go too far with respect to disclosure and reporting. The law also seems to create a regulatory nightmare in that it overlaps with—and also contradicts—current reporting paradigms.

While it remains to be seen what the outcome of this “Dark Money” law will be, these new reporting requirements will not go into effect for the time being.  For more information on negotiating these changes, click here.