Political Law Playbook – April 2024

April 24, 2024

Introduction

Welcome to the April 2024 edition of the Political Law Playbook. This month's federal coverage features the Federal Election Commission's proposed regulations that would allow federal candidates to spend campaign dollars on security measures and the Commission's new advisory opinion, which indicates that certain paid canvassing activities may not constitute public communications for the purposes of federal law. We also highlight bipartisan legislation in the Senate that would mandate disclosure of "substantial" artificial intelligence ("AI") use in federal political advertisements.

At the state level, legislatures and courts across the country have worked to settle politically charged issues ahead of the 2024 general election. Of particular note, for the first time in the state's history, Oregon has passed legislation implementing political contribution limits. In Wisconsin, political advertisements must now disclose AI generated content. Meanwhile, in North Carolina, a three-judge panel found the general assembly's plan to restructure the Tarheel State's election boards to be unconstitutional.

Federal Elections & Campaign Finance

FEC Proposes New Regulations to Allow Candidates to Pay for Security Measures - The FEC recently proposed new regulations to allow federal candidates to use campaign funds for a wide range of security measures. The proposed regulations represent a significant expansion of the permissible uses of campaign funds amid a heated political environment. The changes would allow federal candidates to use their campaign accounts to pay for things like security personnel, camera equipment, motion detectors, and cybersecurity services provided these purchases "address ongoing dangers or threats" arising from their status as federal candidates or officials and they pay the fair market value for such goods and services. After a sixty-day comment period, the Commission will take any comments into consideration, and could make tweaks to the proposed regulations, before voting on the final rule. It is believed that a final vote will be held either at the end of the summer or early fall.

Bipartisan Senate Bill Would Mandate Disclosure of "Substantial" AI Use in Federal Political Ads - In March, Senators Amy Klobuchar (D-MN) and Lisa Murkowski (R-AK) introduced the "AI Transparency in Elections Act." If enacted, the bill would require political advertisements with AI-generated images, audio, or video to include a statement disclosing the use of such content. The legislation would also require the FEC to create criteria for determining when a communication includes content "substantially generated" by AI, and thus is covered by the law, and develop language to be included in the required disclosure. Senator Klobuchar co-sponsored similar legislation last year, but that bill has so far attracted only Democratic support.

Voting Advocacy Group Sues Alleged Creators of AI-Linked Robocall in New Hampshire Primary - As we reported in the February 2024 Edition of the Playbook, New Hampshire primary voters received robocalls that allegedly used AI to mimic President Joe Biden's voice and discourage voters from coming to the polls during the state's presidential primary election. In a new lawsuit, the League of Women Voters of New Hampshire accuses campaign consultant Steve Kramer and telecom companies Life Corporation and Lingo Telecom of being responsible for these calls, and alleges voter intimidation, coercion and deception in violation of federal and state laws, including the Voting Rights Act and the Telephone Consumer Protection Act. The suit was filed on behalf of three voters who said they received the robocalls and asks the court to fine the defendants and block them from producing, generating, or distributing other robocalls generated with AI. Mr. Kramer, who at one point advised Representative Dean Phillip's presidential campaign, has publicly acknowledged his involvement in the creation of the robocall and claims that it started as an act of civil disobedience to call attention to the dangers of AI in politics.

FEC Issues Advisory Opinion Regarding Whether Certain Canvassing Activities Constitute Public Communications - In March, the FEC released an advisory opinion related to a PAC's paid canvassing program. The PAC seeking the advisory opinion sought to retain and pay third-party vendors, managed by the PAC's paid staff, to execute a canvassing program. Third-party vendors would design and produce canvassing literature and a script, and hire, train, and manage the canvassers, who would only visit individuals who have opted-in or otherwise sought out a visit by the canvassers. In the opinion, the Commission concluded that the described canvassing literature and scripts do not qualify as public communications, and as a result the costs to produce and distribute such literature and scripts cannot constitute coordinated communications or independent expenditures under FEC regulations. This guidance from the FEC will have far-reaching impacts on many non-campaign entities that currently engage in paid canvassing and have been reporting such activity as independent expenditures with the FEC.

FEC Announces New Enforcement Case Procedures - The FEC has adopted new procedures for public disclosure of closed enforcement cases. Under the previous procedures, disposition letters were sent to the complainants and respondents shortly after the Commission voted to close the file. The file was made public within 30 days of the date on which the Commission sent case disposition letters. Under the new procedures, when the Commission formally votes to close an enforcement matter, that action will be effective 30 days after the Commission Secretary certifies the Commission's vote. Disposition letters will be sent to the complainants and respondents after the 30 days have elapsed and the file closes. This will occur simultaneously with the public release of the file. Administrative complainants will have 60 days from the day they are notified of the case's outcome to determine whether to seek judicial review of the Commission's actions, as they will be notified on the day the file officially closes. These new procedures are effective this month, and the first cases to be released under the procedures are expected to close later this month.

Federal Lobbying & Ethics

Ethics Complaint Against Senator Whitehouse Alleges Support of Legislation Beneficial to Wife's Financial Interests - A conservative watchdog organization recently filed a complaint with the Senate Ethics Committee urging them to investigate Senator Whitehouse (D-RI) for potential conflicts of interest connected to his wife Sandra Whitehouse's consulting business. Senator Whitehouse's wife is the president of Ocean Wonks LLC, a Rhode Island-based consulting firm whose clients have received millions from legislation supported by Senator Whitehouse, the ethics complaint alleges. The Senator has denied any wrongdoing in conjunction with the accusations.

Nonprofit Compliance & Disclosure

Nonprofit Argues that Charitable Organizations' Political Activities Should Not be Restricted - A nonprofit is seeking declaratory judgment from the United States Tax Court asserting that the federal law prohibiting Section 501(c)(3) nonprofits from engaging in political activity is unconstitutional under the First Amendment. In its application for tax exemption under Section 501(c)(3) of the Internal Revenue Code (the "Code"), the nonprofit SAFE SPACE asserted that it will engage in candidate endorsements and "substantial" lobbying activities - both of which are prohibited activity for public charities under the Code. The Internal Revenue Service ("IRS") has not yet issued a determination on whether the organization qualifies under Section 501(c)(3), and therefore, the organization asserts, the IRS has constructively denied its application. SAFE SPACE's mission is to educate students and the general public on the importance of freedom of thought and intellectual diversity on college campuses. In its filing, the organization requests that the Tax Court qualify it as a tax-exempt organization under Section 501(c)(3) because the Code's restrictions on political activity are facially unconstitutional and as applied to SAFE SPACE. Nonprofit law commentators anticipate that the case may ultimately find its way to the US Supreme Court.

Foreign Agents Registration Act

Foreign Agent Law Faces Sweeping Changes - This month, the Department of Justice ("DOJ") is expected to propose sweeping updates to disclosure rules for agents of foreign principals who are engaged in political or other activities in the United States. The changes could reshape the contours of the Foreign Agents Registration Act ("FARA"), a law which has been on the books since World War II. The DOJ has signaled that it is open to making potential revisions that may impact key regulatory provisions applicable to the statute, including the "commercial" and Lobbying Disclosure Act ("LDA") exemptions, and help bring relevant disclosure guidance better into alignment with the digital era. The commercial exemption to FARA currently excuses an agent of a foreign principal from registration obligations under the statute if the agent's activities are private and nonpolitical activities that further bona fide trade or commerce. The LDA exemption excuses an agent that has engaged in federal lobbying activities and has registered with the House and Senate in accordance with the LDA. Changes to these exceptions could have a cascading effect for companies doing business with foreign governments as well as for policy groups that conduct advocacy work on behalf of foreign entities.

Non-Federal Elections & Campaign Finance

Oregon Limits Contributions to Political Candidates - For the first time in the state's history, Oregon will limit contributions to state political candidates. A recently enacted law holds that starting in January 2027, individuals and corporations will be limited to giving no more than $3,300 to a statewide candidate per election cycle, while political party committees will be restricted from donating more than $30,000 per cycle. Under the new rules, "membership organizations" such as labor unions and nonprofit advocacy groups will face donation limits of up to $26,400 to a statewide candidate per cycle. Limits will be lower for non-statewide candidates running in legislative, district attorney, or circuit court judge races. Political parties and "membership organizations" will be permitted to donate up to $15,000 and $13,200, respectively, to such candidates. The $3,300 limit for individuals and corporations remains the same for non-statewide recipients. The law also directs the Oregon Secretary of State to create an online dashboard by 2028 that lists the 100 largest contributors to candidates and campaign committees, and will disclose how much money industry groups donate to candidates.

Pennsylvania House Advances Campaign Finance Reform Legislation - The Pennsylvania House of Representatives State Government Committee recently advanced a pair of bills that would reform Pennsylvania's campaign finance laws by expanding reporting requirements for independent expenditures and for candidates running for the state legislature. If signed into law, House Bill 1472 would amend the Pennsylvania election code to require the reporting of campaign finance reports from civic leagues and Section 501(c)(4) tax-exempt organizations that independently advocate for or against candidates for office. A piece of companion legislation - House Bill 1220 - would amend Pennsylvania's election code to require candidates for the state House and Senate to file expense reports on or before the sixth Tuesday prior to the election, in addition to filing campaign expense reports on the second Friday before the election. Questions have already been raised about the constitutionality of House Bill 1472, and may face legal challenges if signed into law. Both bills are currently under review at the legislative committee level.

Texas Could Require Social Media Influencers to Disclose Paid Political Posts - The Texas Ethics Commission recently gave its initial approval to a proposal that would require social media users to disclose if they are being paid to share or create political advertisements. The action comes just months after The Texas Tribunereported that a company called Influenceable LLC paid internet influencers to defend Attorney General Ken Paxton ahead of his state senate impeachment trial. The Commissioners did not mention the company by name at their March 20 meeting, but the agency's general counsel noted that the rule change was in response to "at least one business" that paid social media users for undisclosed political messaging. The proposed rule could be finalized at the Texas Ethics Commission's next meeting in June.

Voters in Huntington Beach, California Approve Voter ID Ballot Initiative - Voters in Huntington Beach, California, voted to approve a ballot initiative allowing city officials to require all residents who want to cast a ballot in municipal elections to show a valid ID. The measure, which was approved by 53.4% of voters, also adds more polling places and authorizes city officials to monitor drop boxes. A member of the City Council stated that the City anticipates implementing the law by 2026. The City is the latest in a number of Republican leaning jurisdictions that have taken steps to introduce voter ID laws since the 2020 presidential election.

Judges Rule North Carolina State Legislature Cannot Restructure State Election Boards - A bipartisan three-judge North Carolina state superior court panel recently issued a ruling barring the Republican-controlled state legislature's effort to restructure state and county election boards as an unconstitutional usurpation of appointment power from the executive branch. Under current state law, the North Carolina governor has the power to appoint all members of the five-person state election board. The process for populating county election boards, which currently have five members, is more complex, but the governor appoints the chairs. The bill at question in the suit, which passed the state's legislature last year, would have created an eight-member state election board with an equal number of Democrats and Republicans appointed by the state legislature. County election boards would have had similar structures. The ruling constitutes a short-term win for Democrat Governor Roy Moore, who filed suit last fall against Republican legislative leaders hoping to bar the change and its infringement on his appointment powers. Legislators are expected to appeal the trial court's decision in due course.

Montana Supreme Court Declares Voting Laws Unconstitutional - The Montana Supreme Court recently affirmed the ruling of a lower court in the state determining that four pieces of legislation passed by the state's legislature in 2021 contravene the fundamental rights of voters outlined in the Montana State Constitution. The bills at issue in the case barred the practice of same-day voter registration, enacted new voter identification requirements, prohibited paid third-party ballot collection, and banned county election officials from distributing mail-in ballots to minors who would be eligible to vote by Election Day. The court's majority opinion leaned heavily on the view that Montana's Constitution guarantees stronger voter protections than the US Constitution. The majority opinion also supported the trial court's determination that the state legislature's voter fraud and voter security justifications for the legislative changes were insufficient to overcome the purported burdens placed on voters. Two justices on the court authored a lengthy dissent criticizing the majority's inconsistent analytical approach and substitute of its own will for that of the legislature. The legislature is likely to pursue new versions of these bills in future sessions, but for now the 2021 bills will remain inactive.

Political Ads in Wisconsin Must Now Disclose AI-Generated Content - On March 22, the Governor of Wisconsin signed into law a bill which will require candidates and political groups to disclose the use of AI in certain political advertisements. The law, which had bipartisan support, requires any audio or video campaign materials - whether produced by a candidate, PAC or other campaign entity - to disclose at the start and end of an ad if they used "synthetic media," or media that is "substantially produced by means of generative artificial intelligence." Groups that violate the requirement will be subject to fines.

Non-Federal Lobbying & Ethics

In the Kansas House, Lobbyists Who Ask for a New Law are Named on the Bill - Each bill in the Kansas House of Representatives now lists who requested the legislative change: whether that be a lawmaker at someone else's request or an individual lobbyist for a specific client. Historically in Kansas, legislation was largely sponsored by individual lawmakers - fifty years ago, nearly 70% of bills and resolutions were sponsored by individual lawmakers. Today, the figure is around 15% after decades of committees sponsoring an increasing percentage of bills. This practice, sometimes referred as "anonymous" bills, was one reason that The Kansas City Star declared in 2017 that the process of passing laws in the state's legislature was "among the least transparent in the country." Other states, including Massachusetts, New York, and Ohio, have disclosure rules requiring lobbyists provide information about specific measures their clients are watching. However, the Kansas House is currently the only state legislative body actually listing lobbyists and groups on its bills.

Redesign of the Pennsylvania Governor's Mansion Is Funded by Undisclosed Donors - Murky details regarding the planned redesign of the Pennsylvania Governor's mansion have led media in the Keystone State to begin raising ethics questions about the process and participants. According to information obtained via a public records request, the redesign will focus on bringing in new pieces of furniture, art, and other items to the public areas of the historic mansion along the Susquehanna River. However, little else is known about the project, including who is managing it, raising money for it, or paying for it. The design contract, made with a New York design firm, was signed by a nonprofit organization named Team Pennsylvania whose mission is to bring together public officials and private-sector leaders to collaborate on bolstering the state's economy. While the organization publicly acknowledges that its investors include corporations from Pennsylvania's largest industries, Team Pennsylvania is not required to disclose its donors. The arrangement raises questions about the Pennsylvania Governor's ties to the organization, and whether expenses paid on his or his administration's behalf by the nonprofit should be disclosed on his annual statements of financial interest.

Michigan House Democrats Introduce Lobbying Disclosure Bill Package - Democrat members of the Michigan House of Representatives recently introduced a package of bills called the "BRITE Act" - Bringing Reforms in Integrity, Transparency and Ethics - that would require more disclosure from lobbyists, lawmakers, and other state-level public officials. In part, the BRITE Act, would require nonprofit Section 527 and 501(c)(4) organizations to register with the Secretary of State, and disclose the name of the individual who directs or controls the organization and the name of the official or candidate with whom the organization is associated. If enacted, the legislation would also bar lawmakers from becoming lobbyists within one year after their term ends (with some exceptions), require the disclosure of gifts from lobbyists to legislative staff, and require disclosure of items, including food and travel, purchased for elected officials by a membership organization or association.

Miami Mayor Absolved in State Ethics Probe - The Florida Commission on Ethics recently dismissed a complaint filed against Miami Mayor Francis Suarez over his attendance at high-end Formula 1 racing events, finding that he reimbursed the ticket costs and that there was no probable cause to believe he accepted gifts in exchange for political favors. The Mayor's attendance at the Miami Formula 1 race events spurred extensive local news coverage and scrutiny over who bankrolled the attendance costs. An ethics complaint filed against the Mayor alleged that he engaged in an ongoing abuse of public office to benefit and enrich himself while compromising his work to properly represent the best interests of City of Miami residents. After a months-long probe, the Commission on Ethics determined that Suarez reimbursed Kenneth Griffin, head of the hedge fund Citadel, for the cost of attending the events two months after the media firestorm, but before the 90-day deadline to reimburse a would-be gift under Florida's ethics rules.

The Courts & Free Speech

US Supreme Court Holds that Public Officials May Be Held Liable for Blocking Critics on Social Media - Last month, the Supreme Court ruled that public officials who post about topics relating to their work on their personal social media accounts are acting on behalf of the government, and therefore can be held liable for violating the First Amendment when they block their critics, but only when they have the power to speak on behalf of the state and are actually exercising that power. The Court's ruling resulted from a pair of cases involving local officials in California and Michigan who blocked constituents who made repetitive and critical comments on their personal social media accounts. Coverage of the cases' oral arguments was included in our November 2023 Edition of the Playbook. The Court stressed that a determination relying on this decision will require a fact-specific undertaking in which the post's content and function are the most important considerations. This ruling is the first of several expected during this Supreme Court term involving the relationship between government and social media.

Federal Judge Suspends Enforcement of Maine Law Barring Foreign Spending on Referendum Elections - A federal judge has halted enforcement of a Maine law designed to bar foreign government-owned entities from spending money to influence referendums. Approved by 86% of Maine voters last November, the law prohibits any entity or business with at least 5% ownership by a foreign government or government-influenced entity from spending money on state or local elections. In granting the plaintiffs' motions for a preliminary injunction, the judge concluded that the law could apply to domestically held corporations and, as a result, is likely facially unconstitutional. The court's granting of an injunction foreshadows that U.S. District Court Judge Nancy Torreson is likely to find that the new law is contrary to US Supreme Court precedent protecting the constitutional right to political speech in the corporate context.

Practice Pointers

This edition of Practice Pointers focuses on the changing cadence of campaign finance reports due for federal and state PACs in 2024. As a presidential election year, your PAC's federal and/or state reporting obligations may change, in part depending on the nature of the PAC's activities.

Federal political action committees (including separate segregated funds, nonconnected, hybrid, and super PACs) must elect to file regular reports with the FEC on either a quarterly or monthly basis. During non-election years, quarterly filers file semi-annually and monthly filers file on a monthly basis. In election years, in addition to its quarterly filings, a quarterly-filing PAC must also file a pre-general report if the committee makes contributions or expenditures in connection with a federal election during the pre-general reporting period and a post-general report 30 days after the general election, regardless of its activity. For monthly filers, instead of filing November and December reports, such PACs must file pre- and post-general reports. Pre-general reports are due 10/24/2024 and post-general reports are due 12/05/2024.

Many states, including California, Georgia, and Texas, also change the cadence of state PAC reporting obligations during election years. Additionally, other jurisdictions require certain committees to file reports if they engage in specified political activity leading up to primary and general elections.

The Dentons Political Law Team regularly advises a wide array of clients on federal and non-federal PAC filings, so if your organization or client has questions regarding federal, state, or local campaign finance reporting obligations this election year, please do not hesitate to reach out to us for assistance.

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