Political Activity Compliance: A Complex But Necessary Subject for Compliance Professionals

By Scott Stetson
From Compliance & Ethics Professional, a publication for SCCE members

With the U.S. Supreme Court decision in Citizens United,[i] corporate involvement in political issues and campaigns is at an all-time high.  Lobbying, procurement lobbying, campaign finance, political action committees (PACs), public gift law—collectively these areas make up political activity compliance, a vitally important area that all compliance professionals should be aware of.  Political activity compliance is a complex area, because compliance requirements are continually changing with the passage of new legislation at local, state, and federal levels.  A large part of political activity compliance is tracking legislation on lobbying, campaign finance, procurement, ethics, and public gift law, so you are aware of possible changes in the law or administrative rules governing political activity.  This can be done internally or outsourced to a legislative tracking service.  Staying current on proposed rule changes is fundamental to maintaining total compliance.

In 2012 there were 12,374 registered federal lobbyists.  When you consider that there are also registered lobbyists in all 50 states, the total number of registered lobbyists exceeds 20,000.  Total federal lobbying spending for 2012 was $3.28 billion.[ii]  Spending by lobbyists at the state level is also significant.  For example, lobbyist spending in Florida for 2012 was $123 million.[iii]  The vast majority of lobbyists, whether in-house or contract, are hired to advocate the interests of corporations.  Every state, as well as Congress, requires lobbyists to register and file some form of disclosure reports, but 35 states have no threshold requirement for registration.  If you are lobbying, you need to be registered.  One area of particular importance is procurement lobbying.  An attempt to influence the award of a government contract is considered lobbying in a number of states, and registration and reporting is required.  Lastly, several cities and counties have enacted some form of lobbying registration and reporting requirements.

The majority of reporting revolves around lobbying expenditures made for the benefit of public officials.  Reporting may include itemization of lobbying expenditures, the name of the public official for whom the expenditure was made, and the subject matter, bill number, or issue lobbied on. A number of states also require registered lobbyists to disclose the amount of compensation they have received for lobbying.  Public officials include members of both the legislative and executive branches and in some cases, members of the judiciary as well.

Disclosure reporting is an area in constant flux as states introduce new legislation or regulatory agencies promulgate new rules affecting expenditure amounts or definitional changes to the term “gift.”  Lobbying expenditure reporting overlaps with ethics and public gift law, and compliance professionals need to be current in both areas.

Keeping track of 51 separate reporting systems is a daunting-but -necessary task to insure compliance. Penalties for non-compliance with registration and reporting requirements range from administrative fines to criminal charges.  Non-compliance also creates a public record and an unnecessary public relations problem. Some states post the names of late filers on the Internet.

Lobbying is only one facet of political activity that corporations are engaged in.  In the post-Citizens United world, spending by corporate political action committees (PACs) and Super PACs has increased substantially.  Additionally, 28 states allow direct corporate contributions to candidates or candidate committees.[iv]  Ironically, while some states allow direct corporate contributions, 28 states prohibit registered lobbyists from making campaign contributions while the legislature is in session.

In most corporations, the general counsel or the Government Affairs department are responsible for compliance.  Although this would seem to make sense, because the Government Affairs department should know what is necessary to maintain compliance, the corporate compliance officer needs to be included as the person who is responsible for the overall compliance functions of the organization.  If political compliance is too time consuming for the compliance officer and/or the general counsel, then serious consideration should be given to outsourcing the registration an