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Lawyers Address Business Political Activity Law


Describing the past two years as a watershed period in areas of the law affecting corporate political activities, lobbying and elections, Washington-based attorneys Lee E. Goodman, a shareholder in LeClairRyan, and Chris Ashby, a partner in the firm, covered an array of related topics in a Lorman Education Services teleconference in July

Describing the past two years as a watershed period in areas of the law affecting corporate political activities, lobbying and elections, Washington-based attorneys Lee E. Goodman, a shareholder in LeClairRyan, and Chris Ashby, a partner in the firm, covered an array of related topics in a Lorman Education Services teleconference in July. Chief among them were the First Amendment right of businesses to expressly advocate the election or defeat of candidates--a right affirmed in the Supreme Court's landmark decision in Citizens United v. Federal Election Commission--and the requirement, by an increasing number of state and local governments, that government contractors' sales employees must register as lobbyists, file lobbying disclosure reports, and conform with a growing list of other restrictions on their activities.

"For the first time in decades, American businesses will be legally permitted to make unlimited independent expenditures to advocate the election of candidates for office," said Goodman, whose practice is focused on election law and campaign finance, nonprofit political activity, First Amendment law, administrative law and federal and state government relations. "Many corporations will exercise this right by contributing funds to nonprofit organizations, which will conduct electoral advocacy. The corporations and nonprofits need to be aware of the changes in law and conduct their activities in compliance with a web of federal and state election and tax issues."

Goodman detailed a number of those issues, including specific requirements of the Federal Election Campaign Act and recent judicial and legislative developments. He noted that the DISCLOSE Act passed by the House in June, now under consideration in the Senate, would prohibit certain independent expenditures and electioneering communications by, for example, corporations with government contracts over $7 million ($50,000 in the Senate version of the bill), corporations that received TARP funds and have not repaid them, and businesses in which foreign corporations or individuals have more than a 20% ownership stake. The DISCLOSE Act also would require additional disclaimers identifying sponsors of independent expenditure ads and includes exemptions for certain types of organizations, including the so-called "NRA Exception." Goodman said that the Act is facing stiff political opposition in the Senate (where a filibuster has been threatened) and, if it passes, will face legal challenges in the courts.

Meanwhile, businesses that sell their goods and services to government need to be aware that 26 states now regulate business-to-government sales as a form of lobbying, Ashby said. "Consequently, in those states and many localities, a government contractor's sales employees may be required to register as lobbyists, report their compensation and activities and abide by a host of other restrictions," he said. "These restrictions can include annual training requirements, a ban on providing product samples and promotional items to government officials and prohibitions against contingent or commission-based compensation."

Ashby also zeroed in on so-called "pay-to-play" laws which ban or limit campaign contributions and gifts from government contractors to public officials. He said that wide variations among pay-to-play laws in different states and localities, suggested a five-step approach as the key to breaking down and understanding any pay-to-play law, and cautioned against a "one size fits all" approach to compliance with state and local pay-to-play laws.

"Clearly, these issues need to be high on the radar of legal departments at all corporations, especially those doing business, or seeking to do business, with federal, state and/or local government agencies," Goodman said.