A.G. Schneiderman Adopts New Disclosure Requirements For Nonprofits That Engage In Electioneering

Starting Today, Nonprofits Will Be Required To Disclose Extent Of Their Political Spending In Annual Reports To The Attorney General, Identify Donors And Expenditures Related To New York Elections

So-Called “Dark Money” Groups That Proliferated Since Citizens United Will Be Brought Into The Light

Schneiderman: Today’s Regulations Requiring Disclosure Of Nonprofit Electioneering Will Protect Charitable Organizations And Donors, Make Electoral Process More Transparent

NEW YORK – As part of a groundbreaking effort to bring transparency to the political process and protect donors to nonprofits, Attorney General Eric T. Schneiderman today announced that he has adopted new regulations that will require nonprofit groups, including 501(c)(4) “social welfare” organizations, to make more robust disclosures of their political campaign activities.  Effective today, nonprofits that are registered with the state will now be required to report the percentage of their expenditures that go to federal, state and local electioneering. Groups that spend at least $10,000 to influence state and local elections in New York will be required to file itemized schedules of expenses and contributions. Those disclosures will be available to the public on the Attorney General’s NY Open Government website.

“There is only one reason to funnel political spending through a 501(c)(4), and that is to hide who has bankrolled the effort. By shining a light on this dark corner of our political system, New York will serve as a model for other states, and for the federal government, in protecting the integrity of nonprofits and our democracy,” Attorney General Schneiderman said. “By requiring nonprofits to disclose the extent and nature of their electioneering activities, we are protecting prospective donors from misleading solicitations, and giving voters more information about who is behind many of the ads they will see in this year’s elections, and elections to come.”

Since the U.S. Supreme Court’s 2010 Citizens United decision, 501(c)(4) organizations, which are exempt from federal and state taxes because they purportedly engage in the “promotion of social welfare,” have become vehicles for political activity, including funding sham “issue ads” that attack candidates for public office. 501(c)(4)s have become attractive conduits for this sort of activity, because they can raise and spend unlimited funds, conceal their funding sources, and avoid paying corporate taxes on donations.  In the last two election cycles, 501(c)(4)s and other nonprofits that do not publicly disclose sources of funds reported spending over half a billion dollars on political intervention. But that number reflects only the spending that groups chose to report to authorities; the actual figure is probably much higher.

As the state law enforcement official with primary responsibility for overseeing nonprofit organizations, Attorney General Schneiderman is empowered by New York law to determine the form and manner in which organizations make required annual financial reports to his office, and to enact rules and regulations to administer the financial reporting system. The Attorney General makes these reports available to the public so that prospective donors can make informed decisions before contributing. In light of the recent spike in nonprofit election spending, the Attorney General is concerned that without improved disclosure, misleading solicitations and abuse of charitable assets for electoral purposes will undermine public confidence in the nonprofit sector.   Attorney General Schneiderman believes that expanded disclosure requirements will help protect the reputation of the nonprofit form and further empower donors to protect themselves.

Since the Watergate era, intervention in political campaigns has been largely confined to political action committees (PACs). PACs are governed by state and federal election laws that require them to disclose expense and contributor information to election authorities and the public. But since the Supreme Court’s decision inCitizens United v. FEC, there has been a well-documented proliferation of secretive nonprofit groups engaging in electioneering activities with minimal disclosure to regulators and the public.

Good government advocates have coined the term “dark money” to describe anonymous election spending through 501(c)(4)s. Advocates of government transparency decry dark money because it allows deep pocketed interests to spend millions of dollars supporting or opposing candidates — often even more than the candidates themselves spend — without disclosing their identities. This opens the door to conflicts of interest and corruption.

“When people spend money to try to influence our elections, the public needs to know the source of that money, and how it is being spent. The regulations going into effect today will ensure that New York nonprofits are not used to subvert that basic principle,” Attorney General Schneiderman added. “Simply put, transparency reduces the likelihood of corruption.”

Throughout 2013, the Attorney General’s office has held an open process to allow the public to comment on the regulations.  After submitting the proposed regulations to the Department of State in December, members of the public provided written comments on the regulations to the Attorney General’s office over the course of three months. The Attorney General’s office also held four public hearings, in New York City, Albany, Buffalo and Mineola, to allow members of the public to comment in person. In total, the Attorney General’s office received over 6,000 comments on the regulations.

The Attorney General adjusted the regulations based upon recommendations received from the public, submitting the revised regulations to the Department of State in April.  The regulations became effective today upon publication of the Attorney General’s Notice of Adoption in the State Register. 

Under the proposed regulations, nonprofits are required to begin making enhanced disclosures as part of annual financial reports filed with the Attorney General’s Charities Bureau. These enhanced disclosures are expected to occur in many cases in time to effect disclosure of information concerning 2013 local elections, including New York City elections, and in all cases in time for New York State’s 2014 elections.

“As secret money has overwhelmed our elections, federal regulators have failed in their most basic task,” said Michael Waldman, President of the Brennan Center for Justice at NYU School of Law. “Attorney General Schneiderman has shown decisive leadership to bring political spending out of the dark. His disclosure rule provides a national model. He is doing his part. Other officials in Albany must do theirs. That starts with swift enactment of comprehensive campaign finance reform.”

Susan Lerner, Executive Director of Common Cause New York, said: "The scourge of 'dark money' in our politics must be stopped.  Donors and the public have a right to know who is funding nonprofits that intervene in our elections.  I commend Attorney General Schneiderman for his innovative efforts to promote transparency and encourage other policymakers to do the same."

NYPIRG Legislative Counsel Russ Havensaid: “States across the country eager to shed light on who really underwrites ‘dark money’ campaigns should pay close attention to the new ground that Attorney General Schneiderman has broken in this area.  Using existing tools to go after new problems is the hallmark of innovative regulation and responsive government.  Every bit of sunshine that is shed on the shadowy world of dark money strengthens our democracy.  NYPIRG applauds Attorney General Schneiderman and his staff for leading the way in this critically important area.”

"Undisclosed donors funneling money to dark money groups to influence elections is a rampant problem across all levels of government,” said Melanie Sloan, Executive Director of Citizens for Responsibility and Ethics in Washington (CREW). “While it may have started out impacting congressional and the presidential elections, it has now become a problem in state legislative and judicial races as well.  Americans are rightfully concerned about the role of money in politics and have a compelling interest in knowing who is funding candidates and ballot initiatives so they can make educated choices at the polls.  CREW applauds New York Attorney General Schneiderman for introducing common sense regulations that will pull back the curtains on shadowy political groups masquerading as social welfare organizations."

Copies of today’s adopted regulations and other related information are available online here.

Summary of AG Schneiderman’s Disclosure Regulations

Application:

  • The new regulations apply to all registered organizations exempt from taxation under section 501(c) of the Internal Revenue Code, except for 501(c)(3) organizations, which are already strictly prohibited from intervention in political campaigns.

Types of Advocacy Covered:

  • The regulations cover two types of “electioneering activities”:
  • Express advocacy: advertisements and other communications that call specifically for (or are susceptible of no reasonable interpretation other than as a call for) the election or defeat of a particular candidate, referendum, or party.
  • Election targeted issue advocacy: communications made within 45 days of a primary election or 90 days of a general election that identify or depict particular candidates, referenda, or parties by name, but do not explicitly call for their election or defeat.
  • However, this does not include:
  • The promotion of town halls and similar forums to which multiple candidates are invited and given equal opportunity to present.
  • Communications by an organization to its own members that are purely issue advocacy.

Communications Covered

  • The regulations apply to communications through the following methods and media:
  • Paid advertisements broadcast over radio, television, cable, or satellite
  • Paid placement of content on the Internet or other electronic communication networks
  • Paid advertisements published in a periodical or on a billboard;
  • Paid telephone communications to one thousand or more households;
  • Mailings sent or distributed through the United States Postal Service or similar private mail carriers to five thousand or more recipients
  • Printed materials exceeding five thousand copies.

Aggregate Disclosures

  • The regulations require covered nonprofits to disclose the amount and percentage of their total annual expenditures that go to influencing federal, state and local elections.

Itemized Disclosures

  • Attorney General Schneiderman’s regulations require covered nonprofits that spend $10,000 or more in a year in connection with New York state and local elections to file an itemized schedule disclosing:
  • Each expenditure of $50 or more that it made in connection with a New York state or local election, including the expenditure’s recipient, date, amount and purpose.
  • Contributions totaling $1000 or more from a single contributor, including the contributor’s name, employer and address, and the amount and date of the contributions, subject to certain limitations and exceptions to protect donor privacy.

Exemptions from Disclosure to the Attorney General

The following information need not be disclosed to the Attorney General:

  • Information that a covered organization discloses to another agency that makes it available to the public.
  • Information about donors whose donations are deposited into a segregated fund that is not used for electioneering in New York. So long as an organization’s New York electioneering expenses are paid out of a segregated fund, the organization is only required to disclose donors to the segregated fund.

Exemption from Public Disclosure

Some information on donations that must be disclosed to the Attorney General may be exempt from disclosure to the public if a waiver is granted by the Attorney General.

  • If the organization’s primary activities involve areas of public concern that create a reasonable likelihood that disclosure of donors will cause undue harm, threats, harassment or reprisals, the organization or the donor can apply to the Attorney General’s office for a waiver from disclosure of information concerning that donor.
  • Waiver applications may be made using a form that will be available here.
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