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Carville B. Collins: Maryland campaign finance law changes, this year and next

The votes have been cast — and the returns are in — on Maryland’s earliest-ever state Primary Election, held June 24. Although the primaries are now over, Maryland’s campaign finance cycle is not. Campaigns gearing up for the Nov. 4 General Election, as well as contributors to General Election candidates, must still keep in mind that the four-year state election cycle continues until Dec. 31, 2014. This is especially important for purposes of ensuring that applicable limits on contributions to candidates are not exceeded by donors or recipients.

Part I of this article, published on April 28, described the major changes to Maryland’s campaign finance laws. While many of these changes will not go into effect until 2015, one change went into effect on April 11, 2014, and has ongoing implications for both the past Primary and the upcoming General Elections in Maryland this year. That change was the announcement by the Maryland State Board of Elections (“SBE”) on aggregate political contribution limits for the 2014 State and local elections in Maryland.

Specifically, SBE issued guidance, approved by the Maryland Attorney General’s office, explaining that the $10,000 aggregate limit on contributions (by any person or entity other than a state PAC) to all candidates for State and local office in Maryland and to State PACs, during the four-year State election cycle, would not be enforced.

Other changes to Maryland’s campaign finance law, not addressed in Part I of this article, are summarized here. These changes were enacted in 2013, but with an effective date of 2015.

Out-of-State PACs

State PACs organized in states other than Maryland (“Out-of-State PACs”) will be required to register with the SBE within 48 hours of making cumulative transfers of $6,000 or more during the four-year election cycle to candidates for State or local office in Maryland or to Maryland PACs.

These Out-of-State PACs will also be required to file reports of their expenditures during the election year in accordance with the filing deadlines for all Maryland State and local candidates and State PACs. These are all first-time requirements that will become effective January 1, 2015.

Current law governing Out-of-State PAC transfers will remain unchanged – they are subject to the same $6,000 transfer limit as State PACs, and no aggregate limit applies.

Nonprofit Participating Organizations

Entities organized under § 501(c)(4) or (6) or § 527 of the Internal Revenue Code that made certain contributions or donations of $6,000 or more that lead to a candidate or State PAC making a disbursement in the State, or that lead to a person making an independent expenditure or disbursement for electioneering communications in the State, are required to register with the SBE within 48 hours of making that contribution or donation.

These organizations, if required to register, must also report their five largest donors, or report how the public may access, via Internet, the organization’s reports that disclose all expenditures and donations. These are all first-time requirements effective January 1, 2015.

Persons doing public business or hiring lobbyists

Campaign finance reporting requirements generally apply to all candidates, State PACs and other campaign finance entities, but not to individual persons or entities who make political contributions to these candidates, PACs and other entities. The exception is for certain persons who do public business with the State or local government, or who hire lobbyists. Either group is subject to reporting requirements if they make certain campaign contributions. Under current law, persons who have contracts with all State or local governments in Maryland involving cumulative compensation or $100,000 or more, or who spend more than $500 to hire lobbyists at the State level, are required to report their political contributions to certain State and local candidates totaling over $500, during certain time periods.

Effective Jan. 1, 2015, there will be an array of changes for persons doing public business, the most significant of which are: (1) the $100,000 threshold for all contracts is changed to $200,000 for a single contract with a single governmental entity, and (2) only political contributions of $500 or more in a certain period made to persons who are candidates for a government agency or body with which the person is doing public business are reportable. Persons doing public business under these new thresholds will also be subject to new electronic filing, record retention, and certification requirements.

Enforcement

The law enacted in 2013 greatly expands the reach and effect of current enforcement provisions. Among the changes that could impact State PACs and their officers after Jan. 1, 2015, the SBE’s existing late fee powers will be extended to persons who fail to file an amended report, and the per-weekday penalty of $10-$20 per day will now also apply on weekend days and holidays, with maximum late fee accruals doubling from $250 to $500. For the first time, civil penalties of $500 per incident can be imposed for unauthorized expenditures, failure to maintain bank accounts or accurate financial records, and failure to report all contributions received and transfers made. If a State PAC lacks the funds to pay civil penalties or late fees, the officers of the State PAC will be responsible for paying these fines. The statute of limitations for misdemeanors under the campaign finance laws will be extended from two years to three, applicable only to offenses committed on or after Jan. 1, 2015.

Independent expenditures and electioneering communications

Under current law, persons who make independent expenditures or disbursements for election related communications in excess of $10,000 in an election cycle must report their activities to the SBE. Effective Jan. 1, 2015, there will be several more stringent requirements. These include: (1) the definition of communications subject to the reporting requirements has been expanded to include such large-scale communication methods as emails, mass mailings, telephone banking, texting, and other forms of modern-day campaign techniques; (2) the $10,000 reporting threshold has been lowered to $5,000; (3) time periods for when reports are due have been shortened; and (4) stricter penalties have been established, including a civil penalty of up to $1,000 per day for late-filed reports within 28 days of an election or 10% of the amount of expenditures not timely reported.

Local public campaign financing

Although not directly affecting campaign contributors and State PACs, they may be interested to know that the 2013 enactments authorize any county in Maryland to establish a system of voluntary public campaign financing after Jan. 1, 2015. This would be for executive or legislative branch elective offices at the County level.

This would entail the use of county funds from taxpayers to finance certain local elections. Depending on how a particular county implements such a system, campaign contributors and State PACs may be impacted by the infusion of tax dollars into political campaigns, spending caps placed on candidates, and other relevant restrictions. Public financing of elections has been permitted in statewide elections but not previously implemented in Maryland, except once in the 1994 gubernatorial election, and more recently, by some of the candidates for governor in the 2014 Primary Election.

Carville B. Collins is a partner of the law firm of DLA Piper in Baltimore and Annapolis, and has been a member of various election law and campaign finance review groups since 1995, including the Maryland Attorney General’s 2011 Advisory Committee on Campaign Finance that gave impetus to the enactment of comprehensive legislation in 2013. He may be reached at carville.collins@dlapiper.com. © Carville B. Collins 2014. All rights reserved.