Political Activity Law Issues Should be Top-of-Mind for Businesses

WASHINGTON, July 29 /PRNewswire/ --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 on July 14. 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, non-profit political activity, First Amendment law, administrative law and federal and state government relations. "Many corporations will exercise this right by contributing funds to non-profit organizations which will conduct electoral advocacy. The corporations and non-profits 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 of Representatives 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 pointed out that the Act is facing stiff political opposition in the U.S. 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 "B-to-G" (business-to-government) sales as a form of lobbying, stressed Ashby. "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 related. "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 noted 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.

The two attorneys used the teleconference to assess the "lay of the land" in this hot and evolving legal field, explaining the regulatory schemes that apply, highlighting new legal developments and suggesting approaches for compliance. "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.

About LeClairRyan

Founded in 1988, LeClairRyan provides business counsel and client representation in corporate law and high-stakes litigation.  With offices in California, Connecticut, Massachusetts, Michigan, New Jersey, New York, Pennsylvania, Virginia and Washington, D.C., the firm has approximately 300 attorneys representing a wide variety of clients throughout the nation.  For more information about LeClairRyan, visit www.leclairryan.com.

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