Michigan Campaign Finance & Lobby Compliance
July 22, 2016
The relationship between campaign finance and lobbying are complex and the rules that apply to these activities are often confused. The two areas frequently intersect and reinforce each other as corporations and interest groups use both in order to advance their goals. In Michigan, two separate laws, the Michigan Campaign Finance Act (MCFA) and the Michigan Lobby Registration Act (MLRA) govern these activities.
The MCFA, Act #388 of 1976 regulates political activity, including but not limited to campaign finance contributions and expenditures, campaign advertising, and reporting requirements.
The purpose of the MLRA, Act #472 of 1978, is to ensure transparency and accountability in lobbying of the state executive branch and public office holders. Individuals, groups and companies do have a right to communicate with elected or appointed government officials, but there are rules.
When lobbying, even the perception of poor ethical policies can be damaging. All states define who is a lobbyist and what lobbying is, and all definitions reflect that lobbying is an attempt to influence government action. All states also have lobbyist registration requirements, and they require lobbyists to report their activities.
Corporations engaged in government relations need to understand the rules of both campaign finance & lobby regulations.
1. Know Which Rules Apply
Different laws can apply to different activities as we can see by breaking out state, federal and local elections. Which law applies will also determine how much an individual or political committee can contribute to candidates.
Campaign finance (MCFA) rules on a statewide level apply to the elections of governor, state senator, state representative, some judicial seats and state-wide ballot initiatives.
The MCFA does not apply to federal elections. If your state Political Action Committee contributes more than $1,000 total in one year to federal races, it would trigger filing on the Federal level.
In general, federal laws govern campaigns for offices such as president, Congressional seats for senator and representative. Contributions to these seats are reportable to the Federal Elections Commission (FEC) and federal contribution limits apply.
Local elections include campaigns for Commissioners, County Clerks, School Boards and local judicial races. Rules and reporting requirements on the county level are managed by the individual County Clerks. The contribution limits are different for these seats as well.
Know the rules before making contributions and check contribution limits in each jurisdiction. You, the contributor, and the committee to which you give- are both legally responsible for making sure that your contribution does not exceed these limits.
2. Know What Constitutes a Contribution
Whether making a contribution personally or from your Political Action Committee, know what constitutes a contribution. Direct contributions can be in the form of cash, credit, goods, services, and in-kind donations. All of these forms of contributions, basically anything of value, apply to contribution totals of how much an individual or PAC can give to a candidate committee.
For example, the owner of an incorporated “mom and pop” restaurant or grocery is not permitted to use a business account to make contributions, or offer free goods (in-kind) or services from the business to a political/candidate committee.
However, there is an exception for individuals to the contribution rule. Individuals/employees can volunteer services to a candidate, PAC or political party-but the services must be uncompensated, meaning the employee must (if employed) use leave or vacation time to do so.
Employees/individuals may also spend their own to assist a PAC or Candidate Committee-without needing to report.
These exemptions include:
- A volunteer’s personal services to a committee as long as there is no agreement that compensation will be received for time donated
- The first $500 spent by an individual for travel expenses, again with no agreement for reimbursement and voluntarily incurred
- The first $1,000 of food and beverages donated during the year by an individual are not counted and do not need to be reported.
Anything above these amounts would need to be reported by the committee receiving the services, and they would count toward the individual’s contribution limit.
3. Avoid Incidental Corporate Contributions and Filtering
The MCFA prohibits corporate contributions directly to candidate committees and hard dollar political committees. It is important that corporate resources (often referred to as “soft dollars”) are used only where allowed (ie: administering a Separate Segregated Fund, contributions to an expenditure only SuperPAC). Remember, donations of company goods or services, and discounts made available that are not also available to the general public are considered in-kind contributions, and thus illegal.
Disguising, or filtering the true source of a contribution or making a contribution on behalf of another is forbidden. A corporation cannot reimburse an employee for making a contribution-cash or in-kind. For example, an individual who has already contributed up to the limit for a candidate’s election may not give money to another person to make a contribution to the same candidate. Similarly, a corporation is prohibited from using bonuses or other methods of reimbursing employees for their contributions.
4. No Earmarking
Earmarking is the practice of giving or accepting a contribution with the agreement that the receiving committee will transfer the contribution to a specified candidate. Earmarking is expressly prohibited under the MCFA.
5. Acting as a Group
Corporations and other individuals may at times form a coalition or act together as a group to conduct activities such as issue advocacy. Depending on the type of activities the group conducts, it is possible they could trigger campaign finance filings and require the group to form a political committee. In general, a person or group that raises or spends over $500 per year to directly influence state elections (expressly advocate for the election or defeat of a candidate, or ballot initiative) must register as a Political Committee and file reports on the committee’s activities.
Be aware of the group’s activities (issue advocacy v. express advocacy) and if those activities may trigger filing requirements.
At times individuals or PAC’s may bundle personal contributions and deliver them to a candidate. This practice is not illegal, however if your PAC collects/bundles contributions for a candidate it must be reported on a special form to the Bureau of Elections and contribution limits do apply to the bundled total.
Bundling is defined by the MCFA as “the delivery of 1 or more contributions form individuals to the Candidate Committee of a candidate for Governor, Lt. Governor, Secretary of State, Attorney General, State Board of Education, University of Michigan Regent, Michigan State University Trustee, Wayne State University Governor or Supreme Court Justice by an Independent or Political Committee (PAC) registered with the Secretary of State.”
Lobbying Best Practices
7. Know What Constitutes Lobbying – Who, What & How Matters
- Who- Lobbyable officials can include/be legislators, state department directors, the Auditor General, administrative rule makers and certain university presidents (for a complete list see: http://www.michigan.gov/sos/0,1607,7-127-1633_11945_46448-188034–,00.html)
- What- Activities that are considered lobbying include attempts to influence legislation or administrative rules
- How- Spending thresholds once met, can trigger requiring registration as a lobbyist or lobbyist agent.
If the issue of concern to your business involves a proposed administrative rule, regulation or legislation, be aware that your attempts to influence the substantive wording is lobbying.
8. Avoid Contingent-Fee Lobbying Arrangements
Do not compensate your Lobbyists/Lobbyist Agent based on outcomes. Entering into any “contingent fee” or bonus agreement with a lobbyist that makes payment to the lobbyist contingent on success is prohibited.
9. No Gifts or Honorarium – Know What is Prohibited Under the Lobby Act
A Lobbyist or Lobbyist Agent- or anyone acting on their behalf, may not give a gift or a loan to a lobbyable public official. Prohibited gifts include any goods or services of value in excess of the current threshold of allowable spending (the 2016 threshold under the MLRA is $58 during any 1 month period). However, something of value given below this amount is allowed.
Honorarium to a state Senator or Representative is prohibited. This includes a payment of money to a person holding elective office as consideration for an appearance, speech or any activity related that is associated with the performance of duties as an elected official.
Yet, it is allowable to pay for or reimburse a Senator or Representative for certain costs related to an appearance associated with an event such as:
- The cost of transportation
- Accommodations or meals for the person
- An award (may not exceed the “gift” limit).
This is not a complete list; always check the current spending limits and thresholds when planning an event involving elected officials.
10. Corporations Registered as Lobbyist -Know the Spending Thresholds & Limits
Have record keeping systems in place for bi-annual reporting. Michigan lobbying laws apply even when a registered lobbyist/agent is attending regional and national meetings out of state. Keep records tracking time & activities to report and always report food, beverage & entertainment expenses. Be aware of spending limits on food, beverages and travel that can require detailed reporting.
Hard Dollars –Hard dollars are political donations that are raised from personal contributions regulated by Elections. Hard dollars can be given directly to a candidate’s campaign committee.
Soft Dollars– Money that is raised from corporate sources but is not allowed to be given directly to candidates; soft dollars can be used to pay for issue advocacy.
This column is provided as general information and not as legal advice. The content above is meant to serve only as a guide. Every filing situation is different and you should always call me or email your questions (517/482-5311 or Lfarnum@farnuminc.com), visit the Bureau of Elections for more information (http://www.michigan.gov/sos/0,4670,7-127-1633_8723—,00.html) and consult with your attorney.
Lisa Farnum, MPP is President of L Farnum, Incorporated. L Farnum, Inc. is a firm that specializes in PAC & Lobby compliance, research and association management. Lisa has been helping clients resolve campaign finance issues and maintain compliance for more than 16 years. She earned a Bachelor of Arts in Business Administration from Northwood University and a Master of Public Policy from the University of Michigan, Dearborn. Ms. Farnum has over 25 years of experience in business and association management.