Litigation Prior to an Election - Litigation Before an Election

The FPPC recently passed significant new rules regarding how political contributions from LLCs must be publicly disclosed. The new rules were prompted by concerns that individuals set up phony LLCs and use them to make political contributions in order to avoid publicly disclosing the true source of the contributions. Though this practice may occur (especially on the national level with regards to Super PACs), the vast majority of LLCs which participate in California state and local political campaigns are bona fide businesses, no different than corporations or partnerships. The FPPC chose to ignore this reality, and – using a sledgehammer when it should have used a scalpel – enacted regulations which impose significant new compliance burdens on LLCs and campaigns.

These new rules go into effect on August 21, 2020, thereby requiring quick implementation by both LLCs which make political contributions and political committees and campaigns which receive contributions from LLCs. Although the FPPC noted that changing reporting rules in the middle of an election could cause chaos for contributors and campaign treasurers, the Commissioners expressed little sympathy for the regulated community and merely pointed out that the new California rules are less onerous than what is now required in New York.

Any LLC which makes a contribution to a candidate, ballot measure, PAC or political party is now required to identify the individual (or one of the individuals) primarily responsible for its political contribution decisions, whether one of the LLC’s members, a project manager or other employee. Under the new rules, this “Responsible Officer” must now sign and be listed on the LLC’s Major Donor reports. In addition, any campaign or committee which receives a contribution from an LLC must now list both the name of the LLC and the name of the company’s Responsible Officer on its reports. To date, the FPPC has not yet provided any guidance on how this disclosure must look.

While committees and LLCs filing their reports on next week’s July 31st deadline will not need to follow these new rules, political committees must follow these rules for 24-hour reporting period beginning on August 5th. LLCs should get into the habit of sending a cover letter with all political contributions, or sending an email when it makes a credit card contribution through a campaign’s website, letting the campaign or committee know the name of its Responsible Officer – or else be ready when the campaign treasurer seeks this information. Campaigns and committees will need to closely monitor all incoming contributions and – as of August 21st – be ready to disclose Responsible Officers within a day of receiving an LLC’s contributions.

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If the Sutton Law Firm prepares and files your Major Donor or PAC reports, rest assured that we are in contact with the FPPC with specific questions about these new reporting rules and will make certain that your 24-hour reports and pre-election are in compliance. If the Sutton Law Firm does not prepare your reports, feel free to contact a Sutton Law Firm attorney or Political Compliance Specialist with any questions regarding the reporting responsibilities of your LLC or committee.

THIS ALERT IS INTENDED FOR GENERAL INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE LEGAL ADVICE.