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Pay-to-Play Disclosure

— Background —

On January 5, 2006, Gov. Richard Codey enacted P.L.2005, c.271, which authorized county and local government entities to enact more stringent pay-to-play laws than those previously enacted by the Legislature. In addition, the law also provides a greater degree of transparency to the public by requiring business entities that have government contracts to disclose certain political contributions both prior to the award of the contract and in an annual filing.

Effective in 2006, this law impacts all companies that have a contract with State or local entities and receive aggregate payments totaling $50,000 or more as a result of those contracts in a calendar year. Thus, businesses such as law firms, engineering firms, consulting firms, plumbing supply stores, equipment sales, etc. that received contracts from government entities, including boards of education and fire districts, must complete this form.

—What Does the Law Require?—

 As part of the enforcement of P.L.2005, c.271, the New Jersey Election Law Enforcement Commission (ELEC) has adopted regulations that require businesses with state or local contracts to disclose certain campaign contributions. Following a legislative amendment, the ELEC regulations define a business entity to exclude nonprofit entities. The regulations only require the disclosure of “reportable” (i.e. $300 or more) political contributions (i.e. more than $300 per election to a candidate committee and more than $300 per calendar year to a party committee, continuing political committee, or legislative leadership committee).

The regulations require two types of disclosures.

First, the regulations require businesses to disclose contributions prior to the award of a no-bid contract of $17,500 or more with a public entity. Specifically, a business must provide a state or local unit with a list of contributions attributed to the business at least 10 days prior to the award of the contract that was made during the preceding 12-month period. The list must include the name of each political party committee, legislative leadership committee, continuing political committee, and candidate or joint candidate committee, as well as the date and amount of the contribution. The scope of the pre-contract disclosure may vary depending on the level of government at which the contract is being awarded.

Second, the regulations require a business that has received an aggregate of $50,000 or more in payments as a result of government contracts in a calendar year to file an annual report with ELEC.  Known as Form BE, the report must be filed with ELEC online.  The annual report must include the name of the business entity, the name of each public entity from which the business received a contract, the amount of the contract, the date of the contract and a description of the goods, services, equipment or property sold to the public entity. In addition, the annual report must also provide a list of the political contributions attributed to the business. The deadline for submitting the annual report is March 30, covering the preceding calendar year.

For both types of disclosures, a covered business must include contributions made by the business as well as reportable contributions from:

  1. A person or other business entity having an interest in the business entity;
  2. A principal, partner, officer, director or trustee of the business entity;
  3. The spouse of a principal, partner, officer, director or trustee of the business entity;
  4. A subsidiary directly or indirectly controlled by the business entity; and
  5. A continuing political committee (CPC) that is directly or indirectly controlled by the business entity.

 —Strategies for Compliance with the Annual Report—

 The scope of a company’s annual disclosure will vary depending on whether reportable contributions have been made. For example, if a business entity has received payments of $50,000 or more in the aggregate as a result of government contracts, but does not have reportable contributions to disclose, the business entity is not required to file a detailed Form BE. Rather, the business entity will be able to check the box on Page 1 of Form BE indicating that the business entity has received payments of $50,000 or more, but has not made any reportable contributions. The rest of the form will then disappear. Thus, although many companies tend to gather contract information before assessing contribution information, if a business entity knows that it has exceeded the $50,000 threshold, but has reason to believe that no reportable contributions have been made, the business entity may wish to gather contribution information prior to gathering contract information.

If a business is fairly certain that reportable contributions have been made, the business should first identify the contracts they have with state and local governmental entities and the amounts received in the relevant calendar year. The law does not define the term contract. Instead, that term is left for the government body to define pursuant to the earlier pay-to-play laws, known as Chapter 19 and Chapter 51. Businesses should be mindful that this law covers most agreements for goods and services. Additionally, certain grants received by state or local entities may trigger the requirements of this law.

If the business did not receive $50,000 or more in the relevant calendar year from these entities, no filing is required regardless of whether a contract was actually awarded in that calendar year.  For term contracts, ELEC has provided guidance that suggests businesses should only include amounts received by governmental entities in the relevant calendar year.

If a business has received $50,000 or more in the relevant calendar year, the business should next ascertain the number of reportable contributions made in the year. A “reportable contribution” is any contribution of more than $300 per election to any candidate committee or joint candidates committee and any contribution of more than $300 per calendar year to a political party committee, legislative leadership committee, or continuing political committee (CPC, also commonly referred to as a political action committee or PAC). In addition, the business entity must also disclose the personal contributions of any officer, director, trustee, partner or subsidiary of the business. Further, the business must disclose the reportable contribution of any spouse of a principal, partner, officer, director or trustee of the business entity.

To assist in the gathering of this information, a business should consider notifying its principals, partners, officers, directors or trustees of the requirements of the law and request that such individuals provide information regarding any personal contributions, including those of a spouse, made during the relevant calendar year. Additionally, ELEC maintains a searchable database where businesses can search under an individual’s name.

 —For More Information—

 Genova Burns LLC, Corporate Political Activity Law Group

Attn: Angelo J. Genova, Esq.
Address: 494 Broad Street
Newark, NJ 07102
Phone: 973-535-7100
Email: agenova@genovaburns.com
Website: www.genovaburns.com
Blog: www.corporatepoliticalactivitylaw.com

Attn: Rebecca Moll Freed, Esq.
Address: 494 Broad Street
Newark, NJ 07102
Phone: 973-230-2075
Email: rfreed@genovaburns.com
Website: www.genovaburns.com
Blog: www.corporatepoliticalactivitylaw.com

New Jersey Election Law Enforcement Commission

  To access copies of the law and forms:

If you need additional information, please contact NJBIA’s Member Action Center at 1-800-499-4419, ext. 3 or member411@njbia.org.

 

This information should not be construed as constituting specific legal advice. It is intended to provide general information about this subject and general compliance strategies. For specific legal advice, NJBIA strongly recommends members consult with their attorney.