New Year, New Congress, New Administration: Tips for Federal PAC & Lobbying Compliance in 2021
PACs and other politically active organizations have already seen a lot of activity in the first few weeks of 2021 – including an upcoming Presidential transition and runoff Senate elections in Georgia. Before we see what else 2021 has in store, we wanted to share a few useful tips for your PAC, lobbying and other political activities. It’s not exhaustive, but it’s our hope that you can use this list to give your political operations a quick tune-up as we kick off the new year.
Now is the time to elect Quarterly Filing status with the Federal Election Commission (FEC). Although the FEC puts PACs on the Quarterly Filing schedule by default, during election years like 2020, we advise clients to choose Monthly Filing to avoid the need to file Pre- and Post-Primary reports. If your PAC was on a Monthly schedule in 2020, make sure that you choose Quarterly for 2021, in which case your PAC will only have to complete the Semi-Annual and Year-End reports. But note that, as a Quarterly filer, if you participate in a primary or special election held in 2021, your PAC may still need to file Pre- or Post- Primary or General Election FEC Reports.
No matter which filing frequency you choose, make note of the 2021 filing deadlines in our filing schedule and plan accordingly.
Now is also a good time to review your restricted class membership. January is a good time to evaluate whether you are reaching all of the eligible members of your restricted class. Not only do your members’ contribution limits reset with the calendar, January is also a time when many promotions or raises take effect, which might result in employees becoming newly eligible to be PAC members.
Make sure you’re using 2021 contribution limits, once they are announced. The FEC’s quorum is back for 2021, so we anticipate that the FEC will soon announce the 2021-2022 election cycle limits that are subject to a cost-of-living increase every odd year. Individual contribution limits to candidates and party committees are affected, while contribution limits from individuals to PACs remains at $5,000. The last time the FEC announced these increases was in early February 2019, and we expect the same timing this go-round in 2021. Stay tuned!
Now is a good time for internal compliance audits and updates to PAC bylaws and policies. The 2020 election was the most expensive, and, thanks in part to the pandemic, one of the most unconventional in history. If you’re like many PACs, you may have had to adjust your practices to handle work-from-home and other pandemic-related adjustments. Now is a good time to review your operations for compliance, as well as update policies to reflect your current practices.
Now is the time to determine the method by which you report your federal lobbying expenditures. The federal Lobbying Disclosure Act (LDA) provides most filers a choice of two different methods by which they may disclose their lobbying expenditures - the LDA method and the Internal Revenue Code (IRC) method. Once you choose a method for your first Lobbying Report (LD-2) of the year, you need to stick with it for the subsequent filings covering that calendar year. The LDA method requires filers to include the value of all communications with covered officials regarding any policy or program of the federal government, as well as regulations and legislation. The number of executive branch officials who are “covered” for purposes of calculating the expenditures is large compared to the IRC method. The IRC method essentially limits an organization’s reportable executive branch lobbying to communications about legislation (regardless of to whom they are made); but it does include reporting of any public “grassroots” communications regarding legislation, as well as state level communications regarding legislation. Depending upon the type of advocacy program(s) you are running, you may want to consider a change in the method by which you disclose your expenditures.
It’s not too early to begin collecting information regarding potential “Lobbying Contributions,” and don’t forget Inaugural Committee contributions. In addition to reporting funds contributed to federal candidates, officeholders, leadership PACs and political party committees, the LDA requires registrants to include on their semi-annual “Lobbying Contribution Report” (LD-203) expenditures for “Honorary” (non-FECA) expenditures. Registrants are required to include the date, the name of honoree and/or honorees, the payee(s) and amount of funds paid:
- For an event to honor or recognize a covered Legislative Branch or covered Executive Branch official;
- To an entity or person that is named for a covered Legislative Branch official or to an entity or person in recognition of such official;
- To an entity established, financed, maintained or controlled by a covered Legislative or Executive Branch official or to an entity designated by such official;
- For a meeting, retreat, conference or other similar event held by, or in the name of, one or more covered Legislative Branch or covered Executive Branch officials; and
- To each Presidential library foundation and each Presidential inaugural committee.
Plus, an important difference for 2021 LD-203s is that contributions to the Presidential Inaugural Committee must also be reported, as we discussed here.
It can take time to collect all of this information regarding an expenditure and to evaluate whether it’s reportable, so it is advisable to start as soon as the semi-annual period is complete.
Also, while our filing chart lays out your LDA filing obligations that cover 2021, please note that when a filing falls on a weekend or holiday, the LDA provides for next business day filing. That means this year the 2020 4th Quarter LD-2 is due January 21, 2021 (January 20 is Inauguration Day) and LD-203s are due on February 1, 2021 because January 30, 2021 is a Saturday.