New California Disclosure Rules For 501(c) Organizations That Make Independent Expenditures
When does a 501(c)(6) trade association have to disclose its members to the public? Not often, as the schedule of contributors provided to the IRS is not a public document. California – as is so often the case – has other ideas about that. If a 501(c) organization makes independent expenditures in California state races, or is involved in a ballot measure, new rules from the California Fair Political Practices Commission will require disclosure of certain members or contributors.
New Rules:
On May 19, 2012, the California Fair Political Practices Commission's ("FPPC") new rules governing disclosure became effective. These new rules require organizations, such as 501(c)(6) trade associations, 501(c)(4) social welfare organizations, and 501(c)(3) charities, to disclose certain contributors or members if those organizations are involved either in independent expenditures supporting or opposing candidates or an effort to support or oppose ballot measures (note that charities can only be involved in the latter).
California law requires any entity that that raises, contributes, or makes independent expenditures of over $1,000 to register as a political committee. That has been the law for some time. What is new is how these entities must disclose donors. There are two types of donors that must be disclosed:
Any donor that "makes a payment in response to a message or a solicitation indicating the organization's intent to make a contribution or independent expenditure," will have to be disclosed as a donor. If the organization uses funds that were donated without that knowledge, then the organization must disclose its donors using a last-in-first-out accounting method until the amount of the expenditure is fully accounted for. The second prong is only triggered if the organization has made an expenditure or contribution prior to the time the payment was made. In other words, the FPPC's regulation takes the view that such donors had constructive knowledge that their contribution might be used for a political expenditure. If even these donors do not cover the costs of the expenditure, then the organization lists itself as the contributor.
An organization may avoid disclosing a donor based on "evidence clearly establishing specific circumstances that show the donor did not...
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