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AB-236 Campaign disclosure: limited liability companies. (2021-2022)

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Date Published: 03/10/2021 09:00 PM
AB236:v98#DOCUMENT

Revised  April 15, 2021
Amended  IN  Assembly  March 10, 2021

CALIFORNIA LEGISLATURE— 2021–2022 REGULAR SESSION

Assembly Bill
No. 236


Introduced by Assembly Member Berman
(Coauthors: Assembly Members Kalra and Bennett)

January 13, 2021


An act to amend Section 84222 of, and to add Section 84211.5 to, add Sections 84109 and 84110 to the Government Code, relating to the Political Reform Act of 1974.


LEGISLATIVE COUNSEL'S DIGEST


AB 236, as amended, Berman. Campaign contributions: disclosure: limited liability companies.
The Political Reform Act of 1974 provides for the comprehensive regulation of campaign financing, including requiring elected officials, candidates for elective office, committees formed primarily to support or oppose a candidate for public office or a ballot measure, and other entities to file periodic campaign statements and reports concerning campaign finances.
This bill would require a limited liability company that qualifies as a committee or a sponsor of a committee under the act, as specified, to file a statement of members with the Secretary of State. The bill would require the statement of members to include certain information about the limited liability company, including a list of all persons who have a membership interest in the limited liability company of at least 10% or who made a cumulative capital contribution of at least $1,000 to the limited liability company after it qualified as a committee or sponsor of a committee, or within the 2 calendar years before it qualified.
A regulation adopted by the Fair Political Practices Commission requires a limited liability company that makes independent expenditures totaling $1,000 or more in a calendar year, or that makes contributions totaling $10,000 or more in a calendar year to or at the behest of candidates or committees, to identify in its statements and reports the individual primarily responsible for approving its political activity. A Commission regulation also requires a committee that receives a contribution of $100 or more from a limited liability company to include in its statements and reports the name of the limited liability company and the name of the individual primarily responsible for approving its political activity.
This bill would codify these regulations.
Existing law makes a knowing or willful violation of the Political Reform Act of 1974 a misdemeanor. By expanding the scope of an existing crime, this bill would impose a state-mandated local program.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.
The Political Reform Act of 1974, an initiative measure, provides that the Legislature may amend the act to further the act’s purposes upon a 2/3 vote of each house of the Legislature and compliance with specified procedural requirements.
This bill would declare that it furthers the purposes of the act.

The Political Reform Act of 1974 provides for the comprehensive regulation of campaign financing, including requiring elected officials, candidates for elective office, and committees to file periodic campaign statements. The act requires that these campaign statements contain prescribed information related to campaign contributions and expenditures of the filing entities. A violation of the act is a misdemeanor.

This bill would require a committee to include within a campaign statement the name of each individual who owns or controls, or controls the contributions or expenditures of, a limited liability company or foreign limited liability company from which the committee received a campaign contribution.

The act requires multipurpose organizations meeting specified criteria to comply with the registration and campaign reporting requirements of the act, including the disclosure of information relating to the organization’s donors.

This bill would make a limited liability company a multipurpose organization for these purposes.

Because a violation of the requirements of the bill would be a crime, the bill would impose a state-mandated local program.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

The Political Reform Act of 1974, an initiative measure, provides that the Legislature may amend the act to further the act’s purposes upon a 23 vote of each house of the Legislature and compliance with specified procedural requirements.

This bill would declare that it furthers the purposes of the act.

Vote: 2/3   Appropriation: NO   Fiscal Committee: YES   Local Program: YES  

The people of the State of California do enact as follows:


SECTION 1.

 Section 84109 is added to the Government Code, to read:

84109.
 (a) A limited liability company that qualifies as a committee pursuant to Section 82013, or qualifies as a sponsor of a committee pursuant to Section 82048.7, shall file a statement of members with the Secretary of State.
(b) The statement of members shall include a list of all persons who either:
(1) Have a membership interest in the limited liability company equal to or greater than 10 percent of the total outstanding membership interests.
(2) Made a cumulative capital contribution of one thousand dollars ($1,000) or more to the limited liability company after it qualified as a committee or sponsor of a committee, or within the preceding two calendar years before it qualified.
(c) The statement of members shall include all of the following:
(1) The name of the limited liability company and the contact information for its responsible officer or principal officer.
(2) The name of each member required to be identified by subdivision (b).
(3) The dollar amount of the cumulative capital contributions made by each member identified in the statement of members.
(4) The date of each capital contribution made by a member identified pursuant to paragraph (2) of subdivision (b).
(5) The percentage ownership interest in the limited liability company of each member identified in the statement of members.
(d) (1) (A) Except as provided in subparagraph (B), a statement of members is due within 10 days of the limited liability company qualifying as a committee or sponsor of a committee.
(B) A statement of members is due within 24 hours of the limited liability company qualifying as a committee or sponsor of a committee if the limited liability company qualifies within 30 days of an election and the limited liability company has made a contribution to, or an independent expenditure supporting or opposing, a candidate or ballot measure on the ballot in that election, or made a contribution to a committee that made a contribution to, or an independent expenditure supporting or opposing, a candidate or ballot measure on the ballot in that election.
(2) (A) A limited liability company required to file a statement of members under subdivision (a) shall file an amended statement if it receives a capital contribution of one thousand dollars ($1,000) or more after qualifying as a committee or sponsor of a committee.
(B) (i) Except as provided in clause (ii), a limited liability company required to file an amended statement of members shall file the amended statement within 10 days of receiving the additional capital contribution.
(ii) A limited liability company required to file an amended statement of members shall file the amended statement within 24 hours of receiving the additional capital contribution if the limited liability company receives the contribution within 90 days of an election and the limited liability company has made a contribution to, or independent expenditure supporting or opposing, a candidate or ballot measure on the ballot in that election.
(C) A capital contribution or other payment made to a limited liability company that qualified as a committee or sponsor of a committee that is earmarked, in whole or in part, for political purposes shall be deemed a contribution to the committee.
(e) If a member listed on a statement of members is a limited liability company, the statement shall list all members of that limited liability company who would be listed on a statement of members pursuant to subdivision (b) if the member limited liability company qualified as a committee or sponsor of a committee.
(f) Contributions from a member of a limited liability company identified in a statement of members shall be aggregated with contributions from the limited liability company pursuant to Section 82015.5.
(g) For purposes of this section, the following terms have the following meanings:
(1) “Capital contribution” means money, or the fair market value of any other property, contributed to a limited liability company in exchange for a membership interest in the limited liability company.
(2) “Limited liability company” means an entity defined in subdivision (j) or (k) of Section 17701.02 of the Corporations Code.
(3) “Member” has the same meaning as defined in subdivision (p) of Section 17701.02 of the Corporations Code.

SEC. 2.

 Section 84110 is added to the Government Code, to read:

84110.
 (a) A limited liability company that qualifies as a committee under subdivision (b) or (c) of Section 82013 shall identify a responsible officer on each statement and report filed under this chapter or Chapter 5 (commencing with Section 85100).
(b) (1) For purposes of this section, the “responsible officer” of the committee means the individual primarily responsible for approving the political activity of the limited liability company, including, but not limited to, both of the following:
(A) Authorizing expenditures, including contributions, on behalf of the limited liability company.
(B) Developing or approving campaign strategy on behalf of the limited liability company.
(2) If more than one individual shares the primary responsibility for approving the limited liability company’s political activities as described in paragraph (1), at least one of those individuals shall be listed as the committee’s responsible officer.
(c) A responsible officer may be held liable for a violation of this title pursuant to Section 83116.5.
(d) (1) (A) For a contribution of one hundred dollars ($100) or more received from a limited liability company that has qualified as a committee under subdivision (a) of Section 82013, the name of the contributor reported in a committee’s statements and reports filed under this chapter or Chapter 5 (commencing with Section 85100) shall include the name of the limited liability company’s committee and the name of the committee’s principal officer, as defined in Section 82047.6.
(B) For a contribution of one hundred dollars ($100) or more received from a limited liability company that has qualified as a committee under subdivision (b) or (c) of Section 82013, the name of the contributor reported in a committee’s statements and reports filed under this chapter or Chapter 5 (commencing with Section 85100) shall include the name of the limited liability company and the full legal name of the limited liability company’s responsible officer.
(C) For a contribution of one hundred dollars ($100) or more received from a limited liability company that does not qualify as a committee under Section 82013, the name of the contributor reported in a committee’s statements and reports filed under this chapter or Chapter 5 (commencing with Section 85100) shall include the name of the limited liability company and the full legal name of the individual primarily responsible for approving the contribution. If more than one individual shares in the primary responsibility for approving a contribution, at least one of those individuals shall be identified.
(2) A contribution for which the information described in paragraph (1) is not included in a committee’s statements and reports shall be returned pursuant to Section 85700.

SEC. 3.

 No reimbursement is required by this act pursuant to Section 6 of Article XIII B of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIII B of the California Constitution.

SEC. 4.

 The Legislature finds and declares that this bill furthers the purposes of the Political Reform Act of 1974 within the meaning of subdivision (a) of Section 81012 of the Government Code.
SECTION 1.

This act shall be known, and may be cited, as the LLC Dark Money Ban.

SEC. 2.Section 84211.5 is added to the Government Code, to read:
84211.5.

If a committee receives a contribution from a limited liability company or foreign limited liability company, as defined in the California Revised Uniform Limited Liability Company Act (Title 2.6 (commencing with Section 17701.01) of the Corporations Code), the committee shall include both of the following within the campaign statement covering the time period in which the contribution was received:

(a)The name of each individual who owns or controls the company.

(b)The name of each individual who controls the contributions or expenditures of the company.

SEC. 3.Section 84222 of the Government Code is amended to read:
84222.

(a)For purposes of this title, “multipurpose organization” means an organization described in Sections 501(c)(3) to 501(c)(10), inclusive, of the Internal Revenue Code and that is exempt from taxation under Section 501(a) of the Internal Revenue Code, a federal or out-of-state political organization, a trade association, a professional association, a civic organization, a religious organization, a fraternal society, an educational institution, a limited liability company as defined in Section 17701.02 of the Corporations Code, or any other association or group of persons acting in concert, that is operating for purposes other than making contributions or expenditures. “Multipurpose organization” does not include a business entity other than a limited liability company, an individual, or a federal candidate’s authorized committee, as defined in Section 431 of Title 2 of the United States Code, that is registered and filing reports pursuant to the Federal Election Campaign Act of 1971 (Public Law 92-225).

(b)A multipurpose organization that makes expenditures or contributions and does not qualify as a committee pursuant to subdivision (c) may qualify as an independent expenditure committee or major donor committee if the multipurpose organization satisfies subdivision (b) or (c) of Section 82013.

(c)Except as provided in subparagraph (A) of paragraph (5), a multipurpose organization is a recipient committee within the meaning of subdivision (a) of Section 82013 only under one or more of the following circumstances:

(1)The multipurpose organization is a political committee registered with the Federal Election Commission, except as provided in subdivision (a) of this section, or a political committee registered with another state, and the multipurpose organization makes contributions or expenditures in this state in an amount equal to or greater than the amount identified in subdivision (a) of Section 82013.

(2)The multipurpose organization solicits and receives payments from donors in an amount equal to or greater than the amount identified in subdivision (a) of Section 82013 for the purpose of making contributions or expenditures.

(3)The multipurpose organization accepts payments from donors in an amount equal to or greater than the amount identified in subdivision (a) of Section 82013 subject to a condition, agreement, or understanding with the donor that all or a portion of the payments may be used for making contributions or expenditures.

(4)The multipurpose organization has existing funds from a donor and a subsequent agreement or understanding is reached with the donor that all or a portion of the funds may be used for making contributions or expenditures in an amount equal to or greater than the amount identified in subdivision (a) of Section 82013. The date of the subsequent agreement or understanding is deemed to be the date of receipt of the payment.

(5)The multipurpose organization makes contributions or expenditures totaling more than fifty thousand dollars ($50,000) in a period of 12 months or more than one hundred thousand dollars ($100,000) in a period of four consecutive calendar years.

(A)A multipurpose organization shall not qualify as a committee within the meaning of subdivision (a) of Section 82013 pursuant to this paragraph if the multipurpose organization makes contributions or expenditures using only available nondonor funds. A multipurpose organization that makes contributions or expenditures with nondonor funds shall briefly describe the source of the funds used on its major donor or independent expenditure report.

(B)For purposes of this paragraph, “nondonor funds” means investment income, including capital gains, or income earned from providing goods, services, or facilities, whether related or unrelated to the multipurpose organization’s program, sale of assets, or other receipts that are not donations.

(d)A multipurpose organization that is a committee pursuant to paragraph (1) of subdivision (c) shall comply with the registration and reporting requirements of this chapter, subject to the following:

(1)The multipurpose organization is not required to comply with subdivision (k) of Section 84211 for contributions and expenditures made to influence federal or out-of-state elections, which shall instead be reported as a single expenditure and be described as such on the campaign statement.

(2)A multipurpose organization registered with the Federal Election Commission is not subject to subdivisions (d) and (f) of Section 84211 but shall disclose the total amount of contributions received pursuant to subdivision (a) of Section 84211, and shall disclose the multipurpose organization’s name and identification number registered with the Federal Election Commission on the campaign statement.

(e)(1)A multipurpose organization that is a committee pursuant to paragraph (2), (3), (4), or (5) of subdivision (c) shall comply with the registration and reporting requirements of this chapter, subject to the following, except that if the multipurpose organization is the sponsor of a committee as described in subdivision (f) it may report required information on its sponsored committee statement pursuant to subdivision (f):

(A)The multipurpose organization shall register in the calendar year in which it satisfies any of the criteria in subdivision (c). The statement of organization filed pursuant to Section 84101 shall indicate that the organization is filing pursuant to this section as a multipurpose organization and state the organization’s nonprofit tax exempt status, if any. The statement of organization shall also describe the organization’s mission or most significant activities, and describe the organization’s political activities. A multipurpose organization may comply with the requirement to describe the mission or significant activities and political activities by referencing where the organization’s Internal Revenue Service Return of Organization Exempt From Income Tax form may be accessed.

(B)Except as provided in this subparagraph, the registration of a multipurpose organization that meets the criteria of paragraph (5) of subdivision (c) shall terminate automatically on December 31 of the calendar year in which the multipurpose organization is registered. The multipurpose organization shall not be required to file a semiannual statement pursuant to subdivision (b) of Section 84200, unless the multipurpose organization has undisclosed contributions or expenditures to report, in which case termination shall occur automatically upon filing the semiannual statement that is due no later than January 31. After the multipurpose organization’s registration has terminated, the multipurpose organization’s reporting obligations are complete, unless the organization qualifies as a committee for purposes of subdivision (a) of Section 82013 again in the following calendar year pursuant to subdivision (c) of this section. Notwithstanding this subdivision, a multipurpose organization may elect to remain registered as a committee by submitting written notification to the Secretary of State prior to the end of the calendar year.

(C)A multipurpose organization shall report all contributions received that satisfy the criteria of paragraph (2), (3), or (4) of subdivision (c) of this section in the manner required by subdivision (f) of Section 84211, and for the balance of its contributions or expenditures shall further report contributors based on a last in, first out accounting method.

(2)A multipurpose organization reporting pursuant to this subdivision shall disclose total contributions received in an amount equal to the multipurpose organization’s total contributions and expenditures made in the reporting period. When a multipurpose organization reports donors based on the last in, first out accounting method, it shall attribute to and include the information required by subdivision (f) of Section 84211 for any donor who donates one thousand dollars ($1,000) or more in a calendar year, except for the following:

(A)A donor who designates or restricts the donation for purposes other than contributions or expenditures.

(B)A donor who prohibits the multipurpose organization’s use of its donation for contributions or expenditures.

(C)A private foundation, as defined by subdivision (a) of Section 509 of the Internal Revenue Code, that provides a grant that does not constitute a taxable expenditure for purposes of paragraph (1) or (2) of subdivision (d) of Section 4945 of the Internal Revenue Code.

(3)A multipurpose organization that qualifies as a committee pursuant to paragraph (5) of subdivision (c) shall not be required to include contributions or expenditures made in a prior calendar year on the reports filed for the calendar year in which the multipurpose organization qualifies as a committee.

(4)If a multipurpose organization qualifies as a committee solely pursuant to paragraph (5) of subdivision (c) and the committee is required to report donors based on a last in, first out accounting method pursuant to paragraph (1), the multipurpose organization shall not be required to disclose donor information for a donation received by the multipurpose organization prior to July 1, 2014. This paragraph shall not apply with respect to a donation made by a donor who knew that the multipurpose organization would use the donation to support or oppose a candidate or ballot measure in the state by requesting that the donation be used for that purpose or by making the donation in response to a message or solicitation indicating the multipurpose organization’s intent to use the donation for that purpose.

(5)A contributor identified and reported in the manner provided in subparagraph (C) of paragraph (1) that is a multipurpose organization and receives contributions that satisfy the criteria in subdivision (c) shall be subject to the requirements of this subdivision.

(6)The commission shall adopt regulations establishing notice requirements and reasonable filing deadlines for donors reported as contributors based on the last in, first out accounting method.

(f)A multipurpose organization that is the sponsor of a committee as defined in Section 82048.7, that is a membership organization, that makes all of its contributions and expenditures from funds derived from dues, assessments, fees, and similar payments that do not exceed ten thousand dollars ($10,000) per calendar year from a single source, and that elects to report its contributions and expenditures on its sponsored committee’s campaign statement pursuant to paragraph (1) of subdivision (e) shall report as follows:

(1)The sponsored committee shall report all contributions and expenditures made from the sponsor’s treasury funds on statements and reports filed by the committee. The sponsor shall use a last in, first out accounting method and disclose the information required by subdivision (f) of Section 84211 for any person who pays dues, assessments, fees, or similar payments of one thousand dollars ($1,000) or more to the sponsor’s treasury funds in a calendar year and shall disclose all contributions and expenditures made, as required by subdivision (k) of Section 84211, on the sponsored committee’s campaign statements.

(2)The sponsored committee shall report all other contributions and expenditures in support of the committee by the sponsor, its intermediate units, and the members of those entities. A sponsoring organization makes contributions and expenditures in support of its sponsored committee when it provides the committee with money from its treasury funds, with the exception of establishment or administrative costs. With respect to dues, assessments, fees, and similar payments channeled through the sponsor or an intermediate unit to a sponsored committee, the original source of the dues, assessments, fees, and similar payments is the contributor.

(3)A responsible officer of the sponsor, as well as the treasurer of the sponsored committee, shall verify the committee’s campaign statement pursuant to Section 81004.

(g)For purposes of this section, “last in, first out accounting method” means an accounting method by which contributions and expenditures are attributed to the multipurpose organization’s contributors in reverse chronological order beginning with the most recent of its contributors or, if there are any prior contributions or expenditures, beginning with the most recent contributor for which unattributed contributions remain.

SEC. 4.

No reimbursement is required by this act pursuant to Section 6 of Article XIII B of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIII B of the California Constitution.

SEC. 5.

The Legislature finds and declares that this bill furthers the purposes of the Political Reform Act of 1974 within the meaning of subdivision (a) of Section 81012 of the Government Code.

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REVISIONS:
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