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Question and Answers:
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General Questions
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Que. When is the Initial Report due?
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Ans. The Initial Report is due at the awarding of the contract and the Semiannual Reports are due every six(6) months during the performance of the contract. The initial report covers the period 24 months prior to the award date.
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Que. How is a business entity’s amount of business calculated to determine whether the $200,000 minimum has been reached and how is the total amount of business reported?
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Ans. If a single individual government contract of the business entity amounts to $200,000 of consideration being paid by or to the business entity, the minimum amount of business standard has been met. The fact that a contract will be performed over a period of several years does not change this result; a business entity does not aggregate the total contract amount for each year or reporting period. The statute and reporting requirements make clear that the “Amount of Consideration” to be listed for each contract is the total consideration to be paid or received under the contract, not the amount of consideration paid or received during the reporting period. If the total consideration to be paid or received under the contract is not ascertainable with reasonable accuracy, a reasonable estimate
should be provided along with the actual amount paid or received during the reporting period.
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Que. Are partnerships included in the scope of business entities required to file reports?
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Ans. Yes. The definition of business entity is broad, including such terms as “firms” and “other organizations.” This definition is clearly broad enough to encompass partnerships. Further, §14-105 explains that “each officer, director, and partner of a business entity… shall report” any contribution made to the business entity. The inclusion of the term “partner” in this section confirms that the definition of business entity includes partnerships.
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Que. Are C Corporations, formerly known as S Corporations, included in the scope of business entities required to file reports?
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Ans. Yes. C Corporations are like any other corporation with respect to their ability to enter into contracts with government agencies. The distinction between a C Corporation and a traditional corporation is purely related to the tax obligations of the entities, which is not a basis for an exemption from the reporting requirements. This same analysis and conclusion would apply with respect to other “specialty” companies, such as professional corporations, professional associations and limited liability companies.
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Que. Must contributions to slates and political action committees (PACs) be disclosed?
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Ans. By definition, a slate is “a political committee of 2 or more candidates.” Because a business entity must report all contributions to “a political committee for a candidate,” a contribution to a slate must be disclosed. The contribution shall be considered a single contribution of the total amount and not aggregated among the slate members. The slate shall be listed under the heading “Candidate” on the relevant chart. For a more detailed explanation of this conclusion, see 61 Opinions of the Attorney General 372 (1976). A political action committee, or PAC, is not by definition a political committee for a candidate. Contributions made to the traditional form of a PAC, one designed to support a variety of candidates and issues for the benefit of a specific company or trade, are not considered contributions for reporting purposes because such PACs are considered independent of any particular candidate. However, contributions made to a PAC that was created to support a specific candidate or group of candidates must be reported.
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Que. Must in-kind contributions to candidates be disclosed in the fair market value?
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Ans. Yes. In-kind contributions must be reported. The law excludes gifts between certain relatives as well as honorary memberships to certain organizations. The exclusions make clear that the broad definition of contribution is intended to reach those in-kind contributions not excepted.
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Que. When are contributions aggregated to determine if the $500 limit has been exceeded?
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Ans. If during the reporting period—two (2) years for the Initial Report and six (6) months for Semiannual Reports— cumulative contributions of $500 or more made by the entity, a subsidiary, a director, or any other individual whose contributions are attributed to the business entity, the individual contributions must be reported.
Contributions to a slate must be included in determining the cumulative amount. A contribution to a slate should be allocated equally among its members to determine each member’s “share” of the contribution to determine the total amount contributed to any single candidate. For example, if ABC Company contributes $400 to Mr. Smith and $300 to a two-person slate of which Mr. Smith is a member, a total contribution to Mr. Smith of $550 must be reported ($400 individual contribution, plus half of the $300 slate contribution). This calculation will vary if the contribution to the slate is designated to be used for a particular candidate--in which case the contribution will be attributed solely to that candidate--or if the contribution to a slate is made with the restriction that it not be used for the benefit of a particular candidate--in
which case the excluded candidate’s “share” of the contribution will be allocated equally among all other members of the slate.
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Que. What period of time is to be covered by the Initial Report?
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Ans. The Initial Report should cover the twenty-four (24) months preceding the awarding of the contract. For example, if ABC Company executed a government contract in January 2015, the company would be required to file an Initial Report covering January 2013 through January 2015.
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Que. What is the obligation of the reporting entity with respect to collection of the information necessary to complete the report and in timely reporting contributions?
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Ans. Each officer, director, partner, employee, agent, or other person who at the suggestion or direction of the business entity makes an applicable contribution shall report the applicable contribution to the chief executive officer.
A business entity must make a good faith effort to gather the contribution information required by §14-105. Such efforts include contacting all officers, directors and partners from the parent and any and all subsidiaries requesting contribution information.
Reports are due five (5) days after the close of the reporting period. For some very large entities, it is necessary to begin collecting contribution information well in advance of the end of the reporting period. Late filings will result in a in a fine of $10 per day up to $500.
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Que. When should a waiver under §14-104 be requested and for what period of time will a waiver be granted?
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Ans. A waiver request should be submitted to the State Board of Elections several weeks in advance of the February 5 filing deadline each year. The request may seek a waiver for both the February 5 filing and the August 5 filing for that year.
The waiver request must provide in detail as to why the disclosure of the contracts would be unduly burdensome and not impair substantially the public interest with its omission.
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Que. If the business entity has not made any reportable contributions during the reporting period, but an officer or director has, is a filing required?
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Ans. Yes. A contribution of an officer or director is to be attributed to the business entity for reporting purposes. Therefore, a report listing the contributions of the director and officers must be filed even if the entity made no contributions.
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Que. If a business entity establishes a political action committee (PAC) to which contributions are made and makes no direct contributions to any candidate is the business entity required to file a report?
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Ans. If the PAC makes contributions to a candidate, the business entity must file a report listing the contributions of the PAC. A PAC is merely a conduit through which political contributions can be made. See 59 Opinions of the Attorney General 272, 306(1974). When a business entity establishes a PAC through which it makes its political contributions, it has merely established a filter through which the contributions reach the candidate. A PAC created by a business entity does not take on a life of its own; rather, established and operated by the business entity, the PAC makes contributions that are attributed to the entity for reporting requirements.
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Que. If an individual who serves, as a director, officer or partner of a business entity must disclose political contributions through the filing of one entity, must that individual’s contributions also be reported through the filing of another entity for which the individual serves as a director, officer or partner?
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Ans. Yes. Each business entity’s reporting requirements are unique to that entity. Although the individual directors, officers and partners bear responsibility for providing contribution information to the business entity, the filing responsibility is born by the business entity. The goal of the statute is not to capture the contribution information from a particular individual but from business entities that contract with the government agencies. Therefore, each entity must file a report listing all reportable contributions, regardless of whether the contributions are listed on another entity’s report.
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Que. Are the contributions of the chief executive officer of a not-for-profit organization required to be reported if the officer is unpaid?
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Ans. No. The contributions of trustees or members of the board of directors of a not-for-profit
entity need not be reported and are not attributable to the entity if the trustee or board member is not paid by the entity. Election Law Article 14-105(f). However, the exemption does not apply if the contribution was made on the recommendation of the non-for-organization or if the individual is paid by the not-for-profit organization.
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Que. Does a contract awarded prior to January 1, 2015 whose value is $200,000 or more require the entity to file the semi-annual report?
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Ans. Yes. If the person is doing public business based on the new definition, then the person is required to file the semi-annual reports. The filer does not need to file an initial report. See Election Law Article 14-104.
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Que. Do contributions to federal candidates or incumbents need to be reported
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Ans. No. This includes a federal committee of a State or local incumbent. Title 14 does not cover federal contributions.
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Que. What is a contract for Title 14 purposes?
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Ans. An agreement entered into by governmental entity for a procurement.
Procurement means leasing real or personal property as lessee or buying or otherwise obtaining supplies, services, construction, construction related services, and other services
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Mutual Funds
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Que. Does investment in a mutual fund by a governmental entity trigger reporting obligations?
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Ans. Investment of the State or retirement funds into a mutual fund is not considered a procurement. However, if a management service has a direct contract with a governmental entity for advising and/or managing the investments then management service agreement would be considered a procurement.
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