Welcome to the November 2024 edition of the Political Law Playbook. Undeniably, the biggest news since our last edition is the election of Donald Trump as the next President of the United States. President-Elect Trump’s decisive win will surely bring notable changes to the country’s political law landscape over the next four years. The Playbook will continue to bring our loyal readership the latest developments in the areas of political law, government ethics, campaign finance, lobbying, and election law as the country embarks on this next chapter.
This edition’s federal coverage features discussion of a Federal Election Commission (“FEC”) complaint filed by the Trump campaign alleging that the United Kingdom’s Labour Party engaged in election interference. We also highlight a complaint filed by Senator Ted Cruz with the FEC alleging that his election opponent engaged in illegal coordination with the Democratic party.
In nonprofit compliance news, this edition highlights a recent ruling from the United States Court of Appeals for the Fifth Circuit that has some political law practitioners debating whether a new standard was set with regard to the legal limits of political activities under the federal tax code by Section 501(c)(4) nonprofit social welfare organizations.
On the state-level, a divided panel of the US Court of Appeals for the Sixth Circuit granted the State of Ohio’s application for an emergency stay of a district court injunction barring enforcement of its law prohibiting foreign nationals from spending money to support or oppose a ballot initiative. Similarly, during oral arguments, a panel of the US Court of Appeals for the First Circuit suggested that Maine’s law barring foreign governments and companies they influence from spending on state elections may violate the First Amendment.
Federal Elections & Campaign Finance
Trump Campaign Files FEC Complaint Regarding the UK Labour Party’s Support of Vice President Harris –President-Elect Trump’s campaign filed a complaint with the FEC in October characterizing the United Kingdom Labour Party’s efforts to support Vice President Harris as “election interference.” The complaint alleged that Labour offered to send 100 current and former party staff to battleground states such as Pennsylvania and North Carolina to campaign for Harris. The complaint cited a LinkedIn post from the Labour Party’s head of operations in which she said she would sort out the volunteers’ housing. While federal campaign finance law allows foreign nationals to volunteer in US elections, they may not be compensated, make expenditures, or direct or control activities of US campaigns. The Trump campaign alleged that through its volunteer efforts, the Labour Party made, and the Harris campaign accepted, illegal foreign national contributions. British Prime Minister Keir Starmer has stated that “the Labour party …volunteers, have gone over pretty much every election. They’re doing it in their spare time, they’re doing it as volunteers. . . .” The Labour Party declined to comment on the Trump campaign’s complaint.
Cruz Campaign Files FEC Complaint Alleging Opponent Engaged in Illegal Campaign Coordination – In October, Senator Ted Cruz’s (R-TX) campaign filed a complaint with the FEC against Representative Colin Allred (D-TX), his opponent in the Texas US Senate race. In the complaint, Senator Cruz alleged that Allred engaged in illegal coordination with Senate Majority Leader Chuck Schumer (D-NY) and the Democratic Senatorial Campaign Committee (“DSCC”). Under federal campaign finance law, political parties are generally restricted from spending money on campaign advertising developed with input from a party’s candidate for office. Senator Cruz’s complaint asserts that Allred’s campaign illegally coordinated with Senator Schumer and the DSCC on television ads that exceeded the coordinated party expenditure limit, resulting in potentially millions of dollars in excessive in-kind contributions from the DSCC to Allred.
House Republicans Subpoena Democrat-Favored Fundraising Platform ActBlue – Committee on House Administration Chair Bryan Steil (R-WI) recently issued a subpoena to ActBlue, a Democrat-aligned fundraising platform, regarding allegations that the platform has been used to influence US elections through illicit money laundering activities. According to the House Administration Committee’s press release, the letter demands documents and information related to the platform’s donor verification policies and potential vulnerabilities that foreign actors may exploit to illegally participate in the US political process. Representative Steil sent a series of letters to ActBlue dating back to October 2023 regarding the platform’s verification practices and the Committee’s attempts to regulate them. Steil requested that ActBlue comply with the Committee’s demands by November 6. An ActBlue spokesperson confirmed in an emailed statement to The Hill that it had received Steil’s letter and will “respond to address the continued inaccuracies and misrepresentations about our platform.”
Federal Judge Upholds FEC Interpretation of Joint Fundraising Ads Rules – In the October Edition of the Playbook, we covered the FEC’s deadlock on whether joint fundraising committees should be permitted to run television fundraising ads that also advocate for candidate campaigns. In response to the deadlock, the Democratic Congressional Campaign Committee (“DCCC”) sued the FEC in federal court. The suit invited the court to either ban the practice or to sanction it. Electing the latter path, Judge Randolph D. Moss of the US District Court in Washington wrote that he was unpersuaded to outlaw a practice that the Commission had not. He articulated that Democrat and Republican campaign committees are all on an even playing field and the lack of action taken by the FEC had not tilted it. In response to the ruling, the DCCC indicated that it will evaluate its next steps after the general election.
DC Circuit Will Rehear En Banc Case on FEC’s Prosecutorial Discretion – In October it was announced that the full United States Court of Appeals for the District of Columbia Circuit will revisit an appeal implicating the court’s authority to review the FEC’s decisions on campaign finance complaints when those decisions rest on commissioners’ so-called prosecutorial discretion. The request for rehearing was initiated by End Citizens United PAC, which is vying to revive its lawsuit accusing the FEC of arbitrarily tossing two administrative campaign finance complaints against Senator Rick Scott (R-FL). The first complaint alleged that Senator Scott informally began his Senate run in May 2017 and failed to register his candidacy until a year later. The second complaint accused Senator Scott and New Republican PAC of unlawful coordination, alleging that Senator Scott continued working with the PAC after stepping down from his role as the PAC’s chair. The six-member FEC split 3-3 in a vote over whether there was “reason to believe” a campaign finance violation occurred. Lacking the majority vote needed to launch an investigation, the commissioners then voted 5-1 to dismiss the complaints. The PAC challenged the dismissals in a 2021 lawsuit in the US District Court for the District of Columbia that ruled in favor of New Republican, which had intervened in the case in 2022. A divided DC Circuit panel affirmed the lower court ruling in January. The en banc oral arguments are set for February 25, 2025.
New Federal Election Cycle Begins – Beginning on November 6, 2024 a new election cycle began for federal campaign finance compliance purposes. Federal candidate committees aggregate receipts and disbursements on an election cycle basis. Accordingly, all 2024 campaigns must separate (both in their internal records and on their FEC reports) activity that occurred on or after November 6, 2024 from activity that occurred prior to that date. Donors, likewise, should be aware that any donations made after November 6, 2024 to federal candidates will most likely be attributed to the candidate’s next federal election.
Federal Lobbying & Ethics
Federal Reserve Governor Divesting Stock Bought by Spouse in Violation of Ethics Rules – Federal Reserve Governor Adriana Kugler ran afoul of new ethics rules governing how officials and their families can trade and invest after her spouse bought stock without her knowledge over the summer. The Federal Reserve Board’s ethics rules sharply limit how the central bank’s officials and senior staff can invest their personal funds and requires trading be pre-cleared by designated agency ethics officials. Those rules also cover spouses and minor children of top staff. According to a government filing dated October 24, Kugler indicated that the relevant purchases were carried out by her spouse, without her knowledge, and that upon learning of the purchases, she immediately notified ethics officials, and at their direction, she initiated divestiture of these assets as soon as possible under ethics policies. The Fed’s current ethics rules were put in place in early 2022 after a series of controversies over the personal investing activities of some policymakers.
Angela Alsobrooks Faces Ethics Complaint Over Alleged Unpaid Property Taxes – US Senator-Elect Angela Alsobrooks (D-MD) was recently accused of submitting false financial disclosures in an ethics complaint by a conservative “watchdog” group. The complaint, filed with the Senate Select Committee on Ethics by the National Legal and Policy Center, asserts that Alsobrooks improperly claimed tax breaks that she did not qualify for on her former property in Washington, DC and likewise failed to disclose her full tax liabilities on financial disclosure reports filed with Congress. The complaint at issue also alleges that Alsobrooks failed to report her affiliation with the University of Maryland’s School of Law, as required by candidate disclosure rules. Neither the Alsobrooks campaign nor the Senate Ethics Committee responded to the Washington Examiner’s requests for comment on these issues and the matter remains under review.
Representative Henry Cuellar Wins Reelection as Bribery Trial Looms – US Representative Henry Cuellar (D-TX) secured an 11th term representing his Texas congressional district despite a current federal indictment accusing him of corruption. As we have reported in previous editions of the Playbook, earlier this year, Representative Cuellar and his wife were federally indicted for allegedly participating in a purported bribery scheme involving the nation of Azerbaijan and a foreign financial institution based in Mexico. The couple maintains their innocence. Their trial was pushed in June until after the election and jury selection is set to begin on March 31, 2025.
Foreign Agents Registration Act
Democratic Lawmakers Request Probe into Jared Kushner’s Middle Eastern Ties – In a letter to Attorney General Merrick Garland, Senator Ron Wyden (D-OR) and Representative Jamie Raskin (D-MD) recently accused Jared Kushner – Present-Elect Donald Trump’s son-in-law and a former senior White House adviser – of acting as an unregistered foreign agent by lobbying on behalf of the Kingdom of Saudi Arabia and other interests in the Middle East. Specifically, the letter requested that the Department of Justice (“DOJ”) investigate possible violations of the Foreign Agents Registration Act (“FARA”) by Mr. Kushner. The letter cited recent public reports and a Senate investigation that allegedly uncovered evidence that Mr. Kushner acted as an unregistered foreign agent of the Kingdom and other governments in the Middle East. “Despite being engaged in plainly political activities, Mr. Kushner has not made FARA disclosures to DOJ related to the millions of dollars he is paid annually by entities owned and controlled by the governments of Saudi Arabia, the United Arab Emirates and Qatar,” Wyden and Raskin wrote. Kushner has dismissed the letter as a political stunt and no action has yet been taken by DOJ.
Nonprofit Compliance & Disclosure
Fifth Circuit Affirms Texas Health Coordinator Is Not Tax-Exempt – In October, the United States Court of Appeals for the Fifth Circuit held that a Texas nonprofit corporation that coordinates healthcare primarily for privately insured patients does not qualify for tax-exempt status because its business fails to help the broader community at large. Memorial Hermann Accountable Care Organization, which coordinates healthcare for chronically ill patients – 81% of whom are covered by employer-sponsored insurance plans, was determined to not qualify for tax exempt status as a Section 501(c)(4) social welfare organization because the extent of its commercial activities caused it to have a substantial nonexempt purpose. It remains to be seen whether the standard for nonexempt operations utilized in the case, which appears to articulate a limit of around one third of the organization’s total activities, will have any application for social welfare groups that engage in political activities. Current regulations allow Section 501(c)(4) groups to qualify for tax exempt status so long as their primary purpose meets the definition of social welfare exempt activity, so groups generally limit non-exempt campaign intervention and political activities to less than 40% of all annual activities/spending (or less than 50% for more risk tolerant entities). The Memorial Hermann ruling dealt with a social welfare organization that engaged in a substantial amount of commercial activities, not political activities, so many political law and nonprofit law practitioners are currently debating whether the ruling could signal that a new framework is coming for those social welfare organizations that engage in political activities.
Non-Federal Elections & Campaign Finance
First Circuit Suggests Maine Foreign Election Spending Law Chills Speech – A three-judge panel of the United States Court of Appeals for the First Circuit recently suggested during oral arguments that Maine’s voter-approved law barring foreign governments and foreign-aligned companies from spending money on state elections appears to violate the First Amendment. The law, which applies to companies that are more than 5% owned by a foreign government, was passed seemingly in response to a subsidiary of a Canadian hydropower company spending more than $20 million to influence Maine ballot questions about a controversial clean energy project. A US power company jointly involved in the energy project with the subsidiary filed suit against the Maine Commission on Governmental Ethics and Election Practices, arguing that the law infringes on their First Amendment rights.
Sixth Circuit Allows Enforcement of Ohio Law Barring Foreign Expenditures on Ballot Initiatives – In October, a divided panel of the US Court of Appeals for the Sixth Circuit granted the State of Ohio’s application for an emergency stay of a district court injunction barring enforcement of an Ohio law prohibiting foreign nationals from spending money to support or oppose a ballot initiative. We reported on the district court’s injunction in the September Edition of the Playbook. The district court determined that the plaintiffs were likely to succeed on the merits of their First Amendment challenges. The divided Sixth Circuit disagreed. Writing for the panel, Judge Thapar rejected the plaintiffs’ arguments that the prohibition is overbroad and that it unconstitutionally restricts the First Amendment rights of lawful permanent residents. While lawful permanent residents have First Amendment rights, Judge Thapar explained, the state also has a compelling interest in preventing foreign money from distorting domestic self-government. The court further concluded that the law was sufficiently tailored to this interest.
Washington PAC Supporting Voter Initiatives Fined by State Campaign Finance Regulators – Washington state campaign finance regulators fined Let’s Go Washington, a political action committee behind a slate of voter initiatives on the state’s November ballot, for allegedly failing to report spending by subcontractors or confirm that its vendor did not use subcontractors. In its order, the Washington Public Disclosure Commission (“PDC”) said its rules require PACs to disclose payments to subcontractors or other third parties, and that PACs are obligated to ask and confirm whether their vendors use subcontractors. It went on to state that Let’s Go Washington’s failure to report this information was especially concerning where the PAC’s contractors implied they did utilize sub-vendors. The PDC issued a $10,000 fine for two alleged violations, totaling $20,000, but half of the total will be suspended so long as Let’s Go Washington pays $10,000 within 30 days, complies with all PDC reporting requirements, and does not commit further violations of the state’s campaign finance laws or rules within four years.
Alaska To Vote on Ballot Measure to Impose Contribution Limits in 2026 – In October, Alaska Lieutenant Governor Nancy Dahlstrom approved a ballot measure that would reimpose contribution limits on political candidates and donors. Alaska largely has been without contribution limits since 2021, when the United States Court of Appeals for the Ninth Circuit struck down the state’s prior limits as unconstitutional. Alaska declined to appeal the decision, and both the 2022 and 2024 elections have taken place without limits on the amount of money that an individual can give a state candidate. The new ballot measure will now face a statewide vote in 2026. If voters approve the measure, an individual would be limited to donating up to $2,000 to a candidate in each election cycle, and up to $5,000 to a political party. For a joint governor-lieutenant governor ticket, an individual donor would be capped at $4,000 per cycle.
New York City Campaign Finance Board Proposes New Qualifications for the City’s Public Financing Program – The New York City Campaign Finance Board is considering changes that would make it harder for some candidates to gain access to the city’s public campaign financing program. Under proposed rule changes, the Board would be required to withhold the public financing program’s matching funds from candidates who violate specific campaign finance rules. These violations include failure to submit required disclosure statements or provide appropriate access to mandatory candidate documents and records. In recent years, the Board has largely been able to use its discretion to determine a candidate’s eligibility for matching funds, despite most compliance concerns. Notably, in 2021, the Board requested missing documents from Mayor Adams’ campaign multiple times, and despite the campaign’s failure to respond, the Board still awarded Adams $10 million in public matching funds. The window for the public to submit comments on the proposed rule changes closed at the end of October.
Maine Ethics Commission Aims to Crack Down on “Straw Donor” Contributions – In October, the Maine Ethics Commission shared a proposal aimed at cracking down on “straw donor” contributions. “Straw donations” involve a funder giving money to an intermediary who then donates to a group or candidate in order to illegally hide the original source’s identity. The current maximum penalty in Maine for straw donations is $5,000. Commission staff want lawmakers to increase that penalty to up to five times the amount of the illegal contribution. They also want a requirement for text messages that expressly advocate for or against a ballot initiative and are “mass distributed” at a cost of more than $500 to include the funder of the communication. Lastly, according to the proposal, the Commission may ask lawmakers to create a legal definition of “public communication” that would bring more clarity to the types of campaign messages that must identify their sponsors and require an independent expenditure report. The Commission intends on submitting its proposal to the state’s legislature ahead of its 2025 session, which begins in earnest this January.
Non-Federal Lobbying & Ethics
Former Maryland Governor Allegedly Approved Millions of Dollars for His Firm’s Clients While in Office – Prior to Larry Hogan assuming the governor’s office in Maryland, he served as president and principal owner of HOGAN, a multi-purpose real estate brokerage firm. According to TIME’s reporting, over Hogan’s eight years in office, nearly 40% of the competitive affordable housing awards overseen by the governor went to developers listed as clients on HOGAN’s website. According to public records, as one of three members of the Board of Public Works, an administrative body that determines how taxpayer money is spent, Hogan voted on five occasions to issue additional loans or grants to four of those same developers. During this time, Hogan continued to hold regular meetings with his company’s leaders, according to his official meeting calendar, which was obtained by the Washington Monthly via a FOIA request in 2019. Maryland law prohibits government officials from taking part in decisions in which they or a close relative have a known financial interest, or if the decision could reasonably be expected to result in a conflict between the private interest and the official State duties of the official.
Former Illinois House Speaker On Trial for Corruption Charges – The corruption trial for former Illinois House Speaker Michael Madigan began in October. Madigan has been federally charged with racketeering conspiracy, using interstate facilities in aid of bribery, wire fraud, and attempted extortion in a 23-count indictment. Federal prosecutors allege he wrongfully exploited not only his role as speaker, but his other positions of power, including Democratic Party of Illinois chair, for private benefit. Madigan is also accused of benefiting from private legal work illegally steered to his law firm. It is alleged that in one instance, he used his influence to pass legislation favorable to electric utility ComEd. In return, it is purported that ComEd offered kickbacks, jobs, and contracts to Madigan loyalists. Madigan has denied any wrongdoing, and the trial is expected to last three months.
Practice Pointers
This month’s Practice Pointers serve as a reminder that with a new presidential administration comes new enforcement and ethics priorities. The Trump Administration is likely to draft and enforce a new ethics executive order and pledge for senior executive branch officials, may have different enforcement priorities under FARA, and may also step in to influence the revision of FARA regulations, which is forthcoming. Accordingly, now is the time to begin reviewing your organization’s compliance policies and procedures through the lens of such anticipated changes in the political law space. The Dentons Political Law Team, and the greater network of Dentons professionals, regularly advises clients on how to navigate the minefield of compliance concerns associated with federal executive branch transitions. Please do not hesitate to contact a member of our team should you have any questions regarding how to best position your organization’s political engagement compliance programs ahead of January.
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