Maryland has had a pay-to-play law for many years, which requires government contractors to register and file reports concerning political contributions to state and local candidates. Since 2015, the law has been in a state of flux as legislators and regulators have written and re-written the requirements, creating a complex reporting system.
The law is triggered when a business receives a contract from a Maryland state or local government body with a total value of $200,000 or more. The parent company of the business holding the contract must register with the State Board of Elections, and then keep the registration up to date with new contracts it and its subsidiaries receive. Every six months, the parent company must disclose certain contributions made by it and each of its subsidiaries, as well as contributions by each of those entities’ officers, directors, and partners. In addition, it must disclose contributions made by other individuals, such as employees and lobbyists, if they make contributions at the “direction or suggestion” of these officers, directors, or partners.
With the next report due Wednesday, November 30, covering the period from May 1 through October 31, it is a good time to review some of the most recent changes.
Extended Registration Deadlines
The State Board of Elections has extended the deadline for a filer to update its registration statement to include a new contract.
- Contracts with the same jurisdictions: If any additional contracts are awarded from a jurisdiction with which a filer already has a registered contract, the filer has 30 business days to update the registration statement to include the new contract.
- Contracts with new jurisdictions: If a contract is awarded by a jurisdiction in which the filer does not hold a registered contract, the registration must be updated within 15 business days of the award to reflect the new contract. Additionally, the filer must submit an “initial report” within 15 business days of updating the registration, disclosing contributions made to officials and candidates for office in that jurisdiction in the preceding 24 months.
Suggesting that Someone Make a Contribution
Under the new regulations, a communication to an employee, agent, or other affiliated person is considered a “suggestion” for a contribution if a reasonable person would understand it that way. The Board of Elections provides the following examples to help guide that determination:
- If the filer, or an officer, director, or partner of the filer, forwards an email containing a fundraising solicitation to an employee or agent (e.g., a state lobbyist), a contribution that results from this “suggestion” must be reported by the filer.
- An expression of public support – on social media, for example – is not, by itself, considered a “suggestion” for a contribution, and thus contributions made in response to such postings do not have to be reported.
Thus, officers and directors must be very careful about fundraising from employees, company lobbyists, and others. Simply forwarding an email containing a fundraising invitation can significantly expand the number of reportable contributions.
CEO’s Duty to Request Information from Covered Persons
In order to complete the report, the law requires a filer’s CEO, or his or her designee, to ask covered persons if they have made any covered contributions during each reporting period and obtain information about the date and amount of the contributions. Although the law does not impose a specific date by which the request for information must be sent, covered persons must provide information to the filer within 5 business days after a reporting period ends. For the upcoming report, the CEO or designee must request that covered persons provide the necessary information by November 7, 2016 (covering the period from May 1 – Oct 31).
If a filer requires that covered persons must preclear contributions through a corporate legal or compliance department, no separate notice is required. The preclearance policy must be in writing and annually reviewed by covered personnel.
A filer may also dispense with notice to officers, directors, partners, or employees of a subsidiary if (1) the subsidiary does not hold contracts in Maryland; (2) the subsidiary has “a written and well-publicized policy” prohibiting contributions in Maryland, which is annually reviewed by covered personnel; and (3) the filer annually submits the policy and related information to the Board of Elections. This written policy will be available to the public, but the Board of Elections has not yet determined whether it will be posted online.