2012 -- S 2569

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LC02091

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STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2012

____________

A N A C T

RELATING TO ELECTIONS -- DISCLOSURE OF POLITICAL CONTRIBUTIONS AND

EXPENDITURES

     Introduced By: Senators Pichardo, Paiva Weed, Algiere, Ruggerio, and Goodwin

     Date Introduced: February 28, 2012

     Referred To: Senate Judiciary

It is enacted by the General Assembly as follows:

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     SECTION 1. The legislature hereby finds and declares as follows:

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     (1) The amount of money spent in elections by persons, business entities or political

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action committees that are not coordinated with a candidate or political party is playing a greater

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role in elections.

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     (2) The Supreme Court’s decision in Citizens United v. FEC has accelerated these trends

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by allowing unlimited political spending by outside groups via independent expenditures. This

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spending is often extremely difficult or impossible to trace, being funneled through “shadow

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groups” that are able to avoid many current campaign finance disclosure regulations.

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     (3) The legislature finds it to be in the public and governmental interest to revise Rhode

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Island’s campaign finance disclaimer and disclosure laws to keep pace with the aforementioned

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developments and to protect and enhance core democratic values and maintain the integrity of

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elections.

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     (i) The source of political spending is vital information for voters, allowing them to make

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knowledgeable decisions at election time. Disclosure allows voters to properly weigh speakers

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and messages based on their affiliations and other contexts, such as whether the speaker stands to

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personally benefit from their advocated positions.

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     (ii) The United States Supreme Court has repeatedly upheld disclaimer and disclosure

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provisions as constitutionally protected methods of improving the integrity of electoral processes

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without unnecessarily restricting First Amendment free speech rights. The Court has noted that

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these requirements “impose no ceiling on campaign related activities” (Buckley v. Valeo) and “do

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not prevent anyone from speaking” (McConnell v. FEC). Whatever level of burden disclaimer

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and disclosure do place on the ability to speak is justified by a valid government interest in

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providing the electorate with information.

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     (iii) New communications technologies greatly increase the value and potential for

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disclosure by making disclosed information easily available to the average citizen. This potential

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should be embraced by encouraging electronic filing of campaign finance reports as much as is

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practicable and making this information as accessible as possible. New media and technological

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platforms also bring with them a risk of circumvention of existing regulation by funneling money

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through mediums unaddressed by extant law. Extension of disclaimer laws to new media will

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ensure that the interests bolstered by disclosure and disclaimer remain well supported.

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     (iv) By bringing political spending out into the light, stronger, modernized disclaimer and

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disclosure rules can serve as a powerful check on actual government corruption as well as reduce

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the perception of corruption. Armed with information about political spending, citizens can better

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detect improper political favors and then use this knowledge to hold those politicians accountable

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at the ballot box. By preventing the flooding of elections with untraceable money, these rules will

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leave the public with less reason to perceive “bought elections” in which the outcome is

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determined by outside or even out-of-state groups. Thus, improved disclosure and disclaimer laws

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can help restore citizen trust in government.

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     (v) Disclaimer and disclosure can also further the rights and interests of shareholders and

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group members. In both cases, an organization acts in a role representing its constituents’

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interests, including in its political actions. However, if information on a group’s spending is not

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disclosed to members and shareholders, their interests are compromised as they may support or

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oppose certain political spending but not be made aware of the spending being done in their

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names.

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     (vi) At present, spending between the final pre-election filing date and election day is

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hidden from public view until after the election is over. This deprives voters of knowledge when

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it would be most relevant to their decision-making and reduces disclosure’s effectiveness in

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promoting accountability in the political process.

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     (vii) Stronger disclosure rules can also assist in the gathering of information necessary to

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avoid circumvention of other existing rules. Existing law, such as bans on campaign contributions

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by foreign nationals and contribution limits, rely on the type of transparency in political spending

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that these regulations would create.

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     SECTION 2. Section 17-25-3 of the General Laws in Chapter 17-25 entitled "Rhode

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Island Campaign Contributions and Expenditures Reporting" is hereby amended to read as

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follows:

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     17-25-3. Definitions. -- As used in this chapter, unless a different meaning clearly

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appears from the context:

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      (1) "Business entity" means any corporation, whether for profit or not for profit,

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domestic corporation or foreign corporation, as defined in section 7-1.2-106, financial institution,

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cooperative, association, receivership, trust, holding company, firm, joint stock company, public

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utility, sole proprietorship, partnership, limited partnership, or any other entity recognized by the

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laws of the United States and/or the state of Rhode Island for the purpose of doing business. The

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term "business entity" shall not include a political action committee organized pursuant to this

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chapter or a political party committee or an authorized campaign committee of a candidate or

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office holder.

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      (2) "Candidate" means any individual who undertakes any action, whether preliminary or

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final, which is necessary under the law to qualify for nomination for election or election to public

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office, and/or any individual who receives a contribution or makes an expenditure, or gives his or

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her consent for any other person to receive a contribution or make an expenditure, with a view to

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bringing about his or her nomination or election to any public office, whether or not the specific

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public office for which he or she will seek nomination or election is known at the time the

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contribution is received or the expenditure is made and whether or not he or she has announced

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his or her candidacy or filed a declaration of candidacy at that time.

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      (3) "Contributions" and "expenditures" include all transfers of money, credit or debit

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card transactions on-line or electronic payment systems such as "pay pal," paid personal services,

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or other thing of value to or by any candidate, committee of a political party, or political action

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committee or ballot question advocate. A loan shall be considered a contribution of money until it

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is repaid.

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      (4) "Election" means any primary, general, or special election or town meeting for any

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public office of the state, municipality, or district or for the determination of any question

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submitted to the voters of the state, municipality, or district.

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      (5) "Election cycle" means the twenty-four (24) month period commencing on January 1

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of odd number years and ending on December 31 of even number years; provided, with respect to

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the public financing of election campaigns of general officers under sections 17-25-19, 17-25-20,

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and 17-25-25, "election cycle" means the forty-eight (48) month period commencing on January

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1 of odd numbered years and ending December 31 of even numbered years.

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      (6) "In-Kind Contributions" means the monetary value of other things of value or paid

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personal services donated to, or benefiting, any person required to file reports with the board of

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elections.

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      (7) "Other thing of value" means any item of tangible real or personal property of a fair

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market value in excess of one hundred dollars ($100).

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      (8) "Paid personal services" means personal services of every kind and nature, the cost or

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consideration for which is paid or provided by someone other than the committee or candidate for

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whom the services are rendered, but shall not include personal services provided without

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compensation by persons volunteering their time.

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      (9) "Person" means an individual, partnership, committee, association, corporation,

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union, charity and/or any other organization.

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      (10) "Political action committee" means any group of two (2) or more persons that

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accepts any contributions to be used for advocating the election or defeat of any candidate or

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candidates. Only political action committees that have accepted contributions from fifteen (15) or

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more persons in amounts of ten dollars ($10.00) or more within an election cycle shall be

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permitted to make contributions, and those committees must make contributions to at least five

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(5) candidates for state or local office within an election cycle.

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      (11) "Public office" means any state, municipal, school, or district office or other

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position that is filled by popular election, except political party offices. "Political party offices"

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means any state, city, town, ward, or representative or senatorial district committee office of a

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political party or delegate to a political party convention, or any similar office.

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      (12) "State" means state of Rhode Island.

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      (13) "Testimonial affair" means an affair of any kind or nature including, but not limited

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to, cocktail parties, breakfasts, luncheons, dinners, dances, picnics, or similar affairs expressly

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and directly intended to raise campaign funds in behalf of a candidate to be used for nomination

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or election to a public office in this state, or expressly and directly intended to raise funds in

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behalf of any state or municipal committee of a political party, or expressly and directly intended

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to raise funds in behalf of any political action committee.

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     (14) "Electioneering communication" means any print, broadcast, cable, satellite, or

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electronic media communication not coordinated, as set forth in section 17-25-23, with any

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candidate, authorized candidate campaign committee, or political party committee and which

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unambiguously identifies a candidate or referendum and is made either within sixty (60) days

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before a general or special election or town meeting for the office sought by the candidate or

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referendum; or thirty (30) days before a primary election, for the office sought by the candidate;

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and is targeted to the relevant electorate.

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     (i) A communication which refers to a clearly identified candidate or referendum is

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"targeted to the relevant electorate" if the communication can be received by two thousand

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(2,000) or more persons in the constituency the candidate seeks to represent or the constituency

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voting on the referendum.

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     (ii) Exceptions: The term "electioneering communication" does not include:

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     (A) A communication appearing in a news story, commentary, or editorial distributed

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through the facilities of any broadcasting station, unless such facilities are owned or controlled by

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any political party, political committee, or candidate;

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     (B) A communication which constitutes a candidate debate or forum conducted pursuant

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to regulations adopted by the board of elections or which solely promotes such a debate or forum

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and is made by or on behalf of the person sponsoring the debate or forum; or

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     (C) Any other communication exempted under such regulations as the board of elections

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may promulgate (consistent with the requirements of this paragraph) to ensure the appropriate

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implementation of this paragraph.

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     (15) "Independent expenditure" means an expenditure which expressly advocates the

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election or defeat of a clearly identified candidate or referendum and is in no way coordinated, as

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set forth in section 17-25-23,  with any candidate’s campaign, authorized candidate committee, or

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political party committee. An independent expenditure is not a contribution to that candidate or

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committee.

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     SECTION 3. Title 17 of the General Laws entitled "ELECTIONS" is hereby amended by

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adding thereto the following chapter:

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     CHAPTER 25.3

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INDEPENDENT EXPENDITURES AND ELECTIONEERING COMMUNICATIONS

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     17-25.3-1. Independent expenditures and electioneering communications for

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elections. – (a) It shall be lawful for any person, business entity or political action committee, not

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otherwise prohibited by law and not acting in coordination with a candidate, authorized candidate

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campaign committee, political action committee, or political party committee, to expend

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personally from that person's own funds a sum which is not to be repaid to him or her for any

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purpose not prohibited by law to support or defeat a candidate or referendum. Whether a person,

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business entity or political action committee is "acting in coordination with a candidate,

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authorized candidate campaign committee, political action committee or political party

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committee" for the purposes of this subsection shall be determined by application of the standards

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set forth in section 17-25-23. All terms used in this chapter shall have the same meaning as

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defined in section 17-25-3.

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     (b) Any person, business entity or political action committee making independent

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expenditures or electioneering communications shall report all such campaign finance

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expenditures and expenses to the board of elections, provided the total of the money so expended

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exceeds two hundred and fifty dollars ($250) within a calendar year, to the board of elections

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within seven (7) days of making the expenditure.

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     (c) A person, business entity or political action committee who makes or contracts to

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make independent expenditures or electioneering communications with an aggregate value of one

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thousand dollars ($1,000) or more shall electronically file a campaign finance report to the board

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of elections describing the expenditures within twenty-four (24) hours.

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     (d) After a person, business entity or political action committee files a report under

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subsection (b), the person, business entity or political action committee shall file an additional

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report within twenty-four (24) hours after each time the person, business entity or political action

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committee makes or contracts to make independent expenditures or electioneering

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communications aggregating an additional one thousand dollars ($1,000) with respect to the same

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election as that to which the initial report relates.

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     (e) Reports of independent expenditures or electioneering communications by a person

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shall contain the name, street address, city, state, zip code, occupation, employer (if self-

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employed, the name and place of business), of the person responsible for the expenditure, the date

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and amount of each expenditure, and the year to date total.

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     (1) The report shall also include a statement identifying the candidate or referendum that

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the independent expenditure or electioneering communication is intended to promote the success

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or defeat, and affirm under penalty of false statement that the expenditure is not coordinated with

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the campaign in question, and provide any information that the board of elections requires to

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facilitate compliance with the provisions of this chapter.

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     (f) Reports of independent expenditures or electioneering communications by a person,

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business entity or political action committee shall also disclose the identity of all donors of at

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least one thousand dollars ($1000) within the past twelve (12) months, if applicable, unless the

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person, business entity or political action committee has established a separate segregated account

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for independent expenditures and electioneering communications as detailed in section 17-25.3-2

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in which case this paragraph applies only to donors to the person’s, business entity’s or political

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action committee’s segregated campaign account.

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     (g) If a person, business entity or political action committee and a donor mutually agree,

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at the time a donation, payment, or transfer to the person, business entity or political action

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committee which is required to disclose the identification under subsection (f) that the person,

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business entity or political action committee will not use the donation, payment, or transfer for

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campaign-related activity, then not later than thirty (30) days after the person, business entity or

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political action committee receives the donation, payment, or transfer the person, business entity

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or political action committee shall transmit to the donor a written certification by the chief

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financial officer of the person, business entity or political action committee (or, if the

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organization does not have a chief financial officer, the highest ranking financial official of the

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organization) that:

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     (1) The person, business entity or political action committee will not use the donation,

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payment, or transfer for campaign-related activity; and

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     (2) The person, business entity or political action committee will not include any

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information on the donor in any report filed by the person, business entity or political action

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committee under this section with respect to independent expenditures or electioneering

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communications, so that the donor will not be required to appear in the list of donors.

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     (3) Exception for payments made pursuant to commercial activities. Subdivision (e)(1)

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does not apply with respect to any payment or transfer made pursuant to commercial activities in

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the regular course of a person’s, business entity’s or political action committee’s business.

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     (h) For the purposes of this chapter, two (2) or more entities are treated as a single entity

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if the entities:

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     (1) Share the majority of members on their boards of directors;

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     (2) Share two (2) or more officers;

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     (3) A candidate committee and a political committee other than a candidate committee

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are for the purposes of this section treated as a single committee if the committees both have the

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candidate or a member of the candidate’s immediate family as an officer;

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     (4) Are owned or controlled by the same majority shareholder or shareholders or persons;

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     (5) Are in a parent-subsidiary relationship; or

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     (6) Have bylaws so stating.

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     17-25.3-2. Optional use of separate account by person, business entity or political action

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committee for campaign-related activity. – (a) (1) Establishment of account: (i) In general, at

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its option, a person, business entity or political action committee may make disbursements for

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campaign-related activity using amounts from a bank account established and controlled by the

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person, business entity or political action committee to be known as the campaign-related activity

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account (hereafter in this section referred to as the “account”), which shall be maintained

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separately from all other accounts of the person, business entity or political action committee and

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which shall consist exclusively of the deposits described in subdivision (2).

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     (ii) Mandatory use of account after establishment. If a person, business entity or political

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action committee establishes an account under this section, it may not make disbursements for

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campaign-related activity from any source other than amounts from the account, other than

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disbursements for campaign-related activity which, on the basis of a reasonable belief by the

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person, business entity or political action committee, would not be treated as disbursements for an

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exempt function for purposes of section 527(f) of the Internal Revenue Code of 1986.

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     (iii) Exclusive use of account for independent expenditures and electioneering

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communications. Amounts in the account shall be used exclusively for disbursements by the

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person, business entity or political action committee for campaign-related activity. After such

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disbursements are made, information with respect to deposits made to the account shall be

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disclosed in accordance with section 17-25.3-1(f).

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     (2) The deposits described in this paragraph are deposits of the following amounts:

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     (i) Amounts donated or paid to the person, business entity or political action committee

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by a person other than the person, business entity or political action committee for the purpose of

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being used for campaign-related activity as described in section 17-25.3-1(g) and for which the

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person, business entity or political action committee providing the amounts has designated that

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the amounts be used for campaign-related activity with respect to a specific election or specific

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candidate.

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     (ii) Amounts donated or paid to the person, business entity or political action committee

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by a person other than the person, business entity or political action committee for the purpose of

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being used for campaign-related activity as described in section 17-25.3-1(g) and for which the

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person providing the amounts has not designated that the amounts be used for campaign-related

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activity with respect to a specific election or specific candidate.

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     (iii) Amounts donated or paid to the person, business entity or political action committee

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by a person other than the person, business entity or political action committee in response to a

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solicitation for funds to be used for campaign-related activity.

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     (iv) Amounts transferred to the account by the person, business entity or political action

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committee from other accounts of the organization, including from the person’s, business entity’s

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or political action committee’s general treasury funds but excluding any portion of those funds

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whose donors have explicitly refused to have their donations used for campaign purposes as

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described in section 17-25.3-1(g).

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     (3) The establishment and administration of an account in accordance with this

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subsection shall not by itself be treated as the establishment or administration of a political

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committee for any purpose of this chapter.

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     (b) Reduction in amounts otherwise available for account in response to demand of

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general donors.

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     (1) If a person, business entity or political action committee which has established an

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account obtains any revenues during a year which are attributable to a donation or payment from

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a person other than the person, business entity or political action committee, and if the person,

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business entity or political action committee and any such person have mutually agreed as

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provided in section 17-25.3-1(g) that the person, business entity or political action committee will

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not use the person’s donation, payment, or transfer for campaign-related activity, the person,

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business entity or political action committee shall reduce the amount of its revenues available for

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deposit to the account which is described in subparagraph (a)(1)(i) during the year by the amount

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of the donation or payment which is subject to the mutual agreement.

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     (2) Subsection (a) does not apply with respect to any payment made pursuant to

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commercial activities in the regular course of a person’s, business entity’s or political action

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committee’s business.

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     17-25.3-3. Disclaimers. – (a) No person, business entity, political action committee, or

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group of two (2) or more individuals who have joined to promote the success or defeat of a

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referendum question shall make or incur any expenditure for any radio advertising or Internet

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audio advertising which promotes the success or defeat of any referendum question unless the

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advertising ends with an audio message, containing the relevant information specified below, and

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indicating that those identified have approved the advertising. The information to be included is

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determined as follows:

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     (1) In the case of a business entity, organization or association, the name of the business

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entity, organization or association and the name of its chief executive officer or equivalent;

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     (2) In the case of a political committee, the name of the committee and the name of its

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campaign treasurer;

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     (3) In the case of a party committee, the name of the committee; or

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     (4) In the case of a person or such a group of two (2) or more individuals, the name of the

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group and the name and address of its agent.

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     (b) No person, business entity, political action committee or group of two (2) or more

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individuals who have joined to promote the success or defeat of a referendum question shall make

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or incur any expenditure for any written, typed, or other printed communication which promotes

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the success or defeat of any referendum question unless such communication bears clearly upon

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its face the words "paid for by" and the following:

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     (1) In the case of a business entity, organization or association, the name of the business

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entity, organization or association and the name of its chief executive officer or equivalent;

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     (2) In the case of a political committee, the name of the committee and the name of its

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campaign treasurer;

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     (3) In the case of a party committee, the name of the committee; or

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     (4) In the case of a person or such a group of two (2) or more individuals, the name of the

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group and the name and address of its agent.

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     (c) The provisions of subsections (a), (b), (c) and (d) of this section shall not apply to:

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     (1) Any editorial, news story, or commentary published in any newspaper, magazine or

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journal on its own behalf and upon its own responsibility and for which it does not charge or

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receive any compensation whatsoever;

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     (2) Any banner;

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     (3) Political paraphernalia including pins, buttons, badges, emblems, hats, bumper

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stickers or other similar materials; or

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     (4) Signs with a surface area of not more than thirty-two (32) square feet.

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      (d) No person, business entity or political action committee shall make or incur an

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independent expenditure or electioneering communication for any written, typed, or other printed

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communication, or any web-based, written or graphic communication, that promotes the success

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or defeat of any candidate for nomination or election or promotes or opposes any political party

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or solicits funds to benefit any political party or committee or that promotes the success or defeat

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of a referendum, unless such communication bears upon its face the words "Paid for by" and the

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name of the entity, the name of its chief executive officer or equivalent, and its principal business

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address and the words "This message was made independent of any candidate or political party."

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In the case of a person, business entity or political action committee making or incurring such an

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independent expenditure or electioneering communication, which entity is a tax-exempt

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organization under Section 501(c) of the Internal Revenue Code of 1986, or any subsequent

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corresponding internal revenue code of the United States, as amended from time to time, or an

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incorporated tax-exempt political organization organized under Section 527 of said code, such

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communication shall also bear upon its face the words "Top Five Contributors" followed by a list

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of the five (5) persons or entities making the largest contributions to such person, business entity

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or political action committee during the twelve (12) month period before the date of such

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communication.

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     (e) No person, business entity or political action committee shall make or incur an

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independent expenditure or fund an electioneering communication for television advertising or

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Internet video advertising, that promotes the success or defeat of any candidate for nomination or

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election or promotes or opposes any political party or solicits funds to benefit any political party

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or committee or that promotes the success or defeat of a referendum, unless at the end of such

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advertising there appears simultaneously, for a period of not less than four (4) seconds:

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     (1) A clearly identifiable video, photographic or similar image of the entity's chief

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executive officer or equivalent; and

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     (2) A personal audio message, in the following form: "I am …. (name of entity's chief

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executive officer or equivalent), …. (title) of …. (entity). This message was made independent of

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any candidate or political party, and I approved its content."

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     (f) In the case of a person, business entity or political action committee making or

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incurring such an independent expenditure or electioneering communication, which person,

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business entity or political action committee is a tax-exempt organization under Section 501(c) of

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the Internal Revenue Code of 1986, or any subsequent corresponding internal revenue code of the

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United States, as amended from time to time, or an incorporated tax-exempt political organization

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organized under Section 527 of said code, such advertising shall also include a written message in

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the following form: "The top five (5) contributors to the organization responsible for this

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advertisement are" followed by a list of the five (5) persons or entities making the largest

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contributions during the twelve (12) month period before the date of such advertisement.

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     (g) No person, business entity or political action committee shall make or incur an

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independent expenditure or fund an electioneering communication for radio advertising or

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Internet audio advertising, that promotes the election or defeat of any candidate for nomination or

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election or promotes or opposes any political party or solicits funds to benefit any political party

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or committee or that promotes the success or defeat of a referendum, unless the advertising ends

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with a personal audio statement by the entity's chief executive officer or equivalent;

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     (1) Identifying the entity paying for the expenditure; and

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     (2) Indicating that the message was made independent of any candidate or political party,

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using the following form: "I am …. (name of entity's chief executive officer or equivalent), ….

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(title), of …. (entity). This message was made independent of any candidate or political party, and

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I approved its content."

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     (h) In the case of a person, business entity or political action committee making or

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incurring such an independent expenditure or electioneering communication, which entity is a

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tax-exempt organization under Section 501(c) of the Internal Revenue Code of 1986, or any

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subsequent corresponding internal revenue code of the United States, as amended from time to

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time, or an incorporated tax-exempt political organization organized under Section 527 of said

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code, such advertising shall also include:

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     (1) An audio message in the following form: "The top five (5) contributors to the

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organization responsible for this advertisement are" followed by a list of the five (5) persons or

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entities making the largest contributions during the twelve (12) month period before the date of

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such advertisement; or

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     (2) In the case of such an advertisement that is thirty (30) seconds in duration or shorter,

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an audio message providing a website address that lists such five (5) persons or entities. In such

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case, the person, business entity or political action committee shall establish and maintain such a

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website with such listing for the entire period during which such person, business entity or

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political action committee makes such advertisement.

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     (i) No person, business entity or political action committee shall make or incur an

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independent expenditure for automated telephone calls that promote the election or defeat of any

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candidate for nomination or election or promotes or opposes any political party or solicits funds

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to benefit any political party or committee or that promotes the success or defeat of a referendum,

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unless the narrative of the telephone call identifies the person, business entity or political action

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committee making the expenditure and its chief executive officer or equivalent. In the case of a

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person, business entity or political action committee making or incurring such an independent

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expenditure, which entity is a tax-exempt organization under Section 501(c) of the Internal

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Revenue Code of 1986, or any subsequent corresponding internal revenue code of the United

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States, as amended from time to time, or an incorporated tax-exempt political organization

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organized under Section 527 of said code, such narrative shall also include an audio message in

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the following form: "The top five (5) contributors to the organization responsible for this

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telephone call are" followed by a list of the five (5) persons or entities making the largest

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contributions during the twelve (12) month period before the date of such telephone call.

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     17-25.3-4. Penalties. – (a) Any person who willfully and knowingly violates the

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provisions of this chapter shall, upon conviction, be guilty of a felony and shall be fined not more

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than ten thousand dollars ($10,000) per violation or up to 2% of total expenditures.

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     (b) The state board may fine any person or entity who violates the provisions of this

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chapter in an amount not more than one thousand dollars ($1,000) per violation or up to 2% of

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total expenditures.

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     (c) Fines, fees and penalties imposed by the state board for violations of this chapter shall

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be paid for by the person, business entity or political action committee that incurred the obligation

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for the independent expenditure or electioneering communication. Fines, fees and penalties levied

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by the state board pursuant to this chapter shall not be paid for from contributions or funds

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available in a campaign account.

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     SECTION 4. This act shall take effect upon passage.

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LC02091

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N A C T

RELATING TO ELECTIONS -- DISCLOSURE OF POLITICAL CONTRIBUTIONS AND

EXPENDITURES

***

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     This act would impose a regulatory structure relating to the sources of political spending.

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     This act would take effect upon passage.

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LC02091

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