With redistricting, the “billionaire tax” and other ballot measures, and heated gubernatorial and other races, contributors are giving huge amounts of money this year in California state and local elections. California has a complex campaign finance system, and it can be easy to miss some of the requirements. Key among these is the requirement that contributors file disclosures as “major donors” when their contributions in state and local elections total $10,000 or more in a calendar year. This threshold includes contributions to state or local candidates, ballot measure committees, parties, PACs, and other committees. Major donors include not only individual contributors but also corporations and other entities that reach the $10,000 contribution threshold.
Reporting Obligations
Major donors, sometimes called major donor committees, must file periodic reports detailing their outgoing campaign contributions. A major donor committee may also need to file a 24-hour report when it makes a contribution within 90 days of an election. The first report that a major donor must file is often one of these 24-hour reports. Major donor reports only disclose outgoing contributions, which will be disclosed by the recipient as well, so nothing that is otherwise nonpublic is disclosed by becoming a major donor. The state provides helpful calendars of filing dates, available here.
Common Missteps
High contribution limits. Because the major donor threshold has stayed at $10,000 even as contribution limits in the state have increased or been abolished, a few, or even one, contribution can cause a person to become a major donor. In California, the maximum amount an individual or business can contribute to most statewide candidates or a state PAC is $9,800. If an individual, business entity, or committee maxes out to one of these recipients, the individual would come very close to qualifying as a major donor committee. The limit to a candidate for governor is $39,200 per election, so just one contribution to a gubernatorial campaign can trigger major donor status. And there are no limits on contributions to ballot measures.
Aggregation. California requires that contributions among certain affiliated persons be aggregated for purposes of determining when the $10,000 major donor threshold is met. This includes aggregation among individuals and any entity they direct and control; two or more entities whose contributions are directed and controlled by a majority of the same persons; and contributions by all entities majority owned by a person and contributions by that person. Therefore, a person has to consider not only their own contributions but contributions by these affiliated entities in order to determine their major donor status.
Dues payments. It is common for California trade associations to collect contributions for their PAC as part of their dues collection – the invoices indicate that a certain portion of the dues payment is a contribution to the PAC, or ask for a PAC contribution along with dues payments. Companies may end up making contributions without noticing, or without running through standard compliance processes, putting them over the major donor threshold without knowing it.
Nonprofit contributors. A nonprofit corporation or other “multi-purpose organization” as defined in state law can qualify as a major donor committee. But in some instances, contributions by such an organization will cause it to become not a major donor committee, but a standard recipient committee that must disclose not only outgoing spending but also incoming funds. Given the interest many nonprofits have in keeping their donors anonymous, this is a major risk of California election activity. Nonprofit organizations considering spending money in California elections should consult closely with counsel to navigate this issue.
Conclusion
Failing to recognize major donor status and thus missing reporting obligations is a common unforced error in California elections. Given the activity in the state this year, many people may find themselves involved in state campaign finance activity for the first time and should be mindful of this requirement. But this is not the only tricky factor of California campaign finance – in addition to the nonprofit issue noted above, there are special limits on lobbyist campaign finance activity; lobbyist reporting obligations; independent expenditure rules; local law layered on top of state law; and pay-to-play rules, to name just a few.
Covington routinely advises candidates on all aspects of California campaign finance law; for assistance, please reach out to a member of Covington’s Election and Political Law team.