For City and Town Clerks Campaign Finance 101 For City and Town Clerks Arizona Municipal Clerks Association Election Training July 2018 Presented by Cris Meyer City Clerk, City of Phoenix

OVERVIEW Purpose / Content of Outline The Law and Resources Overview of Clerk Responsibilities Political Committees Registration of Political Committees Contribution Limitations

OVERVIEW Disclosure in Campaign Literature & Advertisements Reporting Contributions & Expenditures Termination of Committees Enforcement of Report Filing Enforcement of Other Campaign Finance Violations

PURPOSE and CONTENT Content Reference Summary Duties and issues for local filing officers NOT details on contribution & expenditures Offered in SOS Workshops for candidates Reference Summary Reference guide to apply law to situations Only a Summary – does not cover all details Always refer to statutes (references provided)

THE LAW – Legal Counsel Important to consult with attorney Campaign Finance regulation increasingly complex Law and duties unclear in many cases – conflicts exist Legal opinions differ – Know your attorney’s position Responding to Questions Law is unclear – interpreting is often legal advice Filing Officer role – provide information, not advice An opponent or public could challenge your advice Appropriate response - "You need to discuss that with your attorney or campaign advisor."

THE LAW Arizona Constitution Art VII, Sec 16 Arizona Revised Statutes Title 16, Chapter 6 Election Procedures Manual (SOS) Chapter 8 – Campaign Finance

THE LAW Arizona Constitution, Art VII, Sec 16 “The legislature, at its first session, shall enact a law providing for a general publicity, before and after election, of all campaign contributions to, and expenditures of campaign committees and candidates for public office.”

Arizona Revised Statutes THE LAW Arizona Revised Statutes Title 16, Chapter 6 Campaign Finance (Article I) §16-901 through §16-938 Clean Elections (Article II) §16-940 through §16-961 (Not applicable to cities and towns)

THE LAW – New Organization Arizona Revised Statutes - Title 16, Chapter 6 Campaign Finance (Article I) Article 1 – Definitions, §16-901 Art. 1.1 – Establishment of Committee, §16-905 - 908 Art. 1.2 – Contributions, §16-911 - 917 Art. 1.3 – Expenditures, §16-921 - 922 Art. 1.4 – Reporting and Disclosure, §16-925 – 928 Art. 1.5 – Biennial Financial Adjustments, §16-931 Art. 1.6 – Committee Termination, §16-933 – 934 Art. 1.7 – Enforcement, §16-937 – 938

THE LAW - Resources Arizona Election Law Pamphlet “Camo” Book, Oct 2016, 2017 Supplement Constitution Title 16 (Elections and Campaign Finance Title 19 (Initiative, Referendum & Recall) Title 38 (Public Officers) (Filing, Resignation, Vacancy, Financial Disclosure) CAUTIONS Includes entire old & new Title 16! (p. 624 / p. 719) Advice – In Book, line thru sections updated in Supp

THE LAW - Resources Attorney General Opinions (not Law) Secretary of State (materials online) Campaign Finance Handbook (2018) Election Procedures Manual (Law) (2018 version) (Pending Approval of Governor and Attorney General) League of Cities and Towns Municipal Election Manual (MEM) Campaign Finance Reports Handbook League General Counsel Opinions

LAW – Purpose & Limits Purpose of Regulation Limitation on Regulation Public disclosure of contributions & expenditures Protect public contributions from misuse Limit big money influence in candidate races (declining) Limitation on Regulation First Amendment (political speech) U.S. Supreme Court decisions – Striking restrictions on spending, upholding disclosure – Exploring when anonymity / non-disclosure is necessary State has followed Court on spending, but has also reduced disclosure

LAW - Enforcement Public Disclosure of Information Public, candidates & media identify issues Voters enforce by casting ballots Filing Officers Enforce Report Filing Ensure that public disclosure occurs Filing Officers Enforce Other CF Violations Determine “reasonable cause” Increased Clerk Role – Sole authority to initiate! Complaints being used as campaign tactic

Clerk Responsibilities “Filing Officer” for campaign finance documents for your city or town Keep old documents for retention period! ($500 TES) Assign Committee ID numbers & keep Log Must provide Notice of CF laws and Statement of Org to applicants for Initiative, Referendum & Recall petitions (also provide Title 19 Pamphlet)

Clerk Responsibilities Receive Campaign Finance Documents Campaign Financing & Reporting Statement Statement they have read campaign finance law Candidates – with nomination paper (part of form) Committee officers – with registration (in SO form) Committee Registration Documents Statement of Org only ($500 Exemption Repealed) Termination Statements Periodic Reports Contribution & Expenditure Reports Must report if No Activity – summary page, check box

Clerk Responsibilities Campaign Finance Docs – Repealed No Activity Statement – Repealed Candidate Annual No Activity Statement – Repealed Candidate Notice of Large Contributions – Repealed Notices of receipt of $1000 or more from a single source within 20 days before election “10K” Notices – Repealed Large contributions / expenditures by Prop & Recall Registrations & Notices of Independent Expenditures by Corporations, LLCs & Labor Orgs – Repealed

Clerk Responsibilities Electronic Filing Filing officers must provide electronic filing option Online database not required (yet) Comply using fillable pdf forms filed by email or upload May comply by opting into State System (2018?) Who must Post documents on Internet? All filing officers Prior to 2016 - only required if Pop over 2500

Clerk Responsibilities Post CF Documents on Internet Who must Post documents on Internet? ALL filing officers (before 2016, only if Pop over 2500) What Documents must be Posted? ALL campaign finance statements and reports Registrations, Terminations, Reports Posting NOT Required for other documents Financial Disclosure Statements (Yet) (Some Post) Where to Post On city / town web site (all have)

Clerk Responsibilities Enforce Campaign Finance Reporting Determine Failure to File (Filed on time?) Send Failure to File Notices (By email within 5 days) Refer to attorney if not filed within 30 days Enforcement of other CF Violations Written complaint from 3rd party now required Only filing officer authorized to initiate investigations If determine “reasonable cause” to believe someone is violating CF law, must notify attorney City / Town Attorney is Enforcement Officer Attorney issues Notices of Violation

Clerk Responsibilities Enforce Filing of Registrations & Notices of Independent Expenditures - Repealed Previously Required for Corps, LLCs and Labor Orgs making independent expenditures in candidate elections Must “Register” for each election cycle Must file Notice of Expenditures Clerk must verify whether entity has registered If Not – categorize “unverified” & contact entity

Responsibility Issues Compliance is ultimately the responsibility of the candidates & committees Law & scope of duties unclear (Law new) Interpretation and opinions differ Some actions not required, but are appropriate for the Clerk role and further the purposes of the law E.g. reminders of filing deadlines

Political Committees No general definition applicable to all committees Previously definitions for several committee types Candidates and the committees they designate Exploratory committee Separate segregated fund (Corps & Labor Orgs) Political party or political organization Groups that circulate a petition for a ballot measure or recall (but not groups that support or oppose measure) Was separate test for all other groups

Political Committees New Definition – “Committee” means: A Candidate Committee A Political Action Committee (PAC) A Political Party Registration of a committee is required if an entity meets the requirements in §16-905

Political Committees Candidate Committees (Except cities/towns) Candidate must register a committee IF: The candidate receives contributions or makes expenditures (in any combination) of at least $1100 in connection with that candidacy $1100 increases $100 in Jan odd years (2017) Any combination: Receive $550 and spend it! Candidate limited to 1 committee for same office during an election cycle (must combine any old)

Political Committees Candidate Committee - Cities and Towns New 2018 – HB 2078 Candidate must register a committee IF: The candidate receives contributions or makes expenditures (in any combination) of at least $500 in connection with that candidacy Any combination: Receive $300 and spend it! $500 DOES NOT increase $100 in Jan odd years! Candidate limited to 1 committee for same office during an election cycle (must combine any old)

Political Committees Political Action Committee (PAC) An entity must register as a PAC IF: Entity is organized for the “primary purpose” of influencing an election; and Entity knowingly receives contributions or makes expenditures (in any combination) of at least $1100 in connection with any election during a calendar year Applies to ALL jurisdictions – including cities and towns “Any combination” of spend / receive $1100 Receive $550 and spend it – required to register $1100 threshold increases $100 in Jan odd years Increased from $1000 in Jan 2017

Political Committees Political Action Committee (Cont) “Primary purpose” to influence elections Excludes many entities - Chamber, Trade Assn Provision for when it is NOT (501 Charitable orgs) Provision with a presumption of when it IS During a “calendar year” (not an election cycle) Entity can receive or spend $1099 annually ($2198 in an election cycle), even if its primary purpose is influencing elections, and not have to register or report Amount low for state, significant in smaller jurisdictions

Political Committees Political Action Committee (Cont) Separate Segregated Fund Corporations / Labor orgs cannot contribute to candidates May establish a fund to receive voluntary contributions from employees for making contributions to candidates A Fund must register as a PAC Permitted contributions by Corporation / Labor Org Contributions / expenditures on ballot measures Independent Expenditures in candidate elections Not required to “register” or provide notices of expenditures Instead, IE activity reported on a schedule of a CF report

Political Committees? Specific Situations . . . is it a committee? A candidate? Individual (not a candidate) acting alone? Corporation that makes independent expenditures supporting a candidate? An entity that files an argument on ballot measure & pays deposit?

Political Committees? Specific Situations . . . is it a committee? Business / organization involved in a ballot measure? Business or organization that spends more than $1100 to support or oppose a ballot measure? Public utility spending its own money supporting its franchise measure? Religious assembly or institution that spends $2500 influencing an election?

Political Committees - Definition When to raise question . . . Inquiry about candidacy (always upon 1st contact) Inquiry about making contributions to candidates Inquiry about initiative, referendum or recall (1st contact) Upon filing an argument on a ballot measure (Not for filing argument, but may be other activities) Inquiry about making contributions to influence a ballot measure

Political Committee Registration When to Register? Within 10 days of qualifying as a committee Not required before engaging in "political activity” Accepting contributions or making expenditures Distributing campaign literature or ads Circulating petitions (Not required by CF law) But, signatures on Initiative and Referendum petitions invalid

Political Committee Registration How to Register? File Statement of Organization with Filing Officer Stmt Org is now the ONLY registration document $500 Threshold Exemption Statement - Repealed Upon registration, PAC may engage in any lawful activity Not required to establish separate committees for different activities (e.g. circulate petition and support candidates) Not required to identify activities on registration statement Note: A person or entity must track activity and report on its first report after qualify as a committee

Candidate Committees Candidate may be chairman and treasurer Committee name must include candidate name (first or last) Committee name must include office if candidate has committees for multiple offices Candidate may have only one committee for same office during same election cycle No longer required to designate a committee for each election (Can only have one!) Exploratory Committees - Repealed

Other Political Committees Chairman & Treasurer must be different people Committee name must identify the "sponsoring" organization, if any Committees registered outside of AZ Unclear if / how register in AZ (old provision repealed) Probably can register in AZ No statutory provision regarding using money received before register in AZ

Ballot Measure Committees Most special requirements for committees acting to support or oppose a ballot measure repealed Committee name not required to include: The petition serial number (or Prop number) Whether support or oppose the measure Committees can spend on any measures Now must report activity on ballot measures in campaign finance reports Report must identify the ballot measure to which each transaction relates

Recall Committees Is a Recall committee a ballot measure committee? AG Opinion: No Recall is not a ballot measure (results in a candidate election, not a Prop on a ballot) A recall committee is a committee to influence a candidate election Contribution limitations would apply to recall committees if not a ballot measure committee Corporate money would also be prohibited

Standing Political Committees Eligibility to be “Standing” Committee Active in more than 1 jurisdiction (“for 1 yr” repealed) File a Statement of Organization with the SOS and a copy in each jurisdiction in which the committee is active Registration Statement no longer has to be notarized Only SOS assigns ID number Also needs to file copy of amended Stmt of Org in each jurisdiction Files Reports only with the Secretary of State Committees cannot sponsor candidate or other committee

Penalty for Failure to Register Civil Penalty Presumptive penalty is the amount received or expended while not registered Penalty can be up to 3 times the amount received or expended while not registered if find there are special circumstances (e.g. intent, $$$)

Penalty for Failure to Register Initiative & Referendum petition sigs invalid? Title 16 Committee registration only required if meet requirements (Primary purpose, exceed $1100) Title 19 Must register when file application for petition (Filing officer cannot accept application without a Stmt Org) Signatures invalid if obtained before committee registered Consult with attorney Registration probably required to circulate petition Title 19 (more specific provision) probably trumps Title 16

Penalty for Failure to Register Recall petition signatures invalid? Title 16 Only required to register a committee if meet requirements in Title 16 (primary purpose, exceed $1100) Title 19 Recall different than Init and Ref - §19-202 (change 2016) Applicant NOT required to file Stmt Org with application Filing officer can accept petition without registration No provision that Recall signatures invalid if obtained before committee registered

Penalty for Failure to Register Nomination petition signatures? No statute invalidating nomination signatures obtained before registration (only in Title 19 for Init & Ref) Filing officers have no authority to invalidate signatures Registration required if candidate exceeds $500 ($1100) Superior Court decisions A candidate not always required to register a committee Since 2006, Superior Courts have invalidated signatures on nomination petitions if committee not registered No appellate court decision for legal precedent Consult with your attorney – probably let Court invalidate

Statement of Organization Contents Type committee, name, address, website, phone Email address (must agree to receive all notices) Candidate: Name (first or last) and office sought PAC: Sponsor name or any common nickname Sponsor contact information, including email Officers names, address, occupation, employer Statement by Chairman and Treasurer that have read all CF laws (part of form) Designation of financial institutions to hold funds

Statement of Organization Clerk issues ID number Notarization not required (even for standing) All filing officers must now post copy on Internet Amendments Required for any change in required information Must file within 10 days after change (previously 5) No specific penalty for failure to amend timely

Treasurer Duties Principal officer – has virtually all duties Authorize all expenditures, keep records Track details of all contributions and expenditures and File Reports Use best efforts to obtain donor info At least 1 documented written or oral attempt Preserve committee records - 2 years Maintain separate segregated bank accounts Personal money, Recall, Corporate / Other contributions Must produce records required to be kept At request of filing or enforcement officer

Contribution Limits Limits apply to contributions to Candidates ONLY! And possibly Recall committees (AG Opinion) Current Limit: $6350 per election cycle Limits increase $100 in Jan of odd years Limits apply to an election cycle, not the term office In 2015 and 2016, applied to term office (4 year cycle) Cycle is two years – General (2nd) to General (2nd) Cycle includes the primary and general elections There are two election cycles in a four-year term Candidates can accept up to the limit every two years

Contribution Limits “Election Cycle” - §16-901(18) Regular scheduled elections Two year period between General / 2nd Elections Start and end dates aligned with CF reporting periods Ends last day of calendar quarter of the election (Nov or May) Begins first day of next calendar quarter (Jan 1 or July 1) For Fall elections, ends Dec 31 after election, next begins Jan 1 For Spring, ends June 30 after May election, next begins July 1 For Special Election From date election called to last day of calendar quarter of election For Recall Election From when issue serial # to the end of the “Recall” (election date!) Contributions for recall can’t be used for other elections

Contribution Limits No Limits on: Cumulative total amount an individual can give to all candidates Total a candidate can receive from PACs Use of candidate’s own money Foreign Contributions prohibited (Fed law) Includes anything of value (info about opponent)

Contribution Limits Candidate Committees No limit on amount candidate committees can transfer to other committees for same candidate Exception – City / town candidates can’t transfer to committee for a state office Transfers are contributions – individual donor limits apply Candidate committees can contribute to other political committees (other than candidate) Candidate committee can’t give to other candidates Except – if terminating, can contribute surplus to candidates

Contribution Limits Candidate Committee Transfers A candidate committee can transfer money to other committees for the same candidate without limit Exception: City / town candidate committee can’t transfer to a candidate committee for a state office! City / town candidates can transfer to committee for county office (but then cannot transfer for a state office for 2 years) Some city candidates registered a committee for state office and transferred surplus before effective date (no restriction on transfer from a committee for state offices) Not amended in 2018

Contribution Limits “Excess” Contributions – CAN Committee Candidates can’t knowingly accept more than limit If unknowingly accept an “Excess Contribution” Must refund excess within 60 days; OR May reattribute the excess to a different donor if both of the following apply: The contribution was from an individual; and The contributor authorizes the committee to reattribute the excess to another individual The individual must be a joint account holder on the instrument used to make the contribution

Contribution Limits PAC Contributions Limit for PAC: $6350 Limit for Mega PAC (state qualified): $12,700 (2X) PACs can contribute to candidates Only with money received from individuals, partnerships, political committees or political party Not money from corporations, labor org Political Party Contributions A political party can’t give to non-partisan candidates (only to “nominees” of a party)

Contribution Limits Corporations and Labor Organizations Prohibited: Contributions directly to candidate committees Permitted: Contributions to support or oppose ballot measures Contributions to candidates from a segregated fund Funded by voluntary contributions solicited from employees, shareholders, retirees and families of entity and its affiliates Contributions to PACS for Independent Expenditures “Independent Expenditures” for candidates (may use corporate money)

Expenditures Expenditure Exemptions List of items that are not expenditures Use of email, Internet activity, or social media message if not paid for by the individual and does not contain a solicitation Value of volunteer services Payments for committee accounting & legal services Interest on committee deposits Fees paid by an individual for publicity pamphlet arguments (If paid by a committee, is expenditure) Others in §16-921

Expenditures Independent Expenditures Means an expenditure by a person or committee (not a candidate committee) that: "Expressly advocates" for or against a candidate Not made in cooperation or consultation with the candidate or the candidate’s committee (independent) Evaluating whether expenditure is “Independent” Examples of what is NOT independent in §16-922 Lists factors for determining whether coordination exists Identifies things that are NOT coordination Any person may make independent expenditures

Disclosure for Campaign Lit & Ads Disclosure Requirements A person (other than an individual) must disclose in an advertisement or fund raising solicitation: “Paid for by” followed by the name of the person making the expenditure; and Whether the expenditure was authorized by a candidate and the name of the authorizing candidate (if any) “Person” Includes entities and associations that are not required to register as a political committee Registration may not be required (Meet committee test?) Registration not required at time of expenditure

Disclosure for Campaign Lit & Ads Disclosure Requirements (Cont) PACS must disclose “Paid for by” followed by the name of the person making the expenditure; and Whether the expenditure was authorized by a candidate and the name of the authorizing candidate (if any) PACs must also disclose in advertisements: Names of 3 PACs making the largest contributions to the committee that exceed $20K during election cycle

Disclosure for Campaign Lit & Ads Disclosure Exceptions Items too small for disclosure to fit (buttons, pins) Social media or text messages sent using SMS Ads placed as a paid link on a website if less than 200 characters and the target website has the disclosure Graphic or picture links on websites if too small and the target website has the disclosure Candidate’s signs paid for by own committee No Exception anymore - Repealed The candidate’s own signs must have disclosures

Disclosure for Campaign Lit & Ads Size and Legibility Requirements An Ad mailed or delivered by hand or electronically Must be “clearly readable” Signs or Billboards – minimum 4% of sign height Radio, television and video Specific requirements that combine spoken and print If use acronym or nickname not commonly known Must spell out

Disclosure for Campaign Lit & Ads Advance Copy of IE Ads to Candidate Repealed Previously required to provide advance copy of independent expenditure ad distributed within 60 days before election to the candidate named within 24 hours of submission for mailing, printing or broadcast Disclosure Now Only notice or disclosure is on next CF report

Independent Expenditures by Corp, LLC or Labor Orgs Registration & Notices of IEs Repealed! Entity not required to file separate “registration” if cumulative expenditures in a city or town exceeds $1,000 Not required to file a “notice” of expenditure each time exceed $1,000 in local races in a city or town Disclosure Entities that make independent expenditures (other than individual or PAC), must file independent expenditure reports (specific schedule in a campaign finance report)

Independent Expenditures by Corp, LLC or Labor Orgs “Dark Money” Campaign expenditures with no disclosure of who made expenditure or the source(s) of money Non-Profit Corporation Issue Has no “income” from operations to make expenditures since all funding is from donations Not required to register a committee – so do not report Non-profits being formed to make independent expenditures – with no disclosure of source of $$ Legal challenge pending and proposed Initiative Tempe voters (91%) approved disclosure reqts Similar Phoenix measure on ballot in November

Independent Expenditures by Corp, LLC or Labor Orgs “Issue Advocacy” Expenditures Use of IE rules by Candidates (and others) Candidate forms a non-profit on specific issue(s) Solicits donations or transfers surplus from campaign committees Makes expenditures for Ads to promote issues and accomplishments on that issue (e.g. anti-tax) Does not mention opponent or solicit vote (not express advocacy or influencing election) Not required to register a committee and report No disclosure of source of funds, and contribution limits do not apply

Reporting Political Committee Contributions & Expenditures Who must file? All registered committees must file required reports until committee terminates What to file? Campaign Finance Report for the reporting period If no activity – still must file a report Box to check on summary page if no activity No Activity Statement repealed Annual No Activity Statement repealed (candidates only)

Reporting Political Committee Contributions & Expenditures When to file? – PACs and Political Parties If no Election in Quarter: File Quarterly Report - every quarter every year! File “not later than” 15th of next month Reports Due: Jan 15, Apr 15, July 15, Oct 15 If 15th is weekend or holiday, due next business day Reporting Period Report complete thru last day of calendar quarter Jan 1 – Mar 31; Apr 1 – Jun 30; Jul 1 – Sep 30; Oct 1 – Dec 31

Reporting Political Committee Contributions & Expenditures When to file? – PACs and Political Party If an Election during the Quarter: Pre-Election Report File not later than 10 days before election (Sat) Cover 1st day of Qtr thru 17 days before election Post-Election Report File by 15th day after end of calendar quarter (Same time quarterly report due if no election) Cover 16th day before election thru end of quarter If election does not occur, reports not required E.g. because all seats filled in first

Reporting Political Committee Contributions & Expenditures When to file? – Candidate Committees File ONLY during 4 calendar quarters preceding election 4 quarters preceding 2nd (General/Runoff) election for the office the candidate seeks (e.g. Mar/May or Aug/Nov) “For office” – so not all candidates file at same time If no Election in Quarter: File Quarterly Reports (only during year before election) Same filing and reporting dates as PACs 1st report for election must include election cycle to date If Election in Quarter: File Pre and Post Election Reports

Reporting Political Committee Contributions & Expenditures Where to file? With filing officer for the jurisdiction File in each jurisdiction committee is registered Unless Standing Political Committee (only SOS) Filing date? Must be filed “no later than” due date Filing date is date of actual receipt in office (or Email) Repealed: Cert mail postmark, delivery confirmation date If Due Sat/Sun/Hol – due next business day (SOS EPM) Office closed on Friday? Same as Sat or Holiday? Email probably resolves most issue

Reporting Political Committee Contributions & Expenditures Alternatives to Report None! Both alternative options repealed Must file a report (Summary Page only) Check box on summary sheet for “No Activity” Only file a schedule if have activity to report on it No Activity Statements - Repealed Candidate Annual No Activity Stmt - Repealed

Electronic Reporting All filing officers must provide electronic filing option An online database is not yet required May comply by opting into State System Not available to cities / towns yet (2019?) SOS cannot charge a fee for jurisdictions (2018) Will be no cost to cities and towns Other options for electronic filing Use fillable pdfs filed by email or upload to website Opt into another system - Phoenix or other (Tempe) Develop own system

Reporting Political Committee Contributions & Expenditures Content of Reports Requirements in §16-926(B) See CF Handbook of Instructions / Forms Items for some categories require additional info Proposition or Petition Serial Number Candidate named in independent expenditure item Not required to itemize expenditures less than $250 Statute omitted aggregate total of all expenditures less than $250 But SOS included schedule for aggregate total

Report Form Issues Report form includes 62 schedules / 65 pages 33 Receipt Schedules (A-#) 29 Expenditure Schedules (B-#) Do committees have to file blank schedules? No. SOS revised form to add note at bottom of p. 1 No Activity Report Former “No Activity Statement” repealed No separate form - must file a Report (Page 1 only) “No Activity” check box added on last line of page 1

Report Form Issues Need for Additional Pages for a Schedule Form has only one page per schedule Form cannot generate additional pages Contribution & Expenditure pages have only 5 lines! Problems allowing more pages is pdf format issue Use pdf software (Adobe Pro, Cute pdf) to complete forms, which can generate additional pages for a schedule Fill out page, print, delete data, enter new data, print, repeat Print multiple copies of blank schedules, complete manually

Report Form Issues No Signature Required on Reports Calculation Errors Statue requires only certification under penalty of perjury - §16-926(B)(5) Statement to that effect appears at bottom of page 1 Committees frequently questioned – some signed Calculation Errors Fillable pdfs not a good media for auto calculations Intermittent errors occur on Summary Sheets (p. 2-3) Committees should check math and totals Usually can fix by deleting and re-entering data

Report Form Issues Data Columns on Individual Schedules Many schedules have three columns Amount received or expended Total for reporting period Total amount for election cycle Must complete all columns for each item / donor Committees must calculate by referring to prior reports Manual calculations for multiple contributions from individuals (Statute requires Treasurer to track individual donor totals) Election cycle totals require knowing date cycle

Report Form Issues Cumulative Total Problems on Schedules Forms require totals for Reporting Period and Election Cycle on last page of most schedules If donors gave more than once in a period or cycle, adding columns gives incorrect total (double counts cumulative totals) SOS direction to only include the latest cumulative total for donors that gave multiple times in the period or cycle Election Cycle totals may not balance with actual totals Occurs if a donor did not give in that reporting period. (If no contribution in period, donor not listed, so cumulative amounts for the cycle are not included on this report)

Report Form Issues Use of “Equity” Column? Receipt schedules have columns for cash and equity SOS Answer: Use equity column for assets, in-kind contributions and things that are not cash and cannot be spent The equity totals are not carried forward to the Summary Sheet on reports and are not included in committee cash totals

Termination of Committees Committees terminate only by filing Termination Statement with the filing officer Treasurer must file and certify that the committee satisfies the conditions for termination Filing officer my reject statement if it appears requirements are not met After termination, committee need not report and cannot receive contributions or make expenditures

Termination of Committees Conditions for Termination Committee either: Has no outstanding debt or obligations; or Debts are more than 5 years old and creditors agreed to discharge debt and the termination Any surplus money has been distributed All contributions / expenditures have been reported May need to file final CF report with termination

Termination of Committees Distribution of Surplus Money Permissible ways to distribute surplus Candidate may transfer to own other campaign Return surplus monies to the contributors Contribute surplus to other committees, including candidate committees, within the limits Donate surplus monies to 501(C)(3) charity Repay loans Cannot convert to personal use (or family)

Termination of Committees Committees Active in Multiple Jurisdictions May terminate activities in one jurisdiction and remain active in other jurisdictions Standing committees can terminate in some Termination Statement must include additional statement that remaining monies will be used in other jurisdictions (part of form)

Enforcement Enforcement Role of Filing Officers Enforce report filing (§16-937) Ensure public disclosure of information Disclosure provides information for voters Enforce other violations (§16-938) Increasing role for filing officers Determine “reasonable cause” for violations Filing officer now only official authorized to initiate investigation of complaints (11/5/16)

Enforcement – Failure to File Campaign Finance Reports (EPM 8.8.5) Committees must file timely and complete reports File on or before due date or penalties accrue If due on Sat/Sun/Hol, due on next business day (EPM) No “good cause” defense for failure to file timely File in all jurisdictions registered (except Standing) Treasurer responsible for filing Candidate also responsible Law unclear whether Chairman responsible

Enforcement - Failure to File Filing officer must track committees Identify committees that are required to file PACS – every quarter, every year Candidates – during year prior to election for office All candidates may not be required to file in a year – only if that office is up for election Maintain Log or database Committee type – PAC or CAN For CAN, office sought and next election for office Send reminder notices to committees?

Enforcement - Failure to File Reminder Notices Optional - not required by law Reminder to committees before filing deadline Can send by e-mail (SOS, Phoenix and others) Include link to online forms or attach forms Benefits For Candidates, more helpful now than in past Confusion over when required to file (not all same) File only in year prior to an election for that office Avoids receiving 1st notice after penalties already due Reduces innocent failures from oversight Avoids criticism for not reminding

Enforcement – Failure to File A committee fails to file if it does not file a “timely and complete” report Report must be filed “no later than” due date (midnight) Filed when actually received by filing officer If due Sat/Sun/Hol, due next business day (New, EPM) “Complete as prescribed by Chapter” Treasurer must certify report is true and correct Clerk duty to determine? Filing officer does not appear to have authority to audit Content issues apparently require a 3rd party complaint What if incomplete on face? E.g. Schedules missing?

Enforcement - Failure to File Notices Filing officer must provide Notice of failure to file Must send by email within 5 days after due date Days means calendar days (EPM 8.8.5) Before 2016, required to send within 15 days Send to Treasurer, but may also send to others Not required to send by mail Contents of notice (Form letter) Identifying the late report Explain the penalties and how fines accrue (amounts, continue to accrue until report is filed) Identify permissible methods of payment

Enforcement - Failure to File Penalties Committees that fail to file timely shall pay penalty $10 per day during first 15 days after due $25 per day for each subsequent day (after 15) Penalty increases to $25 automatically (day 16) Penalties accrue until report is filed No maximum amounts (Previous $450 / $1000) Reports can be filed without payment of the late fees due (cannot refuse or require payment) If committee does not pay, attorney may collect

Enforcement - Failure to File Penalties If committee fails to file within 30 days after due Filing officer may notify the enforcement officer Notice must have been sent to committee to be able to refer to enforcement officer Enforcement officer is city / town attorney

Enforcement - Failure to File Penalties Additional Penalties – Committee Suspension Applies only to PACS & Political Party committees - Not CAN Suspension of PACs If Committee Fails to File 3 Consecutive Reports Send Notice of Intent to Suspend On receipt of notice, committee is temporarily suspended Notice must inform committee it has 30 days to come into compliance If fails to come into compliance within 30 days Filing officer may permanently suspend committee Send Notice to committee by email. No further notice required Suspension does not relieve committee of its obligations

Enforcement - Failure to File Penalties Additional Penalty for Candidates Prohibition on Accepting Nomination Petitions Provision in Title 16 on filing nomination papers Filing officer cannot accept nomination petitions if candidate is liable for $1,000 or more in fines, penalties, late fees, judgments related to CF Exception - If liability is being appealed Nomination paper for all candidates must include statement that candidate has satisfied any liability (Statement part of form, also applies to write-ins) Duty of filing officers to verify? Not clear Limited to face of candidate’s affidavit? Investigate?

Enforcement - Failure to File Penalties Additional Penalty for Candidates 5 Year Bar – Repealed Previously, a candidate was not eligible to be a candidate for any local or state office for five years after the last failure to file

Enforcement of Other Campaign Finance Violations Election Procedures Manual 2018

Enforcement of Other Violations Enforcement Structure – “bifurcated” Filing Officer Receives and reviews complaint Makes preliminary “reasonable cause” determination of whether there may be a violation If finds possible violation, refers to enforcement officer Enforcement Officer Performs additional investigation if necessary and makes final determination on whether there is a violation of campaign finance law Issues notice of violation and initiates action to secure compliance or impose penalties

Enforcement of Other Violations Filing officer is sole public officer authorized to initiate campaign finance investigations All CF violation complaints must begin with filing officer Cannot be filed with AG or County Attorney Complaints cannot be filed in Superior Court Filing officer initiates only upon complaint from 3rd party EXCEPT – filing officer can initiate for failure to file Filing officer can declare conflict of interest Then may refer to another filing officer who agrees to accept the referral Issue – what if no jurisdiction agrees to accept?

Enforcement of Other Violations Guidelines for Enforcement Process A.R.S. §16-938 SOS required to establish in Election Procedures Manual (EPM) Guidelines and Procedures governing investigations for all filing officers in state Enforcement Guidelines and Procedures issued in 2018 Election Procedures Manual (available on SOS Website) Chapter 8 – Campaign Finance Section 8.10 – Enforcement All filing officers and jurisdictions must follow EPM Review EPM with AMCA / League materials Meet with your attorney to review and discuss Prepare templates for required notices, communications

Enforcement Process Summary Filing Officer – City or Town Clerk A “person” files a written complaint with the filing officer Filing officer reviews complaint for compliance with requirements If complaint does not comply – notify of defects /no action Filing officer completes analysis for actual or perceived conflict If conflict – refer to other filing officer who agrees to accept Filing officer sends notice/copy to respondent (3 bus days) Respondent may file a response brief Filing officer sends response to complainant (3 bus days) Complainant may then file a reply brief

Enforcement Process Summary Filing Officer – City or Town Clerk (Cont) Filing officer evaluates information to determine whether there is “reasonable cause” to believe a violation occurred Filing officer may dismiss, find reasonable cause, find no RC Reasonable cause finding is not a final decision there was a violation, but that a violation may have occurred If find reasonable cause – Filing officer issues written reasoned decision with factual analysis Filing officer must refer to enforcement officer (City or Town Attorney)

Enforcement Process Summary Enforcement Officer – City or Town Attorney Acts only upon referral from filing officer Enforcement officer completes analysis for actual or perceived conflict of interest If necessary, conducts investigation and compels discovery using existing subpoena powers Makes a final decision on whether a violation occurred Must serve a notice of violation on the respondent Presumptive penalty equal to amount received or expended improperly In special circumstances (severity, amount, intent), penalty may be up to 3 times presumptive amount

Enforcement Process Summary Enforcement Officer – City or Town Attorney (Cont) If respondent takes corrective action ordered within 20 days, not subject to any fine or monetary penalty If respondent does not take corrective action, enforcement officer provides final notice imposing the penalties Notice must provide the statute violated, explanation of violation, and right to a hearing or to request s settlement conference Respondent may file appeal within 30 days If respondent does not respond or request appeal within 30 days, enforcement officer may file action in Superior Court to enforce the order

Enforcement - Complaints Any “person” may file a complaint with filing officer “Person” as defined in 16-901(39) – includes individual, candidate, nominee, committee, corporation, LLC, partnership, labor org, organization, association, etc. Subject of Complaints Include failure to register, comingling of money, violation of contribution limits, unlawful contributions, improper disclosures, failure to file, incomplete / inaccurate reports Must be written (email acceptable) Must include contain full name, mailing address, signature of complainant (even if filed by legal counsel) If filed by legal counsel, communicate with the attorney

Enforcement - Complaints Complaints should: Clearly recite the facts that describe a violation of CF law Be as factually specific as possible – names, dates, etc. Clearly identify each person, committee, org or group alleged to have violated CF law Include supporting documentation, if available Should include copies of ads, articles, mailers, websites Differentiate statements based on personal knowledge from those based on information and belief and identify the sources Sworn affidavits encouraged Be filed as soon as possible after violation occurred (4 yrs)

Enforcement - Complaints Filing officer must review the complaint Verify compliance with the requirements for complaints If does not meet criteria, notify the complainant of deficiencies and no action will be taken on complaint If complaint meets the criteria, filing officer must: Assign a complaint number (Filing Officer determines format) Confirm in writing that complaint received Inform complainant respondent can file a response within 14 days and complainant can file a reply within 7 days thereafter Inform that filing officer will notify complainant when preliminary determination is made

Enforcement - Complaints Filing officer may enforce failure to file without a complaint A complaint for failure to file can be dismissed if filing officer initiates enforcement (before or after complaint) Filing officers can suspend committees for repeated failure to file Filing officer may initiate a complaint based on information provided by law enforcement law agency Sua sponte submissions A person who violates CF law is encouraged to self report violations Submit report to filing officer in writing, identifying and admitting the violation(s), providing facts, documents and explaining how occurred and discovered, and describing corrective action taken If satisfied with the remedial actions taken, filing officer may dismiss the complaint without referral for enforcement If violation is severe, filing officer can refer for enforcement

Enforcement - Conflicts The filing officer must conduct a conflict analysis Promptly on receipt of complaint, before sending notices The filing officer “should avoid actual or perceived” conflicts A perceived conflict may exist in cities and towns on all complaints Discuss the review and standards with your attorney Conflict of interest issue in Cities and Towns State & County filing & enforcement officers independently elected City / Town Clerks & attorneys not independently elected, taking enforcement actions against superiors Since not independent, actions and findings can affect perception of impartiality in elections Enforcement officer cannot advise filing officers and then enforce Clerks typically lack necessary legal background and resources to review to make reasonable cause finding

Enforcement - Conflicts If conflict exists, filing officer should refer to a filing officer in another jurisdiction who agrees to accept the referral Must provide notice to complainant and respondent The receiving filing officer has same authority as original filing officer and makes the reasonable cause determination and notifies the original filing officer Original filing officer is bound by the determination of the other filing officer

Enforcement - Briefing Within 3 bus days of receiving complaint, filing officer must send respondent a notice and copy of complaint Respondent has 14 days to file response, but not required No established format, but guidelines similar to complaint Should address all allegations May be represented by attorney (if so, communicate with attorney) On request, filing officer may extend deadline 10 days for good cause Expected will normally be granted. Filing officer must notify complainant. Within 3 bus days of receiving response, send to complainant Complainant has 7 days to file reply, but not required No established format, but cannot raise new issues Filing officer may give up to 14 days to respond, rather than 7, and may extend 10 days on request (expected normally granted)

Enforcement – Filing Officer Decision Filing officer evaluates complaint After end of briefing period Consider complaint, response, reply and any CF documents on file and information in public record Cannot subpoena documents or witnesses Request committee records? (Treasurers must provide!) Filing officers have 3 decision options: Dismissal No reasonable cause Reasonable cause

Enforcement – Filing Officer Decision No deadline for filing officer to reach decision Should keep parties informed of projected decision timetable Priority for addressing complaints Filing officer should generally address complaints in order received, unless “high priority” “High priority” if substantial amount involved, high legal complexity, possible knowing or willful intent, potential impact of violation on the election

Enforcement – Dismissal Does not merit further use of government resources Factors that may be considered Small amount involved or insignificance of alleged violation Vagueness or weakness of evidence Whether alleged violation remedied and not likely to be repeated Violation unintentional If dismissed, filing officer notifies parties Filing officer may send letter to caution or remind respondent regarding future obligations Dismissal is final and not appealable

Enforcement – No Cause No reasonable cause finding Examples: Information available “fails to give rise to a reasonable inference that a violation has occurred” Even if allegations true, would not be a violation of CF law Examples: Evidence demonstrates no violation occurred Allegation is not credible or so vague that further inquiry or investigation is not warranted Complaint fails to describe a violation of CF law Filing officer notifies parties Decision is final and not appealable

Enforcement – Reasonable Cause Reasonable cause finding Find reasonable cause to believe a person violated CF law Not a definitive finding that there was a violation Means filing officer believes a violation may have occurred Standard of review – probable cause Lower than preponderance of the evidence standard “There is reasonably trustworthy information and circumstances that would lead a reasonable person to conclude there is a substantial likelihood that the respondent committed a violation”

Enforcement – Reasonable Cause If find reasonable cause Notify parties of decision Filing officer should issue a reasoned decision with a reasonably complete factual and legal analysis Must notify enforcement officer and provide relevant documentation from the case City / Town attorney is enforcement officer If find violation was knowing and intentional Filing officer may also refer to enforcement officer for criminal prosecution

Enforcement – Enforcement Officer Enforcement officer (City or Town attorney) Cannot take action without reasonable cause determination and referral from filing officer After referral, is sole and exclusive authority to initiate administrative or judicial enforcement Cannot refer to attorney general or county attorney City / Town attorney has discretion whether to prosecute Must review for potential conflict of interest Should avoid actual or perceived conflicts of interest Should not advise filing officer and then enforce

Enforcement – Enforcement Officer May conduct investigation (has subpoena powers) Makes final decision on whether a violation occurred May serve Notice of Violation / Order of Compliance State with reasonable particularity nature of the violation Specify the fine or penalty imposed Require compliance within 20 days after notice issued May not compel a person to register as committee until proceedings and appeals are final Order may require respondent to register as a committee If respondent appeals, may not enforce until completion of appeal

Enforcement – Enforcement Officer Order should include presumptive penalty Presumptive Penalty – “shall impose” Penalty equal to amount received or spent in violation If find special circumstances, may impose 3 times amount Respondent takes corrective action (within 20 days) Respondent not subject to any fine or financial penalty Primary goal is compliance and disclosure Enforcement officer should close matter and provide written confirmation

Enforcement – Final Notice Respondent does not comply (within 20 days) Enforcement officer may provide final notice and impose the fine or financial penalty Final Notice must Identify rule, statute or provision on which decision based Identify with reasonable particularity the reason why corrective action or a fine or penalty was imposed Include description of right to request a hearing Include description of right to request an informal settlement conference If respondent does not request a hearing or appeal After 30 days, enforcement officer may file action in Superior Court to enforce order

Enforcement – Hearing Administrative Hearing Respondent may request a hearing or appeal File with enforcement officer within 30 days Enforcement officer must within 5 business days Notify filing officer and other interested persons Request a hearing from Office of Administrative Hearings Administrative Hearing Must be conducted with 60 days Respondent has burden of persuasion of no violation Decision must be issued with 20 days

Enforcement – Final Decision Enforcement officer issues final determination Within 30 days of hearing officer’s decision May accept, reject or modify hearing officer decision Must provide notice to respondent, filing officer and other interested parties Must notify respondent of right to appeal to Superior Court within 35 days Respondent complies within 35 days Respondent not subject to any fine or financial penalty Enforcement officer closes matter, provides confirmation If no compliance or appeal with 35 days Enforcement officer files in Superior Court to enforce

Questions / Discussion Campaign Finance 101 For City and Town Clerks Questions / Discussion

Financial Disclosure Distinguish from “campaign finance" Campaign contributions and expenses vs. Candidate’s personal financial information Every city/town had to adopt standards (All did) Electronic filing not required for cities / towns (yet) Who must file? Local public officers (if held office at any time during preceding calendar year) Appointees Candidates

Financial Disclosure When to File? Electronic Filing Public officers – by January 31 for prior year (Includes year after leave office, unless term ended in January!) Candidates - with nomination papers Appointees - within 60 days of taking office Electronic Filing Filing officer must provide option beginning Jan 1, 2017 In format prescribed by SOS Database not specified – Fillable pdf and email comply

Financial Disclosure “Gift” definition amendments (2016) Excludes travel for official purposes if publicly reported Excludes campaign contributions if publicly reported (CF) May disclose family as “spouse” / “minor child” Penalties for Failure (if “knowing”) Class 1 misdemeanor $50 per day penalty up to $500 Officers can file late report without paying penalties Use Process in 16-938 to enforce (other CF violations)