1. Implementation of 2016 Campaign Finance Amendments
Phoenix Candidate Elections
Fall & Spring
Arizona City Attorneys Association
June 2017

2. Overview Review Major Changes in 2016 Issues related to Changes
What is gone – What is new
Issues related to Changes
Resolutions and alerts
Remaining issue for June 2017 (Termination)
Statutory Issues from 2016 Legislation
Reporting and Form Issues
Common Questions (and Answers)

3. 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.”

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

5. Limitation on Regulation
First Amendment - political speech
Supreme Court decisions
Striking restrictions, upholding disclosure
Exploring when anonymity is necessary (no disclosure)
AZ Legislative response to court decisions
Remove restrictions (prior registration, Indep Expend)
Reduce disclosure, expand anonymity
“Primary purpose” and increased registration threshold
Eliminate Independent Expenditure notices
Issue – State Constitutional Provision

6. THE LAW - RESOURCES Arizona Election Law Pamphlet
“Camo” Book, Oct 2016 – Constitution, Titles 16, 19, 38
CAUTION – includes entire old & new Title 16! (p. 624 / p. 719)
Attorney General Opinions
Secretary of State (materials online)
Campaign Finance Handbook (Feb 2017)
Election Procedures Manual (Latest version 2014)
League of Cities and Towns
Municipal Election Manual (MEM)
Campaign Finance Reports Handbook
League General Counsel Opinions

7. Political Committee Changes
Repealed separate definitions for “Types”
No Exploratory, Ballot Measure, or Indep Expend
New Definition – “Committee” means:
A Candidate Committee
A Political Action Committee (PAC)
A Political Party
Significantly fewer entities must register
An entity is a “committee” if satisfies requirements in

8. Political Committee Changes
Candidate Committees
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
Any combination: Receive $550 and spend it!
Amount increases $100 in Jan odd years (2017)
Only have 1 for same office during election cycle
Must combine any old committees into one

9. 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
“Primary purpose” - excludes many (most) entities
Provision in statute for what is Not (501 Charity orgs)
Guidelines establishing a rebuttable presumption of when primary purpose is influencing elections

10. Political Committee Changes
Political Action Committee (Cont)
“Any combination” of spend or receive $1100
If receive $550 and spend it – registration required
“During calendar year” (not during election cycle)
Entity can receive or spend $1099 annually ($2198 for election cycle), even if primary purpose is influencing elections, and not be required to register or report
Amount low for state, significant in smaller jurisdictions
Threshold increases $100 in Jan odd years
Increased in Jan 2017 to $1100 ($1200 in 2019)

11. Political Committee Changes
Registration
Must file Statement of Organization (only form)
$500 Threshold Exception Statement Repealed
Must provide an address and agree to accept all notices at that address
Registered PAC may engage in any lawful activity
Not required to register separate committees for different activities (e.g. support measure and candidate)
Not required to identify types of activities on registration statement

12. Reporting Changes Contributions & Expenditures Reports
PACs file reports for every calendar quarter every year, regardless of whether there is any election
Reports due by 15th of month following end of quarter (Jan 15, Apr 15, Jul 15, Oct 15)
Also file a pre-election report in quarters with an election
No Post–election reports (report in next quarterly report)
Candidates file reports only during the year preceding the general (second) election for that office (only file when a candidate in that election)
If 4 year term, do not file for 3 years - media issue

13. Contribution Limit Changes
Limits now increase $100 in Jan of odd years
Increased to $6350 in Jan 2017
Limits apply to election cycle, not term office
Cycle 2 yrs – General (second) to General (second)
Now 2 cycles in a 4 year term again (like before 2015)
Reattribute “excess” contributions
If a candidate unknowingly accepts amount above limit from an individual contributor (“Excess Contribution”)
Can “reattribute” excess to another donor if meets conditions in §16-913(C) (related / joint donor)

14. Changes to Reporting by Independent Expenditure Orgs
Corps, LLCs, Labor Orgs making Independent Expenditures
Repealed requirement to “Register”
Repealed requirement to file separate notices at time of expenditure
Disclosure now through filing a CF Report
Not disclosed until same time committees file reports
No separate form
Use a specific schedule in campaign finance report
Must identify candidate supported / opposed

15. Electronic Filing Requirement
Filing officers must provide electronic filing option
Online database not required (yet)
SOS wants entire state to opt into State System
Availability to other jurisdictions delayed ?
Interim compliance using fillable pdf forms &
All forms prescribed and provided by SOS
Filing officers can no longer change forms

16. Changes to Enforcement
Enforcement of Reporting
Determine Failure to File (on time)
Send Failure to File Notices (By within 5 days)
Refer to attorney if not filed within 30 days
Penalties for Failure to File
$10 / day during first 15 days after due
$25 / day for each subsequent day (after 15)
Penalties accrue until report is filed
No maximum accrual amounts (Old law $250 / $1000)

17. Changes to Enforcement
Enforcement of other CF Violations
Written complaint from 3rd party now required
Only filing officer can initiate investigations
If filing officer determines “reasonable cause” to believe someone is violating CF law, must notify attorney
City / Town Attorney is Enforcement Officer
If have conflict, filing officer or attorney may refer to other jurisdiction, if jurisdiction accepts referral
Guidelines for Investigations
SOS required to establish in Procedures Manual
Procedures Manual not yet updated for 2016 (last 2014)

18. Pending Implementation Issue
Session Law – HB 2297 (2016)
All committees in existence on Nov 8, 2016 must terminate by June 30, 2017
Clerks have informed committees several times
Reasons for session law:
New registration requirements, fewer committee types
New state database (new design / data conversion)
If committee does not terminate:
Filing officer may terminate or
“Convert” to new committee type (Candidate or PAC)

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

20. Termination Requirement Issue
Committees with Surplus Money
Permitted ways to distribute surplus:
Candidate - transfer to a subsequent campaign
Return surplus monies to the contributors
Contribute surplus to other committees, including candidate committees, within limits
Donate surplus monies to 501(C)(3) charity
Repay loans
Cannot convert to personal use (or family)

21. Termination Requirement Issue
Issues with Termination by Filing Officer
Unknown if committee meets requirements
Have surplus, debt, or unreported activity?
Filing officer cannot prepare a final report
Filing officer cannot distribute any surplus
Committees would still need to file a report and certify that conditions satisfied
Does filing officer terminate and then enforce failure to file the final report (late on July 1)?

22. Termination Requirement Issue
Issues for Filing Officer to Convert Committee
“Convert” not defined – statutorily is Term & Reg
Unknown if committee is still required to register
Filing officer cannot complete new registration
Lacks required info – address, bank, etc
Cannot agree for committee to accept notices
Possible prior restraint issue to register if entity is no longer required to register as a committee
Committee would still need to file new registration
Does filing officer convert, enforce failure to register?

23. Termination Requirement Issue
Proposed Recommendation to Clerks
Proactively encourage committees to act by Jun 30
Send a letter to committees reminding of requirement
Provide new requirements for committee registration
Explain process to terminate if not intend to register
Explain process to convert if will register new committee
File Statement of Org for new committee
Terminate old committee and transfer balance to new
Provide forms or link to online forms
Sample letter has been prepared for Clerks to send

24. Termination Requirement Issue
Discussion – If committee fails to act by June 30?
Administratively terminate on June 30?
Enforce failure to file required report (with termination)?
Late as of July 1?
Administratively “convert” committee on June 30?
Enforce filing of new / amended registration form?
Enforce filing of final report for Term showing transfer?
Most committees have report due on Jul 15
Allow committee to report transfer on next report due?
Which is better if committees never act?

25. Statutory Issues - 2016 Laws
Election Cycle
Cycle start and end dates were on Election Day
Previously was end of post-election reporting period
Committees had to file 2 reports to split on Election Day
HB 2486 (Chap 233) – New definition, §16-901(18)
Still 2 years, from General (second) to General (second)
Now start and end dates aligned with reporting periods
Ends last day of calendar quarter with an election
Begins first day of next calendar quarter
Also clarifies cycles for Special & Recall Elections

26. Statutory Issues - 2016 Laws
Name of Candidate Committee
Candidate committee name must include office
Committees had to change name to add office
Some had used same name for many years
HB 2486 (Chap 233)
Now required only when candidate has committees for multiple offices at same time

27. Statutory Issues – 2016 Laws
Candidate Committee Transfers
A candidate committee can transfer money to other committees for same candidate without limit
Exception: City / town candidate committees can’t transfer to own 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)
Challenges possible
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 2017

28. Statutory Issues - 2016 Laws
Reporting of Expenditures Less than $250
Not required to itemize expenditure transactions in reports if amount less than $250
Statute omitted a requirement to report the aggregate total of expenditures less $250
SOS included a schedule in the report for aggregate total of expenditures under $250
Not amended in 2017

29. Issues from 2016 Legislation
Filing Date for Reports
Must be filed “no later than” due date
Filing date is date of actual receipt in office
Repealed: Cert mail postmark, delivery confirm date
If report due Sat/Sun/Hol – no provision extending to next business day (old law did extend)
Good cause exception for late filing - repealed

30. Issues from 2016 Legislation
Advance copy of IE Ads to candidate
Repealed requirement to provide a copy of IE ad to the candidate identified in ad within 24 hours of distribution or submission
Now disclosed at time of next campaign finance report (report using the IE schedule of the report)
“Paid for by” disclosure on candidate signs
Repealed former exception for candidate’s own signs that were paid for by the candidate’s own committee
Candidate’s own signs must have disclosure

31. Issues from 2016 Legislation
Determining “Reasonable Cause”
Filing officer must determine if “reasonable cause” exists to believe there is a violation of CF law
“Reasonable cause” standard
Undefined / unclear
No Guidelines or standards
Like Motion to Dismiss? (Assume facts true, violation?)
Probable cause? Summary judgement? Other?
Standard is affected by ability / inability to obtain and review evidence

32. Issues from 2016 Legislation
Investigation to determine reasonable cause
Must give alleged violator reasonable opportunity to respond
No audit or subpoena powers to compel production of documents or attendance of witness
May request voluntary production or appearance
Treasurer is required to provide records to filing officer
Guidelines for Investigations
SOS required to establish in Procedures Manual
No update yet for new law (Last update in 2014)
Uniform process, standards, timelines important

33. Form Issues Primary Issue with New Law - Forms!
Must use forms prescribed by SOS (fillable pdf)
Numerous issues identified when first released
2 revisions issued
One revision very late – some had to redo reports
Some issues not yet fixed
Clerks have / will receive all details and guidance on form issues through League
Today –
Review some examples, primary complaints

34. Form Issues No Signature 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 on Summary Sheets (p. 2-3)
Committees should check math and totals!
Usually can fix by deleting and re-entering data

35. Form Issues Report form includes 62 schedules! (65 pages)
Receipts (A) - 33 Sched
Expenditures (B) - 29 Sched
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
Fill in Summary on page 1 (show zeros for current period)
Also carry forward / repeat campaign to date totals from previous report (only 2 totals)

36. Form Issues Need for Additional Pages for a Schedule
Form has only one page per schedule
Forms unable to generate additional pages
Contribution & Expenditure pages have only 5 lines!
Problem allowing more pages is pdf format issue
Use pdf software (e.g. Adobe Pro, Cute pdf) to complete the 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

37. 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 for individuals (Statute requires Treasurer to track individual donor totals)
Election cycle totals require knowing date cycle began, which may not have coincided with reporting periods! (Fixed HB 2486)

38. 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 in report 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)

39. Common Questions How to complete and file new forms?
Which schedule to use to report specific items?
When SOS Handbook issued, answered many questions, but there is no other information if not addressed in Handbook.
Handbook does not address most non-form issues
Questions related to calculations and errors
How to file?
Could send pdf by , or file on paper. More than expected filed on paper.
How to sign, or to verify not required to sign

40. Common Questions What is Reported in “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.

41. Common Questions Extensions of Time to File Reports
Good cause defense repealed. No provision to waive late fees for good cause for filing late.
Penalties accrue on weekends and holidays. Exclusion for these days repealed.
Also, provision extending filing deadline to next business day when due on holiday or weekend was repealed.

42. Implementation of 2016 Campaign Finance Amendments
Implementation Issues
Questions / Discussion