Compliance Corner: Who Can Make Political Contributions in New Jersey?

The Gold Dome.

Now that Labor Day is in the rearview mirror, we are only two months out from important federal and state elections here in New Jersey. In this period will come a rush of dinners, cocktail parties, and breakfasts, all with the goal of raising funds for the homestretch of the election. Before you or your business attend one of these fundraisers, it is important to understand which people and entities are legally permitted to make political contributions, and which are not.

Federal Candidates and Committees

Individuals can contribute to federal candidates, political parties, and PACs. These contributions are subject to limits. Individuals can also contribute to Super PACs and these contributions are not subject to limits.

The one important limitation here is that federal contributions are prohibited from any individual that holds a federal government contract. Because federal government contracts are usually held by entities and not under an individual’s name, the practical effect of this limitation on individuals is generally small.

Corporations may not make political contributions to federal recipients, with the exception of Super PACs. The ability of a corporation to contribute to a federal Super PAC is based on the US Supreme Court case of Citizens United v. FEC and its related case law. However, it is important to understand the limits of these cases—corporations are still prohibited from contributing to any federal recipient other than a Super PAC, and contributions to even Super PACs are prohibited from any corporation that holds a federal government contract.

Last, checks may be drawn on the account of a partnership or LLC (except for an LLC that is taxed as a corporation or an LLC that has publicly traded shares) but the contribution is subject to a double limit (one for the entity and one for the individual) and is treated as a personal contribution from one or more individual equity partners or members of the partnership or the LLC.

New Jersey Candidates and Committees

The laws for New Jersey state and local candidates differ in important ways from the federal overview above.

Individuals, corporations, and unions may all contribute to New Jersey political recipients, subject to campaign-finance limits. All of these contributors may contribute without limits to a New Jersey Super PAC.

But New Jersey does have complex restrictions on permitted contributions for individuals and entities that hold government contracts or that operate in highly regulated industries.

A business entity (and its associated individuals and entities) that holds New Jersey government contracts or redevelopment agreements is subject to reduced contribution limits (and occasionally even complete prohibitions) to maintain eligibility for those contracts. The specifics of these restrictions differ depending on whether the contract is at the state level or at the local level (and approximately 150 municipalities in New Jersey have adopted their own local ordinances) so it is important to understand what contributions may jeopardize eligibility for those contracts and redevelopment agreements.

In contrast, there is a complete prohibition on the making of corporate contributions from any bank, insurance company, utility, or other business that operates in a highly regulated industry. Recent case law does clarify that these regulated-industry companies may contribute to a New Jersey Super PAC or make its own independent expenditures. This prohibition on direct contributions also applies to any individual who is a majority owner of a regulated-industry company—if you happen to buy a bank or an insurance company, make sure that you update your friendly neighborhood political lawyer.

Last, similar to federal law, a New Jersey partnership or LLC can have a political check drawn on its account, but the contribution is treated as a personal contribution from one or more equity partners or members of the entity.

Compliance Tip: It is becoming more common for candidates to provide credit-card options for political contributions. While it is permissible for an individual to contribute via a check or credit card (or even PayPal or other electronic methods in some cases), the best practice is for a corporation or LLC to contribute with check only. Cash contributions may be permitted in some scenarios, but our advice is always to avoid contributing with cash.

Avi D. Kelin is Counsel in Genova Burns LLC’s Corporate Political Activity Law Practice Group and Chair of the firm’s Autonomous Vehicle Law Practice.

This column is for educational and informational purposes only and is not intended and should not be construed as legal advice. It is recommended that readers not rely on this column, but that professional advice be sought for individual matters.

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