Before people disperse for the much-deserved holiday break, there is still time to take stock of some year-end legal-compliance housekeeping.
Business Entities and Government Contractors
While many of New Jersey’s pay-to-play laws were overhauled by the Elections Transparency Act in 2023, one thing that has not changed is the Form BE annual pay-to-play disclosure that is due in March 2024 for 2023 activity. While focus generally turns to this filing in March, activity that takes place in 2024 will not actually be reported until March 2025. This makes December a good time to take stock of payments received from New Jersey government contracts in 2023 plus whether any reportable political contributions were made during the calendar year. Whether the business entity received $50,000 from New Jersey government contracts in 2023 will determine if the business has a filing obligation at all, and whether reportable contributions were made by the business or its covered individuals will determine if a short-form filing (without detailed contract information) can be filed.
PACs and Political Parties
In contrast to New Jersey political candidates, who are subject to a limit of $5,200 per contributor on a per-election basis, PACs and political parties are subject to a per-calendar-year limit. This makes December fundraising potentially especially impactful, as a generous contributor can max out to a PAC or political party for 2023 in the next few weeks, and then will be starting with a clean slate for 2024 starting on January 1.
All committees registered with ELEC should take this year-end opportunity to ensure that their reporting meets applicable standards. If any contributors are approaching maximum limits, better to know that now before accepting another check. If any reports require amendments, best to handle that before year-end to allow 2024 to start anew with clean reports. If any of the heightened pre-election reporting was missed in the craziness of election season, now is the time to review and correct any oversights.
IRS Tax-Exempt Organizations
Tax-exempt organizations—including 501(c)(3) charitable organizations, 501(c)(4) social-welfare organizations, and political organizations exempt under Section 527 of the Internal Revenue Code—all generally have to file annual tax returns with the IRS. For calendar-year filers, the Form 990 annual tax returns are due on May 15.
Under IRS rules, a state and local political organization (such as a New Jersey PAC) may have IRS-reporting obligations depending on monetary thresholds. For example, once a New Jersey PAC raises $25,000 in a tax year, it generally needs to file Form 8871 as an initial notice to the IRS that the PAC is claiming exemption as a political organization. In addition, once a New Jersey PAC raises $100,000 in a tax year, it then generally needs to file Form 990 as the annual tax return. Understanding the PAC’s revenues as they relate to these thresholds will help ensure that a New Jersey PAC complies with IRS reporting obligations, and does not find itself owing money to the IRS for failure to meet the requirements of tax exemption. (These IRS filings are generally not required for state or local political candidates or political party committees.)
Last, many 501(c)(3) charitable organizations and 501(c)(4) social-welfare organizations have an obligation to register as a New Jersey charity with the Attorney General’s office. This status then includes an annual filing due six months after the close of the organization’s tax year. Before the end of 2023, this is an opportune time to understand whether the organization is required to register as a New Jersey charity and whether that registration is in good standing.
Avi D. Kelin is a Partner with Genova Burns LLC, and chairs the firm’s Corporate Political Activity Law and Autonomous Vehicle Law Practices. He regularly assists companies with developing and implementing Political Activity compliance policies and procedures.
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.