CSC Newsletter – July 2017, Vol. 23, No. 2

Posted in Newsletter

REMINDER TO ALL COMMITTEES TO FILE THE SUPPLEMENTAL REPORT

The next report for all committees is the Supplemental Report covering the period January 1, 2017 to June 30, 2017. This report must be electronically filed on your respective filing systems (i.e., candidate filing system (CFS) or noncandidate committee filing system (NCFS)) no later than 11:59 p.m. Hawaiian standard time on Monday, July 31, 2017.

Failure to file this report by the deadline will result in a fine and, if you are a candidate committee or noncandidate committee (see, Act 108, SLH 2017), your committee’s name will be posted on the Commission website under “Candidate Committees That Failed to File or Correct a Report” or “Noncandidate Committees That Failed to File or Correct a Report.”   Moreover, if a fine is assessed against your committee and you fail to timely pay it, Commission staff will issue a complaint against your committee and set it for consideration at the next public Commission meeting.  Therefore, we encourage all committees to timely file their reports.

As a reminder, the reporting period for the Supplemental Report ended on June 30th so the report can be filed as early as July 1st, but no later than July 31st.  Committees do not have to wait until the July 31st deadline to file this report.

NEW – REPORTING SCHEDULES

The new reporting schedules have been posted on our website and are provided via the link below for your convenience to track upcoming reporting deadlines:

These reports must be electronically filed on your respective filing systems (CFS and NCFS) no later than 11:59 p.m. Hawaiian standard time on the day of the deadline.

UPDATE ON SYSTEM MAINTENANCE TO THE COMMISSION’S ELECTRONIC FILING SYSTEMS

The Commission’s electronic filing systems were scheduled for system maintenance on June 20-22, 2017.  The Commission would like to thank and acknowledge the efficient and speedy services of the Office of Enterprise Technology Services (“ETS”) who were able to complete this project in one day thereby allowing our systems to be fully accessible on June 21st.

NEW – RESTORATION OF OPERATIONS TO STATE GENERAL FUNDS AND REMINDER TO CHECK OFF THE $3 BOX ON YOUR 2018 TAX RETURN

A warm mahalo to Governor Ige, Department of Accounting & General Services, Budget & Finance, and the State Legislature for approving H.B. 100 (Act 49, SLH 2017) which effectively restored the funding of Commission operations to general funds.  The Commission was close to declaring that the Hawaii Election Campaign Fund was near depletion such that there would be no public funding in the 2018 election, but thanks to the inclusion of our operational budget in the Executive Budget, the Hawaii Election Campaign Fund is expected to be able to pay for public funding for qualified candidates in the 2018 election.

The Commission however still urges you to continue to check off the $3 “Yes” checkbox on your 2017 tax return which permits $3 from state funds (or $6 if married and filing a joint return) to be allocated to the Hawaii Election Campaign Fund.  The health and sustainability of public funding depends on greater participation of Hawaii taxpayers in checking off the $3 box.  Checking off this box does not increase your tax or reduce your refund.  Our thanks to Common Cause Hawaii for their commitment and efforts in promoting this outreach.

Choose “Yes” for the Hawaii Election Campaign Fund on your state income tax return

By marking the $3 “Yes” checkbox for the Hawaii Election Campaign Fund, you support the work of the Hawaii Campaign Spending Commission. The Commission serves Hawaii voters by helping to ensure that:

  • political candidates’ donations and how candidates spend these donations are lawful and transparent.
  • more qualified candidates have an opportunity to run for office.

Choose “Yes” on your tax return.

It does NOT reduce the amount of your refund or increase the amount of your tax payment.

NEW LAWS GOING INTO EFFECT AND REVIEW OF THE 2017 LEGISLATIVE SESSION

The following Commission bills were passed by the 2017 Legislative Session and approved by Governor David Ige.  They are:

  • Act 97, SLH 2017 (H.B. 280) – Effective July 5, 2017, this Act amends HRS §11-334 by clarifying the due dates of preliminary, final, and supplemental reports to be filed with the Commission, requiring certain candidates to file the Final Election Period Report three (3) business days before the date the candidate is to be sworn into office, and requiring that the Supplemental Report for candidate committees due on January 31st be filed annually.
  • Act 98, SLH 2017 (H.B. 279) – Effective July 5, 2017, this Act amends HRS §11-363 by specifying that certain types of dissemination, distribution, republication, and use of certain types of campaign materials or the financing of such by any person shall not be considered to be a contribution to a candidate.
  • Act 108, SLH 2017 (H.B. 281) – Effective July 10, 2017, this Act amends HRS §11-340 to require the Commission to publish on its website the names of all noncandidate committees that fail to file a report or to correct a report within two weeks of notification by the Commission.
  • Act 109, SLH 2017 (H.B. 282) – Effective July 10, 2017, this Act amends HRS §11-340 to clarify that increased fines may apply if a noncandidate committee fails to timely file the 2nd Preliminary General Report.

The following Commission bills did not pass the 2017 Legislative Session and will carryover to the 2018 Legislative Session:

  • H.B. 283 / S.B. 440 – Amends HRS §11-410 by raising the amount of fine that can be assessed against a Super PAC (that receives at least one contribution of more than $10,000 from one person or has made expenditures of more than $10,000 in aggregate, in an election period) from $1,000 to $5,000 and to permit the fine to be up to three times the amount of the unlawful contribution or expenditure. Also, allows the Commission to recover its costs of investigative services and bank fees for subpoenaed records from violators.
  • H.B. 284 / S.B. 441 – Amends HRS §11-341 (electioneering communications) by changing “disclosure date” to when the electioneering communication is publicly distributed rather than when the contract for the electioneering communication is executed. This is in line with federal law and makes more sense.  Also, deletes “communications that constitute expenditures by the expending organization” from the exceptions to the definition of “electioneering communications” to make it clear that candidate and noncandidate committees are required to file statements of information.
  • H.B. 285 / S.B. 442 – Amends HRS §11-412(b) to provide that the applicable statute of limitations for criminal prosecution of campaign spending violations shall not commence until the Commission’s discovery of the offense. This amendment was recommended by the Attorney General’s Office – Criminal Justice Division.
  • H.B. 286 / S.B. 443 – Amends HRS §11-322(a) by deleting the requirement that contributions be reported in the organizational report of candidate committees. There is no space in the organizational report to list contributions.  The Commission has not required candidates to report contributions in the organizational report.
  • H.B. 287 / S.B. 444 – Amends HRS §11-323(a) by deleting the requirement that contributions be reported in the organizational report of noncandidate committees. There is no space in the organizational report to list contributions.  The Commission has not required noncandidate committees to report contributions in the organizational report.
  • H.B. 288 / S.B. 445 – Amends HRS §11-324(e) to require treasurers of candidate and noncandidate committees to keep information about the employer and occupation of all contributors.
  • H.B. 289 / S.B. 446 – Amends HRS §11-339 to require candidates who do not intend to have more than $1,000 in activity to provide notice to the Commission of such intent by June 30 of an election year and to require noncandidate committees who do not intend to have more than $1,000 in activity to provide notice to the Commission of such intent by the 5th calendar day prior to the due date of the Preliminary Primary Report.

NEW – FINES FOR ADVERTISEMENT DISCLAIMER VIOLATIONS

Advertisement disclaimers must now be on signs and banners.  Under HRS §11-391(a), any advertisement that is broadcast, televised, circulated, published, distributed, or otherwise communicated, including by electronic means, shall:

(1)  Contain the name and address of the candidate, candidate committee, noncandidate committee, or other person paying for the advertisement;
(2)  Contain a notice in a prominent location stating either that:

(A)  The advertisement has the approval and authority of the candidate; provided that an advertisement paid for by a candidate, candidate committee, or ballot issue committee does not need to include the notice; or
(B)  The advertisement has not been approved by the candidate; and

(3)  Not contain false information about the time, date, place, or means of voting.

HRS §11-391 further provides that:

(b)  The fine for violation of this section, if assessed by the commission, shall not exceed $25 for each advertisement that lacks the information required by this section or provides prohibited information, and shall not exceed an aggregate amount of $5,000.

The Commission has adopted a Schedule of Fines pursuant to Hawaii Administrative Rules §3-160-73(a).  For advertisements missing a disclaimer, the fine schedule provides for a fine of $25 per advertisement for the 1st violation, a fine of $100 per advertisement for the 2nd violation, and a fine of $500 per advertisement for the 3rd violation.  Fines for further violations shall be determined by the Commission via a complaint, but shall not exceed an aggregate amount of $5,000.

If this is your first or second advertisement disclaimer violation, and the fine exceeds $25, a Conciliation Agreement which will result in a lower fine amount may be discussed with Commission staff subject to approval by the Commission at a public meeting conducted pursuant to HRS chapter 92.

The Commission is taking these matters very seriously.  If you receive a notification from the Commission, we strongly recommend that your review all of your pending advertisements to see that they have the proper disclaimers and, if not, take the necessary measures to rectify them before the advertisements are made public.

NEW – GUIDANCE REGARDING THE COMMISSION’S CALCULATION OF LATE REPORT FINES

For purposes of clarifying the law as to the Commission’s application of expenditures with respect to calculating late report fines, the Commission would like to issue this guidance.

Hawaii Revised Statutes (“HRS”) §11-302 defines an “Expenditure” as:

(1)  Any purchase or transfer of money or anything of value, or promise or agreement to purchase or transfer money or anything of value, or payment incurred or made, or the use or consumption of a nonmonetary contribution for the purpose of:

(A) Influencing the nomination for election, or the election, of any person seeking nomination for election or election to office, whether or not the person has filed the person’s nomination papers;
(B) Influencing the outcome of any question or issue that has been certified to appear on the ballot at the next applicable election; or
(C) Use by any party for the purposes set out in paragraph (A) or (B);

(2)  Any payment, by any person other than a candidate, candidate committee, or noncandidate committee, of compensation for the services of another person that are rendered to the candidate, candidate committee, or noncandidate committee for any of the purposes mentioned in paragraph (1)(A); provided that payment under this paragraph shall include provision of services without charge; or

(3)  The expenditure by a candidate of the candidate’s own funds for the purposes set out in paragraph (1)(A).

As for committees reporting an expenditure, HRS §11-337(a) provides that:

[A]n expenditure is deemed to be made or incurred when the services are rendered or the product is delivered.  Services rendered or products delivered for use during a reporting period are deemed delivered or rendered during the period or periods of use; provided that these expenditures shall be reasonably allocated between periods in accordance with the time the services or products are actually used.

As for unpaid expenditures, Hawaii Administrative Rule (“HAR”) §3-160-40(d) provides that unpaid expenditures must be reported until payment is made in full or the debt is forgiven.

Based on these provisions, the Commission recognizes that the accounting methods for expenditures contemplates a cash basis (i.e., when a payment is made on the same day that the service is rendered or product delivered) and an accrual basis (i.e., when an expenditure is incurred but not paid).  In consideration of the fact that the Hawaii campaign finance laws were created to provide transparency in the campaign finance process, and to that extent, any ambiguity in the campaign finance laws shall be construed to support transparency (see, HRS §11-301), it makes sense that the accrual basis of accounting for expenditures was invoked to prevent committees from receiving services or the delivery of products and delaying payment (cash basis) until a later date; conceivably, until after an election which would undermine and circumvent the disclosure and transparency reporting requirements of the campaign finance laws and rules.

Applying these principles means that committees must report an expenditure when it is paid or when it is incurred if not paid for immediately.  It further means that if the expenditure is unpaid, it must remain on the committee’s report until it is paid in full or the debt is forgiven.  If the committee files its report late, the Commission will apply HRS §11-340 in computing the maximum fine which cannot exceed 25% of the total amount of expenditures for the period covered by the report.  See, HRS §11-340(b)(1), (c)(1), and (e)(1).  This application is best illustrated with respect to unpaid expenditures in the following hypothetical.

Using an example in which a committee only incurred a $1,000 unpaid expenditure in a reporting period, if the committee files this report late and the committee made no payment towards the $1,000 unpaid expenditure, in calculating the maximum fine, Commission staff would compute the fine to not exceed 25% of the $1,000 unpaid expenditure balance.  If the subsequent reporting period report was filed late and the committee paid $200 of the $1,000 unpaid expenditure during that reporting period, in calculating the maximum fine, Commission staff would compute the fine not to exceed 25% of the $200 payment and the $800 unpaid expenditure balance (i.e., $1,000).  Lastly, if in the next reporting period, the report was filed late and the committee made no additional payments during this reporting period, in calculating the maximum fine, Commission staff would compute the fine not to exceed 25% of the $800 unpaid expenditure balance.

Notably, the Commission is issuing this guidance because previously, with respect to calculating the maximum fine, Commission staff did not include the unpaid expenditure (or its balance) in the computation unless it was paid or partially paid during that reporting period for which the report was filed late.  For example, in the hypothetical above, the $1,000 unpaid expenditure incurred in the 1st late report would not be considered, only the $200 payment towards the $1,000 unpaid expenditure in the 2nd late report would be considered, and the $800 unpaid expenditure balance in the 3rd late report would not be considered.

The Commission believes that this application more accurately applies the governing provisions of expenditures set forth in campaign finance laws and rules.

GUIDANCE ON CANDIDATE COMMITTEE CONTRIBUTIONS TO CHARITABLE/COMMUNITY OR NON-PROFIT ORGANIZATIONS

Under HRS §11-381(a)(3), candidate committees may make donations to any community service, educational, youth, recreational, charitable, scientific, or literary organization as long as the total amount of all donations is no more than twice the maximum amount that one person may contribute to that candidate pursuant to HRS §11-357 and the donations cannot be made from the date the candidate files nomination papers to the date of the general election.

The Commission has been aware of candidate committees’ donations to charitable/community or non-profit organizations being reported as advertising that is directly related to the candidate’s campaign under HRS §11-381(a)(1).  In these instances, the candidate committee is characterizing its donation as advertising because the candidate committee is being recognized as a sponsor in the charitable/community or non-profit organization’s program or recognition materials.  Given these circumstances, the Commission is likely to inquire further since HRS §11-381(a)(3) has amount and time limitations for donations to charitable or community organizations, while advertising directly related to a candidate’s campaign provision (i.e., HRS §11-381(a)(1)) has no limitations.  Generally, if the nonprofit organization reports the expenditure by the candidate committee as a tax-exempt donation to the IRS or records the expenditure as a gift on its books, the Commission will treat the expenditure likewise, and thus the statutory amount and time limitations will apply.  However, if the nonprofit organization reports the expenditure as income to the IRS, or otherwise treats the expenditure as income on its books, the Commission will consider whether the expenditure is permissible as being directly related to the candidate’s campaign.

REMINDER – REPRODUCTION OF CANDIDATE MATERIAL BY NONCANDIDATE COMMITTEES

Pursuant to HRS §11-363(a), the financing by a person of the republication of a candidate’s campaign material is an in-kind contribution to that candidate.  For example, if an independent expenditure committee (Super PAC) obtains campaign material (e.g., a candidate or family photograph with the candidate) from the candidate’s website or social media account, without the consent or knowledge of the candidate, and then uses that image in its own “independent” mailer in support of the candidate, the cost of the advertisement is an in-kind contribution to the candidate.

REMINDER – ADDITIONAL WAY TO SUBMIT CERTAIN CSC FORMS

In February 2016, the Commission launched eSign forms for committees to use as an additional and alternative way to submit forms.  The new tool was made available through ETS’ commitment to employ new technology to improve government efficiency, services, and communication.  The success of this employment has been tremendous to the Commission.  To date, we have received and processed 1,282 eSign documents and have had positive feedback from users.

For candidate committees, eSign is available for the following forms:  (1) Electronic Filing Form; (2) Executed Loan Document; (3) Notice of Intent to Hold a Fundraiser; (4) Request for Termination of Registration; and (5) Public Funding – Statement of Intent to Seek Public Funds.  For noncandidate committees, eSign is available for the following forms:  (1) Electronic Filing Form; (2) Notice of Intent to Hold a Fundraiser; and (3) Request for Termination of Registration.

For those committees who are unfamiliar with eSign, these forms are completed, esigned, and emailed directly to the Commission from Adobe Sign which we are using for this purpose.  Forms requiring multiple signatures (i.e., Electronic Filing Form and Executed Loan Document) must be completed, esigned, and emailed separately by each person required to sign the form.  The Commission will not process a multiple signature form until the form is complete with all the required signatures and will leave it to the committee to ensure that a proper and complete form has been submitted.

DOWNLOADABLE CALENDAR AVAILABLE ON THE COMMISSION’S WEBSITE

A downloadable calendar of events including (but not limited to) the candidate committee and noncandidate committee reporting schedules, our Commission’s monthly meeting schedule, and the State holidays can be downloaded by individuals into their Apple, Google, Microsoft, Outlook, and Yahoo calendars as well as many other calendar programs that use the standard iCal format, from our Commission’s homepage on our website.  View the Commission’s Downloadable Calendar.

TERMINATION OF COMMITTEE REGISTRATION WITH THE COMMISSION

If you are a candidate who does not anticipate running in a future State or county election, or you are a noncandidate committee that does not intend to participate in future State or county elections, and your committee has no surplus or deficit in campaign funds, you may want to consider terminating your registration with the Commission.  If so, you will need to complete and submit the following documents: (1) A “Candidate Committee Request for Termination of Registration (eSign)” form or “Noncandidate Committee Request for Termination of Registration (eSign)” form; and (2) A closing bank statement verifying that your committee’s bank account has been closed.  Further, you must not have any outstanding fines or unresolved matters with the Commission.  Assuming everything is in order, the Commission will approve your termination request and you will no longer be required to electronically file reports with the Commission.  Until your request is approved, you must continue to file reports even if your committee has no activity.

2017 STANDARD MILEAGE RATE ANNOUNCED BY INTERNAL REVENUE SERVICE (IRS)

For candidates that seek reimbursement from campaign funds for the campaign related use of a personal vehicle, the federal standard mileage rate for 2017 is 53.5 cents per mile (which is less than last year).  See IRS Notice 2016-79 (Section 3) which was adopted by Comptroller’s Memorandum No. 2016-23.  The Commission reminds candidates that a daily mileage log noting the campaign use and personal use of the personal vehicle satisfies recordkeeping requirements of Hawaii Administrative Rules §3-160-23.  See, Hawaii Administrative Rules §3-160-45(b)(2).

2017 MEETING SCHEDULE

Commission meetings for 2017 are scheduled for the 2nd Wednesday of each month at 10:00 a.m. in Conference Room 204, Leiopapa A Kamehameha Building, 235 S. Beretania Street, Honolulu, Hawaii 96813.  View the 2017 Meeting Schedule.  Meeting location, dates and times are subject to change so please check the “2017 Meeting Schedule” page prior to attending a meeting.