The Supreme Court recently struck down aggregate limits on campaign donations and on April 11, the Maryland Board of Elections announced that it was no longer enforcing state caps.
Maryland Campaign Finance Law Changes, This Year And Next
By: Carville B. Collins, Daily Record April 27, 2014
One year ago, the Maryland General Assembly enacted comprehensive reshaping of State campaign finance law. Even though enacted during the 2013 Session, these changes to the state campaign finance law, some of which were significant, were not to go into effect until the next state election cycle, which will begin on January 1, 2015. During the 2014 Session, this reshaping remained unchanged, and will remain on the books with its 2015 effective date.
On April 11, the Maryland State Board of Elections (“SBE”), in response to a recent decision of the U.S. Supreme Court, issued guidance that has significant ramifications for state and local elections in Maryland. Importantly, this guidance will affect the current state election in 2014, as well as future state elections beginning with the new four-year cycle in 2015-2018.
The posture of contributors, candidates, and political action committees (“PACs”) in Maryland had been that virtually none of the recent law changes would apply to this year’s election in 2014. However, as a result of the SBE’s recent guidance, that has changed. Some participants in this year’s state and local elections in Maryland will indeed be affected, and they will need to change their posture accordingly.
Contribution limits for the 2014 state election
Prior to the SBE’s guidance in 2014, individual persons — which includes all persons and business entities but not State PACs — were subject to two types of contribution limits:
* $4,000 to any one candidate for state or local office in Maryland or to any one state PAC during the four-year state election cycle; and
* an aggregate of $10,000 to all such candidates and PACs in the election cycle.
Each such business entity may contribute up to the $4,000 individual and $10,000 aggregate limits, assuming each entity is formed for a legitimate business or organizational purpose (and is not formed exclusively for the purpose of making political contributions). An affiliation rule applies to corporations, whereby contributions by a corporation and any wholly owned subsidiary of that corporation, or by two or more corporations owned by the exact same stockholders, shall be subject to a single set of $4,000 and $10,000 limits.
These limits have been the law of Maryland since 1991.
For purposes of these contribution limits, “candidates for State or local office in Maryland” means all candidates for state office in Maryland (governor, lieutenant governor, comptroller, attorney general, and General Assembly) and for local office in Maryland (counties and the City of Baltimore, but excluding municipal elections outside of Baltimore such as Annapolis and Frederick).
The SBE’s April 11 guidance has been issued in response to the U.S. Supreme Court’s recent decision in McCutcheon v. Federal Election Commission, which held that aggregate contribution limits are invalid under the First Amendment.
Accordingly, the SBE has announced that Maryland’s $10,000 aggregate limit will not be enforced. Therefore, a person or business entity may still contribute up to $4,000 to any one candidate for state or local office in Maryland or to any one state PAC during the four-year state election cycle, but there is now no aggregate limit on these contributions. In issuing its guidance, the SBE noted that the Maryland Office of Attorney General had been consulted on this matter, and has reviewed and approved this guidance.
Limits effective January 1
All persons and business entities will be subject to new contribution limits, in the next state election cycle beginning Jan. 1, 2015. The $4,000 individual limit will be increased to $6,000, and under the SBE’s guidance, there will be no aggregate limit. Each person and business entity may contribute up to the $6,000 limit, assuming it meets the aforementioned purpose tests existing under current law.
However, the legislation greatly expands the affiliation rule, such that two or more entities shall be subject to a single $6,000 limit if: (1) one entity is a wholly owned subsidiary of another entity, or (2) the entities are owned or controlled by at least 80% of the same individuals or entities. This expansion effective in 2015 applies to all business entities, including corporations, LLCs, partnerships, sole proprietorships, and real estate investment trusts.
Also effective in 2015 is a first-time indexing of the contribution limits. Thus, the $6,000 limit will be indexed upward (and never downward) at the beginning of each new four-year state election cycle (starting with the 2019-2023 cycle), based on consumer product index (CPI) growth, and rounded to the nearest $500 increment.
Under current law, a Maryland State PAC is subject to a transfer limit of $6,000 to any one candidate for state or local office in Maryland or to any other State PAC during the four-year state election cycle, and there is no aggregate transfer limit. The new law effective January 1, 2015 makes no change to these limits, except that beginning with the 2019-2023 cycle, inflation indexing will be implemented for State PACs in the same manner as for individuals and entities. The SBE’s guidance has no impact on State PACs.
Effective January 1, 2015, State PACs will encounter a variety of new requirements.
* State PACs will be barred from: (1) receiving, transferring or spending money or any other thing of value if a vacancy exists in the office of chairman or treasurer; and (2) reporting contributions into the State PAC of $50 or less as a lump sum without identifying the amount and contributor of each contribution (this does not apply in the case of persons making payroll deductions of $50 or less, if certain conditions are satisfied).
* Other new requirements will apply to State PACs in the areas of disclosure, issuance of receipts for contributions, and fundraising by raffles or games of chance. For example, a State PAC that makes a transfer to a candidate will be required to note on its check by which the funds are transferred the notation “MD Registered PAC.”
* Finally, State PACs formed in Maryland and other states that exclusively make disbursements or independent expenditures for election related communications will be subject to extensive new reporting requirements, and they will face civil penalty sanctions for failure to meet all current and new reporting requirements.
Effective for the election of 2014, State PACs are subject to a slightly revised reporting schedule, as a result of 2014 legislation. Under Senate Bill 930, the reporting deadline on the third Tuesday after the general election has been moved up to the second Tuesday after the general election.
In Part II of this article, other changes to Maryland’s campaign finance law, including new requirements for out-of-state PACs, non-profits, and organizations engaging in the hiring of lobbyists, independent expenditures, or electioneering will be reviewed.