Add §§5-b & 5-c, amd §§1-c, 1-h & 1-j, Leg L; amd §§14-116, 14-120 & 14-124, El L
Relates to limits on outside income earned by members of the legislature; campaign contributions by limited liability companies; communications with journalists and monies received and expenditures made by a party committee or constituted committee.
NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A9535
SPONSOR: Heastie (MS) TITLE OF BILL: An act to amend the legislative law, in relation to
limitations on outside income for members; to amend the election law, in
relation to campaign contributions by limited liability companies; to
amend the legislative law, in relation to communications with profes-
sional journalists and newscasters; and in relation to reporting of
certain funding by lobbyists; and to amend the election law, in relation
to monies received and expenditures made by a party committee or consti-
tuted committee
PURPOSE OR GENERAL IDEA OF BILL:
This bill defines "outside income" as compensation for services actually
rendered and would limit such annual compensation for legislators to 40
percent of the annual salary of New York State Supreme Court Justices.
The bill would also prohibit legislators from receiving a salary or
other payment from any entity or firm for the use of the legislator's
name on such entity or firm letterhead, website or other promotional
materials unless such payment is directly related to work actually
performed and the amount is reasonable and proportionate to the work
performed by the individual.
The bill would codify the professional rules for lawyers regarding
referral fees and division of legal fees. No referral fees are permitted
for simply making or receiving a recommendation and the division of fees
must be proportionate to the services performed by each lawyer.
The bill would add Limited Liability Companies (LLCs) to section 14-116
of the election law, so that LLCs are made subject to the existing
contribution limits for corporations, require that contributions are
attributed proportionally to LLC members and require annual reporting by
LLCs.
The bill would protect communications with the press by exempting such
communications from the definition of "lobbying" and would increase
transparency by giving the public more information about lobbyists' and
clients of lobbyists' sources of funding.
The bill would prevent contributions made to party "housekeeping"
accounts from being used for unintended purposes.
SUMMARY OF SPECIFIC PROVISIONS:
Section one of the bill adds a new section 5-b to the legislative law to
define "outside income" as compensation for services actually rendered
and limits annual outside income for legislators to 40 percent of the
annual salary of New York State Supreme Court Justices.
Payment to a legislator for the use of his or her name in promotional
materials, such as letterhead or websites, would be barred unless the
payment is directly related to work actually performed by the legisla-
tor. Any such compensation that is earned by a legislator who is part of
a business or firm must be reasonable and proportional to the work
performed by that individual.
The proposal also spells out rules for lawyers regarding referral fees
and the division of fees. Legislators may not collect any payment for
simply recommending a lawyer or obtaining employment by a client and any
division of legal fees must be proportionate to the services performed
by each lawyer.
Section two of the bill adds a new section 5-c to the legislative law
and incorporates the limitations in the Public Officers Law regarding
potential conflicts of interests. Legislators are prohibited from
receiving income from an ownership interest in an entity that engages in
an activity that the legislator may not engage in. Legislators would be
required to timely obtain an opinion from the legislative ethics commis-
sion to identify actions that must be taken to prevent income from
prohibited activities being paid to a legislator.
Section three of the bill amends subdivisions one and two of Election
Law § 14-116 to provide that LLCs are subject to the aggregate contrib-
ution limit of $5000 applicable to corporations and by adding a new
subdivision three to require LLCs to report the identity of all direct
and indirect owners of membership interests in the LLC to the State
Board of Elections.
Section four of the bill adds a new subdivision three to section 14-120
of the Election Law to require that all contributions made by an LLC
shall be attributed to each direct and indirect member of the LLC in
proportion to ownership interests and to provide that the State Board of
Elections shall enact regulations to enforce this provision.
Section five of the bill would amend section 1-c (c) of the Legislative
Law to exempt from the definition of "lobbying" communications with
professional journalists or newscasters.
Sections six and seven of the bill would amend sections 1-h (c)(4) and
1-j(c)(4)of the Legislative Law to lower the spending thresholds that
trigger the requirement that clients of lobbyists and lobbyists that
lobby on their own behalf disclose their sources of funding.
Section eight of the bill amends subdivision 3 of § 14-124 of the
Election Law to clarify the use of funds designated for a political
party committee's "housekeeping account." Such funds would be required
to be kept in a segregated account intended explicitly for such purposes
and may not be transferred or contributed to another account unless such
account is also segregated and intended for housekeeping purposes. Such
funds also may not be used for any communication that references the
name, likeness, or voice of any clearly identified candidate or elected
official.
Section nine of this bill is the effective date.
JUSTIFICATION:
The Assembly continues its support for policies that promote ethical
behavior by public officers and transparent reporting of financial tran-
sactions in both the lobbying and political campaign context. This bill
is the Assembly's 2016 package that promotes both ethics and transparen-
cy.
To eliminate the opportunity for a legislator to leverage his or her
public office for financial gain, the amount of compensation that a
legislator may earn in "outside income" would be limited for the first
time; the payment to a legislator for the use of his or her name would
be prohibited, and any compensation that is earned by a legislator who
is part of &business or firm must be reasonable and proportionate to the
work performed by that individual.
The proposal also addresses the issues surrounding legislators who are
also attorneys. Legislators may not collect any payment for simply
recommending a lawyer or obtaining employment by a client and any divi-
sion of legal fees must be proportionate to the services performed by
each lawyer.
Current law, as interpreted, allows a single individual to make multiple
contributions through separate LLCs that would, if combined, exceed the
contribution limits set forth for individuals, allowing some individuals
to avoid campaign donation limits, thus creating the "LLC loophole."
This bill closes this loophole in two ways: by drastically lowering the
contribution limits for LLCs to the same $5,000 limit applied to corpo-
rations, and by attributing the LLC's contributions to the true owners
for the first time. As a result, wealthy individuals will no longer be
free to flout contribution limits through the use of this loophole.
The Joint Commission on Public Ethics recently issued Advisory Opinion
16-01, which defines certain communications with the press as lobbying
activity, including the encouragement of an editorial board to support a
position on a specific government action. This bill would make clear
that communications with the press do not constitute lobbying activity.
This clarification is consistent with current law, which exempts newspa-
pers and other periodicals and radio and television stations from the
definition of lobbying when such entities publish or broadcast news
items, editorials, other comments, or paid advertisements.
Currently, clients of lobbyists and lobbyists that lobby on their own
behalf need to report funding sources if they spent over $50,000 on
lobbying in the year prior to the report and at least 3% of their total
expenditures were devoted to lobbying in New York. Clients of lobbyists
and lobbyists that lobby on their own behalf that meet the current
threshold must list the name of each source of funding over $5,000.
This bill would reduce the threshold for requiring donor disclosure to
any amount over $5,000 spent on lobbying during the prior year and would
remove the percentage requirement. Clients of lobbyists and lobbyists
that lobby on their own behalf that meet this lower threshold would need
to disclose the names of each source of funding over $1000. This
provision is intended to give the public more information about the
individuals and entities that seek to influence government action.
Lowering the current thresholds will provide greater transparency with
respect to lobbying activity.
This bill would provide clarification regarding the use of political
party housekeeping accounts to promote the proper use of, and prevent
the comingling of, "hard money" and "housekeeping money." Segregated
accounts would be required for each and the proper use and transfer of
housekeeping money would be further clarified to promote transparency
and accountability.
FISCAL IMPLICATIONS TO THE STATE:
None.
LEGISLATIVE HISTORY:
New bill
EFFECTIVE DATE:
This act shall take effect immediately; provided that sections one and
two of this act shall take effect January 1, 2017; provided, further,
that any income or other compensation earned prior to the effective date
of sections one and two of this act, and any services actually rendered
prior to the effective date of sections one and two of this act for
which payment is made after the effective date of sections one and two
of this act, shall not be subject to the provisions of sections one and
two of this act.
STATE OF NEW YORK
________________________________________________________________________
9535
IN ASSEMBLY
March 11, 2016
___________
Introduced by M. of A. HEASTIE, MORELLE, PEOPLES-STOKES, LENTOL, CUSICK,
LAVINE, FARRELL, DINOWITZ, FAHY -- Multi-Sponsored by -- M. of A.
ABINANTI, ARROYO, BARRETT, BENEDETTO, BICHOTTE, BRAUNSTEIN, BRENNAN,
BRINDISI, BRONSON, BUCHWALD, CAHILL, CERETTO, COLTON, COOK, CRESPO,
CYMBROWITZ, DAVILA, DenDEKKER, ENGLEBRIGHT, GALEF, GANTT, GLICK, GOTT-
FRIED, GUNTHER, HARRIS, HEVESI, HIKIND, HOOPER, HUNTER, HYNDMAN,
JAFFEE, JEAN-PIERRE, JOYNER, KAVANAGH, KEARNS, KIM, LIFTON, LINARES,
LUPARDO, MAGEE, MAGNARELLI, MARKEY, MAYER, McDONALD, MILLER, MOSLEY,
MOYA, NOLAN, O'DONNELL, OTIS, PAULIN, PERRY, PICHARDO, RAMOS, RODRI-
GUEZ, ROSENTHAL, ROZIC, RUSSELL, RYAN, SCHIMEL, SEAWRIGHT, SEPULVEDA,
SIMANOWITZ, SIMON, SIMOTAS, SKARTADOS, SOLAGES, STECK, STIRPE, THIELE,
TITONE, TITUS, WALKER, WEINSTEIN, WOERNER, ZEBROWSKI -- read once and
referred to the Committee on Codes
AN ACT to amend the legislative law, in relation to limitations on
outside income for members; to amend the election law, in relation to
campaign contributions by limited liability companies; to amend the
legislative law, in relation to communications with professional jour-
nalists and newscasters; and in relation to reporting of certain fund-
ing by lobbyists; and to amend the election law, in relation to monies
received and expenditures made by a party committee or constituted
committee
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. The legislative law is amended by adding a new section 5-b
2 to read as follows:
3 § 5-b. Limit on outside income for members. 1. A member of the legis-
4 lature receiving a salary for legislative work from the state of New
5 York shall not, in a calendar year, earn outside income for personal
6 services actually rendered in an amount greater than forty percent of
7 the annual salary, as provided by law, of state justices of the supreme
8 court.
9 2. (a) For purposes of this section, the term "outside income" shall
10 include wages, salaries, fees, commissions and other forms of compen-
11 sation for services actually rendered.
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD14682-01-6
A. 9535 2
1 (b) For the purposes of this section, the term "outside income" shall
2 not include:
3 (1) salary, benefits, and allowances paid by the state;
4 (2) income and allowances attributable to service in the reserves of
5 the armed forces of the United States, national guard, or other active
6 military service;
7 (3) capital gains or payments from a pension, deferred compensation,
8 or retirement plan;
9 (4) earnings accrued from prior employment or actual service rendered
10 prior to the member taking office, even if the earnings are not paid or
11 do not become due until after the person becomes a member;
12 (5) income derived from investment activities, including investment in
13 real estate, where the member's services are not a material factor in
14 the production of income;
15 (6) income derived from the profits of a business, firm, corporation,
16 limited liability company, partnership, or other business entity, due to
17 the member's ownership interest;
18 (7) payments from workers' compensation benefits, social security
19 benefits, death benefits, or other government or private insurance
20 payments;
21 (8) income or benefits from an inheritance, trust, or other transfer
22 pursuant to a will or similar instrument or by operation of intestacy
23 laws;
24 (9) one-time distributions, such as lottery winnings or court awards
25 or settlements, even if paid in installments; or
26 (10) alimony, maintenance, or child support.
27 (c) For purposes of determining whether the member's yearly outside
28 income exceeds the limit established in subdivision one of this section,
29 a member of the legislature who earns income, including income from
30 commissions or contingency fees, paid at one time but based on work
31 performed on a matter in more than one year may at the member's election
32 apportion that income over the same number of years going forward from
33 the date the income was received as the number of years in which the
34 work was performed.
35 3. A member of the legislature shall not receive a salary or any other
36 form of payment or compensation from a firm, corporation, limited
37 liability company, partnership, association, or other entity ("firm")
38 for use of his or her name in the name of the firm or on such firm's
39 letterhead, website or promotional materials unless the amount of such
40 payment or compensation is directly related to work actually performed
41 by the member and the amount is reasonable when compared to similar
42 payments customarily charged in the locality for similar services or
43 such payment or compensation is proportionally based on an ownership
44 interest in the firm held by the member.
45 4. For members engaged in the practice of law in the state, the
46 following shall apply:
47 (a) Division of fees. A member who is engaged in the practice of law
48 in the state shall not divide a fee for legal services with another
49 lawyer who is not associated in the same law firm unless such lawyer
50 performs legal services and the division of fees is in proportion to the
51 services performed by each lawyer; and
52 (b) Payment for referrals. (1) A member who is a lawyer who is engaged
53 in the practice of law in the state shall not compensate or give
54 anything of value to a person or organization to recommend or obtain
55 employment by a client, or as a reward for having made a recommendation
56 resulting in employment by a client; (2) A member who is a lawyer
A. 9535 3
1 engaged in the practice of law in the state may be recommended, employed
2 or paid by the following offices or organizations if there is no inter-
3 ference with the exercise of independent professional judgment on behalf
4 of the client: a legal aid or public defender office; a military legal
5 assistance office; a lawyer referral service operated by a bar associ-
6 ation or as authorized by law; and any bona fide organization that
7 recommends or pays for legal services, in accordance with the rules of
8 professional conduct promulgated by the appellate divisions of the
9 supreme court.
10 § 2. The legislative law is amended by adding a new section 5-c to
11 read as follows:
12 § 5-c. Conflicts restrictions. 1. A member of the legislature may not
13 receive income from an ownership interest in any firm, corporation,
14 limited liability corporation, or partnership that engages in lobbying,
15 as defined in article one-A of this chapter, that represents clients in
16 litigation against the state, that enters into contracts with the state,
17 or that appears in matters before the state if the member of the legis-
18 lature is prohibited by section seventy-three of the public officers law
19 from engaging in such activity, unless the member of the legislature has
20 received an opinion from the legislative ethics commission, pursuant to
21 article five of this chapter, that directs the member of the legislature
22 to take actions to prevent income from the prohibited activities being
23 paid to the member of the legislature as part of the income from such
24 ownership interest and the legislator fully complies with those
25 directions.
26 2. Any member of the legislature who receives income from an ownership
27 interest in a firm, corporation, limited liability corporation, or part-
28 nership shall, within thirty days of taking office or within fifteen
29 days of become aware of such income, whichever is later, submit informa-
30 tion to the legislative ethics commission that would allow the commis-
31 sion to evaluate such income and give the legislator advice to ensure
32 compliance with the requirements of sections seventy-three, seventy-
33 three-a, and seventy-four of the public officers law. The commission may
34 request further information before issuing its advice. The member of
35 the legislature may only retain such interest if the member fully
36 complies with the advice of the commission.
37 § 3. Section 14-116 of the election law, subdivision 1 as redesignated
38 by chapter 9 of the laws of 1978 and subdivision 2 as amended by chapter
39 260 of the laws of 1981, is amended to read as follows:
40 § 14-116. Political contributions by certain organizations. 1. No
41 corporation [or], limited liability company, joint-stock association or
42 other corporate entity doing business in this state, except a corpo-
43 ration or association organized or maintained for political purposes
44 only, shall directly or indirectly pay or use or offer, consent or agree
45 to pay or use any money or property for or in aid of any political
46 party, committee or organization, or for, or in aid of, any corporation,
47 limited liability company, joint-stock [or], other association, or other
48 corporate entity organized or maintained for political purposes, or for,
49 or in aid of, any candidate for political office or for nomination for
50 such office, or for any political purpose whatever, or for the
51 reimbursement or indemnification of any person for moneys or property so
52 used. Any officer, director, stock-holder, member, owner, attorney or
53 agent of any corporation [or], limited liability company, joint-stock
54 association or other corporate entity which violates any of the
55 provisions of this section, who participates in, aids, abets or advises
56 or consents to any such violations, and any person who solicits or know-
A. 9535 4
1 ingly receives any money or property in violation of this section, shall
2 be guilty of a misdemeanor.
3 2. Notwithstanding the provisions of subdivision one of this section,
4 any corporation or an organization financially supported in whole or in
5 part, by such corporation, any limited liability company or other corpo-
6 rate entity may make expenditures, including contributions, not other-
7 wise prohibited by law, for political purposes, in an amount not to
8 exceed five thousand dollars in the aggregate in any calendar year;
9 provided that no public utility shall use revenues received from the
10 rendition of public service within the state for contributions for poli-
11 tical purposes unless such cost is charged to the shareholders of such a
12 public service corporation.
13 3. Each limited liability company that makes a contribution for poli-
14 tical purposes shall file with the state board of elections, by December
15 thirty-first of the year in which the contribution is made, on the form
16 prescribed by the state board of elections, the identity of all direct
17 and indirect owners of the membership interests in the limited liability
18 company and the proportion of each direct or indirect member's ownership
19 interest in the limited liability company. Provided that, if by applica-
20 tion of this subdivision, any direct or indirect owner of any membership
21 interest is a limited liability company, all owners and the proportion
22 of their membership interests in any such limited liability company
23 shall be further identified.
24 § 4. Section 14-120 of the election law is amended by adding a new
25 subdivision 3 to read as follows:
26 3. (a) Notwithstanding any law to the contrary, all contributions made
27 to a campaign or political committee by a limited liability company
28 shall be attributed to each member of the limited liability company in
29 proportion to the member's ownership interest in the limited liability
30 company. Provided that, if, by application of this paragraph, a campaign
31 contribution is attributed to any limited liability company, the
32 contributions shall be further attributed proportionally to each direct
33 or indirect owner of the membership interests of such limited liability
34 company.
35 (b) The state board of elections shall enact regulations that prevent
36 the avoidance of the rules set forth in this subdivision.
37 § 5. The second undesignated paragraph of subdivision (c) of section
38 1-c of the legislative law is amended by adding a new subparagraph (R)
39 to read as follows:
40 (R) Communications with a professional journalist or newscaster relat-
41 ing to news, as these terms are defined in section seventy-nine-h of the
42 civil rights law, and communications relating to confidential and non-
43 confidential news as described in subdivisions (b) and (c) of section
44 seventy-nine-h of the civil rights law respectively.
45 § 6. Paragraph 4 of subdivision (c) of section 1-h of the legislative
46 law, as added by section 1 of part B of chapter 399 of the laws of 2011,
47 is amended to read as follows:
48 (4) Any lobbyist registered pursuant to section one-e of this article
49 whose lobbying activity is performed on its own behalf and not pursuant
50 to retention by a client[:
51 (i)] that has spent over [fifty] five thousand dollars for reportable
52 compensation and expenses for lobbying either during the calendar year,
53 or during the twelve-month period, prior to the date of this bi-monthly
54 report[, and
55 (ii) at least three percent of whose total expenditures during the
56 same period were devoted to lobbying in New York]
A. 9535 5
1 shall report to the commission the names of each source of funding over
2 [five] one thousand dollars from a single source that were used to fund
3 the lobbying activities reported and the amounts received from each
4 identified source of funding.
5 This disclosure shall not require disclosure of the sources of funding
6 whose disclosure, in the determination of the commission based upon a
7 review of the relevant facts presented by the reporting lobbyist, may
8 cause harm, threats, harassment, or reprisals to the source or to indi-
9 viduals or property affiliated with the source. The reporting lobbyist
10 may appeal the commission's determination and such appeal shall be heard
11 by a judicial hearing officer who is independent and not affiliated with
12 or employed by the commission, pursuant to regulations promulgated by
13 the commission. The reporting lobbyist shall not be required to disclose
14 the sources of funding that are the subject of such appeal pending final
15 judgment on appeal.
16 The disclosure shall not apply to:
17 (i) any corporation registered pursuant to article seven-A of the
18 executive law that is qualified as an exempt organization by the United
19 States Department of the Treasury under I.R.C. § 501(c)(3);
20 (ii) any corporation registered pursuant to article seven-A of the
21 executive law that is qualified as an exempt organization by the United
22 States Department of the Treasury under I.R.C. § 501(c)(4) and whose
23 primary activities concern any area of public concern determined by the
24 commission to create a substantial likelihood that application of this
25 disclosure requirement would lead to harm, threats, harassment, or
26 reprisals to a source of funding or to individuals or property affil-
27 iated with such source, including but not limited to the area of civil
28 rights and civil liberties and any other area of public concern deter-
29 mined pursuant to regulations promulgated by the commission to form a
30 proper basis for exemption on this basis from this disclosure require-
31 ment; or
32 (iii) any governmental entity.
33 The joint commission on public ethics shall promulgate regulations to
34 implement these requirements.
35 § 7. Paragraph 4 of subdivision (c) of section 1-j of the legislative
36 law, as added by section 2 of part B of chapter 399 of the laws of 2011,
37 is amended to read as follows:
38 (4) Any client of a lobbyist that is required to file a semi-annual
39 report and[:
40 (i) that] has spent over [fifty] five thousand dollars for reportable
41 compensation and expenses for lobbying either during the calendar year,
42 or during the twelve-month period, prior to the date of this semi-annual
43 report[, and
44 (ii) at least three percent of whose total expenditures during the
45 same period were devoted to lobbying in New York]
46 shall report to the commission the names of each source of funding over
47 [five] one thousand dollars from a single source that were used to fund
48 the lobbying activities reported and the amounts received from each
49 identified source of funding.
50 This disclosure shall not require disclosure of the sources of funding
51 whose disclosure, in the determination of the commission based upon a
52 review of the relevant facts presented by the reporting client or lobby-
53 ist, may cause harm, threats, harassment, or reprisals to the source or
54 to individuals or property affiliated with the source. The reporting
55 lobbyist may appeal the commission's determination and such appeal shall
56 be heard by a judicial hearing officer who is independent and not affil-
A. 9535 6
1 iated with or employed by the commission, pursuant to regulations
2 promulgated by the commission. The reporting lobbyist shall not be
3 required to disclose the sources of funding that are the subject of such
4 appeal pending final judgment on appeal.
5 The disclosure shall not apply to:
6 (i) any corporation registered pursuant to article seven-A of the
7 executive law that is qualified as an exempt organization by the United
8 States Department of the Treasury under I.R.C. § 501(c)(3);
9 (ii) any corporation registered pursuant to article seven-A of the
10 executive law that is qualified as an exempt organization by the United
11 States Department of the Treasury under I.R.C. § 501(c)(4) and whose
12 primary activities concern any area of public concern determined by the
13 commission to create a substantial likelihood that application of this
14 disclosure requirement would lead to harm, threats, harassment, or
15 reprisals to a source of funding or to individuals or property affil-
16 iated with such source, including but not limited to the area of civil
17 rights and civil liberties and any other area of public concern deter-
18 mined pursuant to regulations promulgated by the commission to form a
19 proper basis for exemption on this basis from this disclosure require-
20 ment; or
21 (iii) any governmental entity.
22 The joint commission on public ethics shall promulgate regulations to
23 implement these requirements.
24 § 8. Subdivision 3 of section 14-124 of the election law, as amended
25 by chapter 71 of the laws of 1988, is amended to read as follows:
26 3. The contribution and receipt limits of this article shall not apply
27 to monies received and expenditures made by a party committee or consti-
28 tuted committee to maintain a permanent headquarters and staff and carry
29 on ordinary activities which are not for the express purpose of promot-
30 ing or opposing the candidacy of specific candidates. Provided that
31 such monies described in this subdivision shall be kept in a segregated
32 account and shall not be contributed, unless such contribution is to the
33 segregated account of another party committee or constituted committee
34 to be used only for non-candidate expenditures. Provided, further, that
35 such monies may not be used to pay for any political communication that
36 includes or references the name, likeness or voice of any clearly iden-
37 tified candidate or elected official.
38 § 9. This act shall take effect immediately; provided that sections
39 one and two of this act shall take effect January 1, 2017; provided,
40 further, that any income or other compensation earned prior to the
41 effective date of sections one and two of this act shall not be subject
42 to the provisions of sections one and two of this act, and provided,
43 further, any services actually rendered prior to the effective date of
44 sections one and two of this act for which payment is made after the
45 effective date of sections one and two of this act shall not be subject
46 to the provisions of sections one and two of this act.
