Disclosure of Independent Expenditures in NYC Elections

On November 2, 2010, New York City voters overwhelmingly passed two Charter Revision Commission proposals that amended the New York City Charter.  Question 1 concerned the reduction of term limits for elected officials.  Question 2 contained various substantive elements, including whether to require individuals and entities to report information on “independent expenditures” in City election campaigns.  This proposal came in light of the Supreme Court’s decision in Citizens United, in which all but one of the Justices upheld disclosure requirements for independent expenditures in federal elections.  This article briefly describes the newly-passed Independent Expenditure Amendment. Question 2 asked, in relevant part, whether the Charter should be amended to:

Require public disclosure of expenditures made by entities and individuals independent from candidates to influence the outcome of a city election or referendum.

The Independent Expenditure Amendment was designed to close a “disclosure gap.”  As stated by the Charter Revision Commission (CRC):

[u]nder existing law … the CFB [New York City Campaign Finance Board] has no power to require disclosure related to expenditures that are made independent of any candidate, but that are nevertheless made with the express intent of influencing the outcome of municipal elections and ballot proposals.  This gap in the City’s campaign finance system allows independent actors to spend lavishly on local elections while remaining largely insulated from public scrutiny.

The CRC report states that “independent expenditures have become an increasingly significant part of election-related spending in New York City” and identifies “minor political parties, labor unions, political committees and other third-party actors” as sources of independent spending in the 2005 and 2009 municipal elections.  The reports political committees file with the Board of Elections under Article 14 “are narrower in scope and do not provide for the degree of transparency contemplated by the Commission’s proposal.” The Charter amendment:

1. Defines the term “independent expenditure.”
2. Requires individuals and entities making independent expenditures aggregating $1,000 or more “in support of or in opposition to” any City candidate or municipal ballot proposal to disclose the expenditure to the CFB.
3. Requires entities that in the 12 months preceding a covered election making such independent expenditures to disclose the identity of entities and certain individuals that contributed to the entity reporting the expenditure.
4. Requires that any literature, advertisement or other communication in support of or in opposition to any City candidate that is paid for by an individual or entity making independent expenditures aggregating $1,000 or more to disclose the name of the individual or entity making the expenditure.
5. Authorizes the CFB to assess civil penalties of up to $10,000 per violation.
6. Treats intentional or knowing violations as misdemeanors.
7. Directs the CFB to promulgate rules regarding the form and manner of independent expenditure disclosure, the information to be disclosed, reporting time periods, required verification, and additional rules to “implement, administer, interpret and enforce” these new requirements.

The Amendment marks the first time that City law requires individuals and entities (other than candidates for City office) to adhere to campaign finance disclosure requirements under threat of civil penalty or criminal prosecution for non-compliance.  The Amendment takes effect immediately, requiring implementation as early as the next special election to fill a vacancy in a City office. Much remains to be seen, however, in how the Amendment will play out.  For example, the CFB has yet to issue its administrative rules fleshing out the definition of independent expenditures and whether the definition will cover only expenditures for public communications containing “express advocacy.”  Moreover, the CFB’s enforcement of the new provisions will no doubt be a jolt to parties that have never before been subject to the CFB’s jurisdiction.