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OLR Bill Analysis
SB 431
AN ACT CONCERNING REFERENDA, INDEPENDENT
EXPENDITURES AND CERTAIN OTHER POLITICAL SPENDING.
SUMMARY
This bill changes laws affecting campaign finance and elections.
Principally, it does the following:
1. prohibits foreign nationals from making contributions or
expenditures under the state’s campaign finance laws (§§ 1 & 17);
2. codifies “independent expenditure political committee” (known
as an IE-only PAC) as a type of political committee (PAC) and
requires IE-only PACs to register with the State Elections
Enforcement Commission (SEEC) (§§ 1-3, 6-7 & 9-15);
3. classifies referendum PACs as IE-only PACs and makes
conforming changes (§ 15);
4. expands IE disclosure requirements (§ 4);
5. increases the maximum penalties for failing to file IE reports (§
4);
6. modifies PAC registration requirements, including expanding
the contents of the registration statement (§ 5);
7. eliminates aggregate individual contribution limits to certain
committees (§ 8);
8. expands disclaimer requirements for referenda and party
candidate listings (§ 16); and
9. narrows the circumstances under which SEEC must dismiss a
complaint within one year after receiving it (§ 18). 2022SB-00431-R000477-BA.DOCX
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The bill also makes minor, technical, and conforming changes.
EFFECTIVE DATE: Upon passage, except that the provisions on
SEEC complaints are effective July 1, 2022.
§§ 1 & 17 — FOREIGN NATIONALS
Federal law generally prohibits foreign nationals from making
contributions, donations, or IEs in connection with federal, state, or local
elections (see BACKGROUND). The bill explicitly prohibits foreign
nationals (as defined in the bill, see below) from making contributions
(or expressly or impliedly promising to do so) or expenditures that are
subject to the state's campaign finance laws. It similarly prohibits a
person from soliciting, accepting, or receiving a contribution or covered
transfer from a foreign national. By law, a “covered transfer” is, with
certain exceptions, any donation, transfer, or payment of funds by a
person to a recipient that (1) makes IEs or (2) transfers funds to another
person that makes IEs (CGS § 9-601(29)).
The bill’s prohibitions expand upon those in federal law by, among
other things, explicitly applying them to referenda. The bill also subjects
additional persons to the prohibitions by defining “foreign national” for
purposes of state campaign finance laws more broadly than federal law
does (see BACKGROUND).
Definitions (§ 1)
Foreign National. Under the bill, “foreign national” includes (1) a
foreign principal (as defined in federal law, see below) and any agent or
segregated fund of the principal; (2) an individual who is not a U.S.
citizen or national or lawfully admitted for permanent residence; and
(3) certain entities with foreign owners (see below).
Under the bill, a “foreign owner” is an entity in which a foreign
national holds, owns, controls, or otherwise has directly or indirectly
acquired beneficial ownership of at least 50% of the total equity or
outstanding voting shares, other than interests held in a widely held,
diversified fund (i.e., a pooled investment that, among other things, has
at least 100 investors, with no investor able to exercise control over the 2022SB-00431-R000477-BA.DOCX
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investment’s financial interests).
The bill deems an entity to be a foreign national if it meets any of the
below criteria:
1. one “foreign owner” or “foreign national” (as described above)
holds, owns, controls, or has directly or indirectly acquired
beneficial ownership of at least 5% of the total equity or
outstanding voting shares;
2. multiple foreign owners or nationals hold, own, control, or have
directly or indirectly acquired beneficial ownership of at least
20% of the total equity or outstanding voting shares, other than
interests held in a widely held, diversified fund (as described
above);
3. any foreign owner or national directly or indirectly participates
in decisions to engage in any activity subject to state campaign
finance laws, including the Citizens’ Election Program; or
4. (a) at least 20 % of the organization’s income in the most recent
taxable year is from one or more foreign owners and (b) the
organization is a tax-exempt 501(c)(4) entity.
Foreign Principal. Under federal law, “foreign principal” (deemed
to be a foreign national under the bill) includes the following:
1. a government of a foreign country and a foreign political party;
2. a person outside of the United States unless it is established that
the person is (a) an individual and a U.S. citizen domiciled within
the United States or (b) not an individual, has its principal place
of business in the United States, and is organized under, or
created by, the United States, a state, or other place subject to U.S.
jurisdiction;
3. a partnership, association, corporation, organization, or other
combination of persons organized under the laws of, or having
its principal place of business in, a foreign country (22 U.S.C. § 2022SB-00431-R000477-BA.DOCX
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611(b)).
§§ 1-3, 6-7 & 9-15 — IE-ONLY PACS
The law authorizes persons (including individuals, entities, and
committees) to make unlimited IEs and defines “independent
expenditure” as an expenditure made without the consent,
coordination, or consultation of a (1) candidate or candidate’s agent, (2)
candidate committee, (3) PAC, or (4) party committee.
The bill codifies “independent expenditure political committee”
(known as an IE-only PAC) as a type of PAC under Connecticut’s
campaign finance laws and, like other committees that make IEs,
requires their registration with SEEC. It defines them as PACs that make
only (1) IEs and (2) contributions to other IE-only PACs (see
BACKGROUND). It also allows these PACs to (1) coordinate with other
IE-only PACs to make IEs and (2) make donations to tax-exempt
501(c)(3) (nonprofit) and 501(c)(19) (veterans) organizations and refund
contributor contributions.
The bill makes several conforming changes, including specifying that
(1) individuals, business entities, and labor unions may make
contributions to IE-only PACs and (2) various types of IE-only PACs,
such as those formed for a single election or primary, may not make
contributions except to other IE-only PACs (see BACKGROUND ). It
also classifies referendum PACs as IE-only PACs.
Lawful Purposes (§ 6)
The bill defines “lawful purposes of the committee” for IE-only PACs
as promoting the following:
1. a political party,
2. the success or defeat of candidates for nomination or election to
a public office or position regulated by state campaign finance
laws, or
3. the success or defeat of referendum questions. 2022SB-00431-R000477-BA.DOCX
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Existing law generally allows PACs to pay specific expenses to
accomplish their lawful purposes.
Surplus Distributions (§ 7)
By law, candidate committees and PACs, other than exploratory
committees or PACs organized for ongoing political activities, must
generally spend or distribute surplus funds (1) within 90 days after (a)
a primary when a candidate loses or (b) an election or referendum not
held in November or (2) by March 31 following an election or a
referendum held in November.
The bill establishes a surplus distribution procedure for IE-only
PACs, other than those formed for ongoing activities. Specifically, it
requires them to distribute surplus funds, according to the schedule
outlined above, to (1) their contributors, on a prorated basis; (2) state or
municipal governments or agencies; or (3) tax-exempt 501(c)(3) and
501(c)(19) organizations.
The bill eliminates provisions in current law that establish
permissible surplus distributions for referendum PACs and instead
subjects them to the bill’s procedure for IE-only PACs.
Referendum PACs (§ 15)
The bill classifies referendum PACs as IE-only PACs and makes
conforming changes. Specifically, it allows any person to establish an IE-
only PAC for a single referendum question or multiple questions
submitted to a vote on the same day. Under the bill, the committee may
make IEs only for these purposes.
§ 4 — REPORTING IEs AND COVERED TRANSFERS
By law, persons must disclose information about IEs they make that
exceed $1,000 in the aggregate by filing certain reports. A “person” is an
individual, committee, firm, partnership, organization, association,
syndicate, company trust, corporation, limited liability company, or any
other legal entity (other than the state or its political or administrative
subdivisions) (CGS § 9-601(10)).
The bill does the following: 2022SB-00431-R000477-BA.DOCX
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1. changes the period during which IE disclosure reports are subject
to a 24-hour electronic filing deadline;
2. expands disclosure requirements for persons that make IEs
without forming a PAC (known as “incidental spenders”) and for
IE-only PACs; and
3. conforms law with practice by requiring that, to disclose IEs, (a)
incidental spenders use SEEC’s long- and short-form reports and
(b) PACs, including IE-only PACs, use SEEC’s campaign finance
forms for PACs formed in Connecticut.
As under existing law, IEs made for or against (1) statewide office or
legislative candidates, or statewide referenda, must be filed with SEEC
and (2) municipal office candidates or municipal referenda must be filed
with town clerks.
Twenty-four Hour Report Filing Deadline
Under current law, a person must electronically file a disclosure
report within 24 hours after making or obligating to make an IE that (1)
is made or obligated during a primary or general election campaign and
(2) promotes the success or defeat of a statewide office or legislative
candidate.
The bill instead applies the 24-hour electronic filing requirement to
these IEs made or obligated to be made during the period (1) beginning
June 1 in a regular election year or, in the case of a special election for
state senator or state representative, the day the governor issues writs
of election and (2) ending on the day after the primary or general
election for which the IE is made or incurred. In the case of a special
election, a person that makes or obligates to make an IE that exceeds
$1,000 in the aggregate before the governor issues the writs must
electronically file the IE report within 24 hours after the governor issues
the writs.
Additionally, the bill applies the 24-hour reporting requirement to
IEs within this timeframe that promote the success or defeat of a
referendum question proposing a constitutional amendment, 2022SB-00431-R000477-BA.DOCX
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convention, or revision.
For any other IEs (those not subject to 24-hour reporting
requirements), the bill requires that IE reports be filed according to the
same schedule as the periodic statements filed by PACs.
Disclosures by Incidental Spenders
Existing law requires persons, other than PACs (as discussed above),
to disclose information about IEs they make using SEEC’s long- and
short-form reports (i.e., SEEC Form 26) (see BACKGROUND). The bill
adds to the information that these IE-makers must disclose in these
reports.
Under the bill, they must additionally disclose the following in the
long-form report:
1. the name of the human being who had direct, extensive, and
substantive decision-making authority over the IE being
disclosed, as well as his or her mailing address, telephone
number, and e-mail;
2. a certification that the person making the IE is not a foreign
national (see FOREIGN NATIONALS above);
3. for the person making or obligating to make the IE, a statement
indicating if the person files a report with the Federal Election
Commission (FEC), IRS, or any similar out-of-state agency, and
identifying information under which the filing is made;
4. generally, any street address that differs from any mailing
address required by the form; and
5. for a referendum, its date, the question’s text, and whether the IE
supported or opposed it.
Under the bill, the short-form report must additionally disclose, for a
referendum, the question’s text and an allocation of the expenditure in
support or opposition to it. 2022SB-00431-R000477-BA.DOCX
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Disclosing Covered Transfers. As part of both the long- and short-
form reports, the law requires a person to disclose the source and
amount of any covered transfer of $5,000 or more, in the aggregate, it
received during the 12 months before the applicable primary or election
if the IE (for which the report is being filed) is made or obligated to be
made 180 or less days before the primary or election. The bill extends
the requirement to covered transfers made to promote or oppose a
referendum question proposing a constitutional amendment,
convention, or revision.
The law exempts from this disclosure requirement a person that
discloses the source and amount of a covered transfer in a report it files
with the FEC or the IRS, as long as the person includes a copy of the
report in the statement it files with SEEC. The bill extends the exemption
to persons that include in their IE reports information sufficient for
SEEC to find their FEC or IRS filing. The bill also extends this exemption
to apply to similar out-of-state agency reports.
Under current law if a person makes the IE from a dedicated IE
account, the IE report and disclaimer (see below) may include only
persons who made covered transfers to it directly. The bill requires that
the report and disclaimer include this information but removes a
provision limiting it to only this information.
Penalties for Failure to File an IE Report
The bill increases the maximum civil penalties SEEC may impose for
failure to file certain required IE reports. It also subjects IEs that support
or oppose referendum questions to these penalties.
Specifically, existing law allows SEEC to impose a maximum penalty
of $10,000 for failure to file more than 90 days before a primary or
general election. The bill extends this penalty and the penalties
described below to IEs that support or oppose a referendum.
For failure to file in 90 days or less before a primary or general
election, SEEC may currently impose a maximum penalty of $20,000.
The bill instead allows SEEC to impose a penalty of up to $20,000 or 2022SB-00431-R000477-BA.DOCX
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twice the amount of any unreported IE, including for a referendum,
whichever is greater.
Currently, a knowing and willful failure to file an IE report is
punishable by a fine of up to $50,000. The bill instead allows SEEC to
impose a civil penalty of up to $50,000 or 10 times the amount of any
unreported expenditure, whichever is greater.
In addition, the bill establishes personal liability for a civil penalty
that remains unpaid after the latter of one year after the date when (1)
SEEC imposed it or (2) a final judgment is issued following any judicial
review of SEEC’s action. Specifically, the bill makes the following
individuals personally liable:
1. in the case of a committee, the chairperson and any officer or
2. in the case of a person other than a committee, (a) the CEO, CFO,
or equivalent; (b) any other officer; and (c) any manager who had
direct, extensive, and substantive decision-making authority
over the IE or IEs made or obligated to be made.
§ 5 — PAC REGISTRATIONS
By law, most PACs must register with SEEC and designate a
treasurer; they may also designate a deputy treasurer. The registration
statement must include, among other things, the committee’s name and
purpose.
The bill expands the required contents of the PAC registration
statement. Under the bill, if a committee files a report with the FEC, IRS,
or similar out-of-state agency, the bill requires that the statement
include identifying information under which those filings are made.
In addition, if a committee is established or controlled by a person or
individual acting as an agent for the person, the statement must indicate
the person’s name. If a committee is established or controlled by a
person other than a human being, the statement must indicate the name
of the CEO or an equivalent and a certification that he or she is not a
foreign national (as defined by the bill). Current law requires only that 2022SB-00431-R000477-BA.DOCX
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a PAC established by a business entity or organization (i.e., a labor
union) indicate the name of the entity or organization.
§ 8 — AGGREGATE CONTRIBUTION LIMIT FOR INDIVIDUALS
State law generally limits the amount that individuals may contribute
to a specific candidate committee, party committee, or political
committee. Additionally, current law prohibits an individual from
contributing more than $30,000 in the aggregate during a single primary
and election to (1) candidate committees, (2) exploratory committees,
and (3) slate committee for justice of the peace (in a primary). The bill
removes this limit, thus allowing individuals to make unlimited
aggregate contributions to these committees (see BACKGROUND).
§ 16 — POLITICAL ATTRIBUTIONS
Disclaimer Exceptions
By law, printed, video, and audio political communications (both IEs
and non-IEs) must include certain attributions, known as “disclaimers.”
Among other things, they must identify the person making the
expenditure for the communication.
The bill exempts from the law’s IE disclaimer requirements (1)
editorials, news stories, or commentaries published independently and
without compensation in any newspaper, magazine, or journal; (2)
banners; (3) political paraphernalia, including pins, buttons, badges,
emblems, hats, or bumper stickers; or (4) signs with a surface area of not
more than 32 square feet. These communications are already exempt
from the disclaimer requirements that the law establishes for non-IE
spending.
Referenda
Under current law, only the disclaimer requirements for printed
communications apply to expenditures made for a referendum. The bill
extends, to IEs promoting a referendum question’s success or defeat,
existing law’s disclaimer requirements for IEs made for video and audio
communications and telephone calls applicable to elections and
primaries. Generally, each of these disclaimers must (1) include the
name of the IE-maker and a statement that the expenditure was made 2022SB-00431-R000477-BA.DOCX
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independent of any candidate or political party and (2) state that
additional information about the IE-maker is available on SEEC’s
website.
Additionally, communications made within 90 days before the
primary or election must also state the names of the five persons that
made the five largest covered transfers to the IE-maker, in the aggregate,
during the 12 months immediately preceding the referendum. As under
existing law for other communications, these disclaimers for
referendum IEs may omit any person that made covered transfers to it
of less than $5,000, in the aggregate, during the 12 months immediately
preceding the referendum.
Party Candidate Listings
Current law requires that party committees (i.e., state central and
town) use the appropriate disclaimer in any print, television, or social
media promotion of a slate of candidates (disclaimers by individual
candidates are not required). The bill expands the disclaimer to cover
organization expenditures for party candidate listings and extends it to
legislative caucus and legislative leadership committees, as well as party
committees.
By law, a “party candidate listing” is a communication that (1) lists
the name or names of candidates for election; (2) is distributed through
public advertising (e.g., cable television, newspapers, or similar media),
direct mail, telephone, electronic mail, publicly accessible Internet sites,
or personal delivery; and (3) is made to promote the success or defeat of
a candidate or slate of candidates seeking nomination or election, or to
aid or promote the success or defeat of a referendum question or a
political party. The communication cannot be a solicitation for or on
behalf of a candidate committee.
§ 18 — SEEC INVESTIGATIONS
By law, SEEC receives complaints from the secretary of the state,
registrars of voters, town clerks, and individuals under oath about
alleged election law violations. It investigates and holds hearings as it
deems appropriate (CGS § 9 -7b(a)(1)). The bill narrows the 2022SB-00431-R000477-BA.DOCX
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circumstances under which SEEC must dismiss a complaint within one
year after receiving it.
Time Limit
Currently, SEEC must dismiss a complaint it receives on or after
January 1, 2018, if it does not issue a final decision on it within one year
after receiving the complaint. However, the deadline must be extended
if specified actions delay the final decision’s issuance.
The bill relaxes this requirement for SEEC complaints received on or
after July 1, 2022. It instead requires the commission to dismiss after one
year any complaint for which it has not (1) found reason to believe a
state election law violation occurred and (2) initiated a contested case
proceeding.
The bill also (1) requires that the deadline for making this finding be
extended for the same reasons that the final decision deadline must be
extended under current law and (2) establishes additional reasons for
extending this deadline. As under current law, the one-year deadline
must be extended by the length of the delay.
Extensions
Under current law, the one-year deadline for SEEC to issue a final
decision must be extended if its issuance is delayed for any of the
following reasons:
1. extension or continuance granted to a respondent by SEEC or its
staff before issuing the decision;
2. issuance of a subpoena in connection with the complaint;
3. litigation in state or federal court related to the complaint; or
4. consultation with the chief state’s attorney, attorney general, U.S.
Department of Justice, or U.S. attorney for Connecticut.
The bill similarly requires an extension, for these same reasons, of the
one-year deadline for finding reason to believe that an election law
violation occurred and initiating a contested case. (SEEC regulations 2022SB-00431-R000477-BA.DOCX
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generally prohibit the commission from proceeding with a contested
case unless it finds, by a majority vote of a quorum, reason to believe
that a violation occurred (Conn. Agencies Regs., § 9-7b-35).)
The bill also requires an extension if the finding and commencement
are delayed because of an investigation by SEEC or its staff involving a
potential (1) IE violation or (2) state election law violation by a foreign
national (as defined in the bill, see above).
BACKGROUND
Aggregate Contribution Limits
In McCutcheon et al. v. Federal Election Commission, 134 S. Ct. 1434
(2014), the U.S. Supreme Court held that aggregate limits on
contributions by individuals to federal candidates, political parties, and
PACs were unconstitutional under the First Amendment.
In Advisory Opinion 2014-03, SEEC announced that, unless it
received further guidance from the legislature or a court of competent
jurisdiction, it would no longer enforce current law’s $30,000 aggregate
limit on contributions by individuals during a single primary and
election to (1) candidate committees, (2) exploratory committees, and (3)
slate committees for justice of the peace (in a primary).
Foreign Nationals and Related Federal Law
Foreign Nationals. Federal campaign finance law defines a “foreign
national” as any of the following:
1. a government of a foreign country and a foreign political party;
2. a person outside of the United States unless it is established that
the person is (a) an individual and a U.S. citizen domiciled within
the United States or (b) not an individual, has its principal place
of business in the United States, and is organized under, or
created by, the United States, a state, or other place subject to U.S.
jurisdiction;
3. a partnership, association, corporation, organization, or other
combination of persons organized under the laws of, or having 2022SB-00431-R000477-BA.DOCX
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its principal place of business in, a foreign country; or
4. an individual who is not a U.S. citizen or national and is not
lawfully admitted for permanent residence (52 U.S.C. § 30121(b)
and 22 U.S.C. § 611(b)).
Prohibited Activities. Federal law prohibits a foreign national from,
among other things, directly or indirectly making:
1. in connection with a federal, state, or local election, a contribution
or donation of money or anything of value; an express or implied
promise to make a contribution or donation; or an expenditure or
IE; or
2. a contribution or donation to a federal, state, or local political
party’s committee.
It similarly prohibits a person from soliciting, accepting, or receiving
any contribution or donation described above from a foreign national
(52 U.S.C. § 30121 and 11 C.F.R. § 110.20).
2021 FEC Ruling. In 2021, the Federal Elections Commission (FEC)
dismissed a complaint alleging that foreign nationals made prohibited
contributions opposing a ballot initiative in Montana. In doing so, the
commission concluded that spending related to referenda and other
issue-based ballot measures is outside of federal law’s purview because
it is not in connection with an election (i.e., a regular or special election,
primary, runoff, or a party convention or caucus). It noted that federal
law applies to spending on ballot measures only if the measure is
inextricably linked with the election of any candidate (FEC, MUR 7523
Stop I-186).
IE-Only PACs
In Declaratory Ruling 2013-02, SEEC ruled that, in light of a line of
cases ruling that contribution limits to IE-Only PACs are
unconstitutional, it would no longer enforce contribution limits to PACs
that receive and spend funds only for IEs unless it received further
guidance from the legislature or a court. 2022SB-00431-R000477-BA.DOCX
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Long- and Short-Form IE-Reports
As part of these reports, a person must disclose the source and
amount of any covered transfer of $5,000 or more in the aggregate that
it received during the 12 months before the applicable primary or
election. This requirement applies if the IE (for which the report is being
filed) is made or obligated to be made 180 days or less before the
primary or election (CGS § 9-601d(f)).
COMMITTEE ACTION
Government Administration and Elections Committee
Joint Favorable
Yea 14 Nay 5 (03/28/2022)