- Hi, I'm Ron Jacobs, the chair of the Political Law Practice at the Venable Law Firm in Washington, DC. Today, we're gonna talk about lobbying compliance. A lot of people wonder what exactly does it mean to have lobbying compliance training. What it means is that whether you're a lobbyist yourself, whether you're someone that interacts with the government, or whether you are a lawyer responsible for compliance for those kind of individuals, these are the rules that apply to deal with registration and disclosure of those lobbying activities and the ethical rules that go along with dealing with government officials in terms of giving gifts, entertaining, and all of those kind of sundry issues that go along with interacting with the government. So today, we're going to talk about sort of three broad topics. We're gonna talk about federal lobbying disclosure, which will take the bulk of our time. Then we'll talk about state lobbying disclosure. And of course, because we have 50 different states, we have 50 different lobbying disclosure regimes in place. And so we won't cover all of them, but we'll talk about some of the common themes and elements that go along with thinking about state lobbying compliance. And then we'll talk about the federal ethics and Gift Rules. The state laws all vary on what's an acceptable gift or not, but follow some of the themes from the federal rules so that if you're dealing with compliance at the state level, you'll know the kind of questions to ask and the issues that may arise. Some people may say, "Well, who cares? What's the matter if I don't file a report, I'll file it late? If I don't register, they'll never catch me." They will. And I think the thing to keep in mind is that in this world where you're dealing with lobbying, disclosure, compliance, it's not just the legal liability that comes into play. There's extensive reputational harm from the news investigations. There are federal and state criminal investigations of this kind of activity if it goes awry, which can lead to business losses. If the company's trying to lobby on a particular matter that's important and there's a lobbying violation, then the company can lose credibility in the ability to interact with government officials. The laws vary widely. It's not easy to comply. There are a lot of traps. There are even mutually contradictory laws. Some laws say to do X and others say not to do X. And so you have to figure out what the right answer is for any particular situation. Not only is there an impact on the business, but there can also be an impact personally. If an individual who is a lobbyist does not register or report, they can be fined, they can be subject to some of the investigations and other compliance matters to receive the negative attention. And it's really important if you're advising a client on how to build a compliance program to remember that this is for the entire organization. It's not just the individual who's gonna interact with the government, but the people who provide the support services, the finance team who approves payments, the contracting team that looks at outside lobbying contracts. All those different parts of the organization have to be involved in order to ensure good solid compliance. This is important because you're facing scrutiny not just from the regulators, but from the media and from competitors. In today's environment, you will see company A lobbying on an issue, and company B will use information about company A's lobbying activities, or practices, or raise issues with them to try and gain a competitive advantage in that space. Your customers are looking at this. There's a higher and higher threshold for making sure that you're behaving in an ethical and compliant way when you're engaging with the government, particularly through the environmental and sustainability issues that come into play. And then there are what we call the government watchdogs, the NGOs of the world who focus on good government, who file complaints with regulators if they see things that don't work, who make investigations, publish reports that talk about impermissible or incorrectly disclosed lobbying. And so it's important to think about all of the sources of scrutiny as you design a compliance program and figure out what needs to be done. So when we're talking about lobbying, it's important to understand what activities are regulated. This can include, generally speaking, attempts to influence government officials to refrain from taking some particular action. But it varies widely in the definitions. There's really no uniformity between federal law or the different state laws. And so it's really important to understand what rules apply when. The lobbying rules cover a variety of different kinds of activities. And we'll dive into that as we go through this presentation. In particular, things that you're looking for that will be covered will be efforts to influence legislation, or regulations, executive orders. Some states in particular will cover grassroots lobbying. Meaning when you're trying to get parts of the public to influence legislation by a letter writing campaign or something like that. And even some states include things like goodwill lobbying, where you're just generating a positive relationship. What's important to remember about lobbying disclosure rules is that in general, they don't prohibit activity. They require disclosure and reporting. The Gift Rules do prohibit certain kinds of activity and giving certain kinds of contributions. But in general, what we're covering today are disclosure regimes that allow you to undertake activities, but that require disclosures. Now, even if you are a company that does not have someone who's registered to lobby, you need to know about these kind of rules, even for non-lobbyists, because in certain times, registration or reporting thresholds will be triggered and captured where you need to understand data about non-lobbyist time to make sure that reports are accurate. Gift giving is gonna be captured regardless of whether you are registered or not. And sometimes giving gifts can cause registration requirements. So it's important that employees who are engaged in an organization's lobbying activities in any way know whether they need to track time and expenses in order to satisfy all of these reporting requirements, which we'll dive into as we go through this. So with that background in place, let's start with the first part, the Federal Lobbying Disclosure rules and talk about what kind of rules apply, how it works, and what registration means. And so the reason that it matters is that the Federal Lobbying Disclosure Act, the LDA, requires organizations to register and file regular reports if they have one or more lobbyists. Lobbyist is a defined term. And we'll spend a little bit of time unpacking what that means. And so what you need to know is whether anyone in your organization qualifies as a lobbyist. If a company hires outside lobbyists, then the lobbying firm will be the registrant, not the company itself. It's important to remember that staff time that's spent on lobbying activities, which is another defined term we'll talk about, have to be reported and disclosed if you are a registrant under the Lobbying Disclosure Act, even if any particular individual is not a lobbyist. The other reason this matters is for tax purposes. There's a separate regime under the Internal Revenue Code that says that companies may not deduct their lobbying expenses. Unfortunately, the IRS definition of lobbying is different than the Lobbying Disclosure Act definition of lobbying. And so there's sort of two sets of books that almost have to be maintained in order to understand what's not deductible and what gets reported on the Lobbying Disclosure Act. We'll come back around to this to talk about some ways to mitigate that complication when the time comes. But just keep in mind that there are different definitions in different places. Once an organization is registered as a lobbyist, different gift and ethics rules apply. So an organization that's not registered to lobby may be able to give a gift that an organization that is not registered, that is registered would not be able to give. So it's important to remember that once an organization is registered to lobby, it will can change a variety of compliance issues. Some people say, "Well, who cares if I'm a lobbyist? Or I care if I'm a lobbyist, I don't wanna be a lobbyist.' So how do you figure out why a person may or may not be registered to lobby? So some reasons that people think about why they might not want to be registered is that it can restrict jobs with government agencies. Some administrations impose restrictions or limitations on former lobbyists serving in an administration in a political appointed spot, or it may be limited in activities when you're leaving a government job in what you can do. And so you have to think about that. And as you design a compliance plan and think about the compliance plan, there may be certain employees who are sensitive to being registered to lobby and will want to think about whether they should or shouldn't be registered. The other thing that comes into play if someone is a lobbyist is that one person is registered as a lobbyist for a company, then all the non-lobbyist time that's that's involved in lobbying has to be tracked and and captured, which can be a little complicated. The other thing that comes into play is that individuals who are registered to lobby have to file what are called LD-203 reports. We'll cover these in a little while, but keep in mind that these are personal reports as opposed to just company reports. So it's important to remember that that will come into play. And then again, if a person is a lobbyist, they have personal gift giving restrictions that would not apply if they weren't a lobbyist. So we've talked a lot about the idea that the Lobby Disclosure Act applies to lobbyists. So then the question is, what is a lobbyist? It's a two-part test. You have to have both satisfied. And the way this works is that you have to have more than one lobbying contact and spend more than 20% of your time on lobbying activity in a three-month period. If you meet both of those prongs of the test, then you're meet the definition of a lobbyist, and therefore the organization that you work for has to be registered under the Lobbying Disclosure Act. And again, it's a both test. It's not either or it's both. So these are all defined terms, lobbying contact and lobbying activity. We'll unpack all of those now. A lobbying contact is an oral or written communication with a covered official, another defined term about one of four things. The first one is kind of the obvious one, it's the formulation, modification or adoption of legislation. The second one is a broad one that catches some people by surprise. It includes the formulation, modification or adoption of any rules, regulations, or any policy or position of the US government. So that's quite broad. If you're meeting with a covered official to talk about a policy or position of the US government, then it's a lobbying contact. It also includes conversations, communications with covered officials about the execution of a program, like a contract, a grant, or a cooperative agreement. And then the final category is the nomination or confirmation of an official by the Senate. So if your company were engaged in communications with covered officials about who should be the commissioner of the Food and Drug Administration, or who should be the Secretary of Commerce, or you're meeting with senators about one of those nominations where they're staff, then that also would be considered to be lobbying. So if you have one of these four types of communications, it's a lobbying contact if it's with a covered official. And so the question then is, who's a covered official? And there are two different kinds of covered officials. The first is legislative branch covered officials. So everyone in the legislative branch is a covered official. It's easy. from a senator or a member of Congress, all the way down to the receptionist or scheduler, front desk person, everyone in between is a covered official. So if you're meeting with anyone on Capitol Hill about one of those four types of communications, it's gonna be considered a lobbying contact. The executive branch is a little bit different. There's very specific lists of people who are included there. In general, you can think of it as political people, but it's not all political people. So the specific categories are the president and the vice president, meaning literally those two people. Everyone in the Executive Office of the President. Now, the Executive Office of the President is pretty broad. It includes things like the White House Council's Office, people like the Chief of Staff, but it also includes some non-White House agencies. So the United States Trade Representative and the Office of Management and Budget are both in the Executive Office of the President. There's a few other organizations as well within the Executive Office of the President. So if you meet with anyone at the United States Trade Representative or anyone at the Office of Management and Budget, even career people, those are considered covered executive branch officials. The next category is fairly limited. It includes the executive schedules Level 1 through 5. What does that mean? The executive schedule is the list of employees appointed by the President and confirmed by the Senate. Generally speaking, Levels 1 through 5 are gonna include all of the cabinet secretaries, any deputy secretaries, assistant secretary, deputy assistant secretaries, generally down to the general counsel level within an agency. For the independent agencies, those agencies that have commissioners, like the Federal Trade Commission or the Federal Communications Commission, the only people in the executive schedule are the commissioners themselves or the chairman or the commissioners of those agencies. It also includes all admirals in generals in the military. If you're meeting with them about one of those topics, it's gonna be a lobbying contact. It also includes all Schedule C political appointees. So Schedule C political appointees often have titles like Special Assistant to the Secretary or Special Assistant to the Deputy Secretary, something like that. They're not particularly high ranking officials, but they are all political officials who serve at the pleasure of that particular political appointee. What's missing from this list, and it's kind of interesting, is what's called the Senior Executive Service. The Senior Executive Service has two parts. One is full of Career Senior Executive Service employees. So these are people who serve regardless of who's the president. They continue on their job even when the president changes. But then there's also the Non-career Senior Executive Service people. And these are political appointees who do change when the president changes. The senior executive service are often considered kind of the people who make the government run. They're there for a little bit longer periods of time. They're making important decisions kind of below the cabinet level to get things done. They're often the people that you wanna meet with if you're trying to influence the federal government. They're not on this list. So you can meet with both career and Non-career Senior Executive Service officials and not be making a lobbying contact. It's only if you're making contact on the executive branch side with more limited buckets of people. So it's a lobbying contact if you talk to a covered official about one of those four different topics: legislation, policies or positions of the government, execution of programs, or nomination or confirmation. Of course, I say all of that except their exemptions. So there are certain things that even if you're making a lobbying contact with a covered official about one of those four things that are exempted from the definition. So what's exempted? There are a few things. So I kind of break them out into five broad categories. So they're administrative requests, so requests for meetings, requests to check on the status of something. As long as there's no intent to influence, it's not considered a lobbying contact. So a phone call to someone on Capitol Hill asking whether a bill is going to pass or whether an amendment's gonna be made would not be a lobbying contact as long as there's no intent to influence when you make that call. This can be important. In particular, if you have kind of junior staff people who may be making those kind of calls all the time would otherwise be making lobbying contacts. This way, it prevents them from having to be listed as lobbyists. The next category or what I call the legislative exemptions. So these are things like giving testimony, making statements for the record, submitting written responses to questions from Congress or responding to a congressional subpoena. All of those are exempt from the definition of lobbying contact. So if your company receives a letter from a chairman of a committee asking questions, and you provide a written response, even though that written response is addressed to a covered official, it would not be considered to be a lobbying contact. Switching over to the executive branch that are sort of the regulatory exemptions. Think about this as things that are on the public record. So if you are responding to a federal register notice, making a written response to agency questions, participating in a federal advisory committee, submitting comments, petitions for rulemaking, anything like that where it's on the public record, it's not considered to be lobbying contact. So even, for example, if an agency issues a federal register notice about proposed regulations seeking comment, you write comments that are addressed to the secretary of that agency, not a lobbying contact because of this exemption. Now, if you go in and meet with the secretary or the assistant secretary to talk about your comments, that would be a lobbying contact. Then there's the law enforcement exemptions. So if you're responding to any kind of subpoenas or providing other confidential information to a law enforcement agency like the FBI or the Department of Justice, there's an exemption there as well. And then finally, the other important thing is to keep in mind that the Lobbying Disclosure Act really applies to communications directly with covered officials. It does not include communications made in articles, speeches, advertisements, or other mass communications. So if, for example, you took out an ad in one of the newspapers that goes directed at Capitol Hill or did direct digital targeted ads, those would not be considered to be lobbying communications or lobbying contacts. They would be exempted. So all of that went into the definition of lobbying contacts that we just covered. So then the other definition is lobbying activity. Lobbying activity includes all lobbying contacts, but it also includes the planning, preparation, research, and coordination of all of your lobbying contacts. So what this means is that for those that two-part test, you have to make more than one lobbying contact. And there's really no time limit on that one. And you spend more than 20% of your lobbying activity, 20% of your time on lobbying activity in a quarter, you become a lobbyist. So you could have an individual who makes a lot of lobbying contacts, but doesn't spend a lot of time on it because they've got other duties, that wouldn't be considered a lobbyist. By the same token, you could have someone doing research all in support of lobbying contacts by someone else, spending a hundred percent of their time on that, but they wouldn't be a lobbyist because they're not making lobbying contacts; they're just doing research for lobbying activity. It's only when you have the two together, the more than one lobbying contact and the people doing all of the planning, preparation, and research for more than 20% of their time, that you reach that threshold of when someone is a registered lobbyist. So if your company has someone who meets that definition, then the company's required to register as a lobbying registrant under the Lobbying Disclosure Act. Once you're registered, then you're required to file quarterly reports. So the quarterly reports include really three broad elements. It includes the amount spent or received for lobbying. So if you're a lobbying firm, you report the amount you received. If you're a company that's doing its own lobbying, it has to register. You report the amount that you spent on lobbying. And we're gonna spend a little bit of time talking about that because that's one of the harder parts to calculate for the report. If you register under the Lobby Disclosure Act, then you're required to file quarterly L-2 reports. There are three elements on the report. They're not that complicated to file, and they don't describe too much information, but there are sort of three broad elements that have to be disclosed. You disclose the amount spent or received for lobbying. If you're a lobbying firm that's registered, you report the amount you've received for lobbying. And if you are a company that has a lobbyist that's required you to register, then you disclose the amount that's spent on lobbying. You'll also disclose the issues on which you lobbied. The lobbying disclosure reports include broad issue codes, so things like budget, or military, or international affairs that you would describe by issue code, and then include a brief description of the matter that for which you're lobbying, including all bill numbers in names, in sections of bills if they're large bills, so that the public could have a reasonable opportunity to understand what it is that you're working on. And then it also includes the name of each lobbyist. That description of the name of each lobbyist is each person who meets that more than one lobbying contact, and 20% of their time on lobbying activity test. It also includes all of their prior government positions going back 20 years, as well as any criminal convictions that that lobbyist has had for certain kinds of bribery and similar convictions. Hopefully, none of the lobbyists that you'll be handling on your disclosures will have to include that disclosure. As I said, the hard part of the report is the amount spent on lobbying. The kind of looking counterclockwise from the right to the left, it includes your overhead costs attributable to lobbying, any expenses on lo that lobbyists incur. So if it's a cab ride or a tour from Capitol Hill, if it's printing a leaf behind, or doing an economic study for that purpose, that would be included. It also includes the payments to any outside lobbyists. This is an interesting one because if you are representing Company X, and Company X hires an outside lobbying firm, and company X has in-house lobbyists, so Company X has registered itself, it reports the total amount spent on lobbying, including its payments to the outside lobbyists. The outside lobbyists are including the amount they've received from Company X on their reports. So there's a little bit of kind of double counting. I've had a number of reporters call me over time to say, "If Company X reported $100,000 in expenditures and lobbying firm reported $20,000 of receipts from that company, does that mean the company really spent $120,000?" They say, "No, no, no, it's, it's 120,000 total." So in that example, it would be $100,000 total. 20,000 of which was paid to the outside lobbyist. And the other 80,000 was for in-house lobbying costs. And then it also includes the staff time spent on lobbying. This is the hardest internal cost to capture. And we're gonna spend a little bit of time talking about how you capture the staff time spent on lobbying because what you're really doing is figuring out how much of a person's time is attributable to lobbying and then taking the amount of their salary based on that percentage amount. So employees involved in federal lobbying will need to capture kinda the dollar time spent on lobbying activity. This includes your lobbyist and your non-lobbyist, again, anyone who's doing lobbying activity. And you have to calculate either an hour basis or a percentage basis, whether it's gonna be lobbying activity. And that's how you generate your lobbying expenses cost for staff time. Now, if we rewind a little bit and think about what I said earlier about how the tax code deals with lobbying, as well as the Lobbying Disclosure Act, this is where things get a little complicated. Companies are not allowed to deduct the amount they spent on lobbying activity. And then there are certain restrictions on different kinds of organizations that also apply all with different definitions. So we're gonna spend a second here to explain why the tax code matters, and then we'll talk about how there's some different methods that apply. So if you are doing work with a 501 charitable organization, those organizations are limited in the total amount that they can spend on lobbying based on a definition that the IRS provides of lobbying. And they could do teach a whole course on just this piece. But for now, just suffice it to say that there is an election that 501 organizations can make called the 501 election that lets them adopt a certain set of definitions to track their lobbying. Now, let's look over at another kind of organization, a 501 trade association. These are things like Chambers of Commerce or associations of particular industries. Those associations are required to track their lobbying expenses using the tax code definition and report to their members the percentage of their dues that are not deductible as lobbying expenses. The good thing is, is we'll talk about a second that the Lobbying Disclosure Act allows those trade associations to report their lobbying expenses using the same definitions that they use for the tax code. The other important thing to keep in mind is that businesses may not deduct their lobbying expenses as ordinary business expenses. So any kind of business is also tracking its lobbying time. And again, while a business can report using the Disclosure Act definitions that we just talked about, it also allows the business to the tax code definitions instead of the LDA definition. So you're not keeping two sets of books. So what does this mean? On the Lobbying Disclosure Act quarterly report, there's a spot where there are three boxes that say check which way you're reporting your lobbying expenses. So any kind of organization that's registered can check Method A using the LDA definitions that we just talked about. A 501 organization that's made its selection can check Method B, and a business or a trade association can select Method C. And what this means is you're using not the definitions that I just spent about a half hour talking about, but rather a different set of definitions. And each one, both B and C are a little bit different. So we're gonna cover those each briefly. So Method B, this 501 expenditure test includes lobbying activity that's measured solely by the amount of money you spent on lobbying. And as long as you meet a certain expenditure cap that I'll show a slide next that kind of shows the chart, the organization will satisfy the 501 definitions and will not be considered to be engaged in excessive lobbying. So this just gives an example of the size of an exempt organization based on zero to 500, 501 to a million, a million to 1.5, and over 1.5 million in exempt purpose expenditures, and shows the amount that you're allowed to include on lobbying. There's a maximum cap on 501 of a million dollars. So what does 501 mean for the purposes of lobbying? So the basic concept of 501 is that it really only applies to attempts to influence legislation. Now, it's different than what we talked about a minute ago where we were really focused on the federal. It applies to attempts to influence legislation at the federal, state, or local level, or through grassroots communications. So before when you're using the Lobbying Disclosure Act definition, you remember I said it excluded any kind of grassroots or media campaigns. It only applied to direct communications. And that only applied to federal lobbying, not state or local lobbying. So again, we have a difference here. The way to think about this is that you can... If a 501 organization makes the 501 election and elect to use the tax code definitions, it means it's gonna be simpler. It doesn't have to have two sets of of lobbying books to figure out what's LDA lobbying and what's tax code lobbying. But those numbers are gonna be different. And so it may mean that you're reporting a number on your Lobbying Disclosure Act report that's different than what you would if you're filing under the LDA method. Briefly, what is it? It's direct lobbying. Any attempt to influence legislation through a communication with a covered official that refers to specific legislation and has a pointed view on that legislation. It also includes grassroots lobbying, which is fairly narrowly defined to is a communication to the public that refers to specific legislation, reflects a point of view on that legislation, and includes a call to action on that legislation. So again, a variety of different ways of thinking about this, what it includes and what it doesn't include. Legislation includes specific legislation. There's a point in time where sort of proposals that aren't quite legislation become legislation. But again, I don't wanna get too bogged down here for purposes of just understanding the tax code definition. There's also, interestingly, under this 501 definition, a lot of exclusions from lobbying. So again, if you're representing an organization like this that's trying to figure out how it complies with the tax code and how it makes its lobbying disclosure definitions, it's important to understand sort of the amount that's spent on lobbying. Things that are excluded include anything that's any effort to change regulations. So again, think back to the LDA definition and how this is different. The LDA definition included regulatory changes, the tax code definition does not. Any kind of nonpartisan analysis study or research, even if it comes to a specific conclusion is exempted. Discussions of broad social and economic problems is opposed to legislation are not included. You can respond to requests for technical advice for congressional committees where they send a request in writing. And then something also called self-defense activity. We'll talk about that in a second. So what this means is, again, the nonpartisan analysis study and research, can spend a lot of time on this, it would be excluded from the definition of lobbying, so it wouldn't have to be counted. Similar with discussions of broad social and economic problems, and also requests for technical advice or assistance. The self-defense communication is pretty limited to where Congress threatens to do away with an organization or to do away with its tax exempt status. So that's kind of the summary of the 501 tax lobbying. Like I said, that could be an entirely separate course in and of itself, but we just wanted to touch on it since it can affect how the lobby disclosure gets done. So then probably more important to talk about today's Method C, which applies to businesses and trade associations. So here again, we're focused more on the legislative lobbying side. So the definition includes any communication with a member of Congress or their staff, any employee of the executive branch in any state legislator or staff of a state legislature if it refers to the formulation, modification, or adoption of legislation. So there's some similarities and differences here. You can talk to a member of Congress or their staff about a policy or position of the US government, and it wouldn't be lobbying here. It's only lobbying if you're talking about legislation. On the other hand, any employee of the executive branch would consider to be covered if you're talking to that person about legislation. Then the other big part that's different here is that state lobbying is included in this definition. So what that means is that you would be, if you elect Method C, if you're a business or a trade association, your federal lobbying reporting will include the amount you spend on state lobbying if you elect to use Method C. Some organizations say, "That's fine, I don't care. I just wanna have one set of definitions to use." Other organizations will say, "Hey, I really wanna keep just my federal lobbying disclosed here." So we'll maintain separate records so we can figure out what's federal lobbying and what's tax code lobbying for these purposes. Now, section 162 of the tax code, which covers lobbying for trade associations and businesses also as a section that's included executive branch lobbying. Now, this is a little strange because the covered officials are different than they are for the Lobbying Disclosure Act. So when we're thinking about the subject matter here, we're talking about any attempt to influence this person's official actions or positions of the government. So again, this is a broad construct, not the narrow legislation, but it applies to a pretty limited group of people. It includes, again, the President and Vice president. It includes within the Executive Office of the President differences. It includes all employees of the White House, Executive Office of the President. So this is where we're talking about the Chief of Staff's office or the White House Council Office, for example. It only includes the two most senior level officers of each of the other agencies. So this is the full list of the other parts of the Executive Office of the President, the Council of Economic Advisors and so forth. It's only the top two people. Under the Lobbying Disclosure Act, it's everybody in these agencies, but here it's only the top two officials. And then it also includes all cabinet level officials when designated as a cabinet level status, as well as their immediate deputy. So it does not include all of the other people that we talked about for the Lobbying Disclosure Act. So what's interesting is there's a bit of a give and take when it comes to the Method C versus Method A. Method C includes that state lobbying, it includes that grassroots lobbying, but it has a much narrower definition of executive branch lobbying. So there's some businesses that say, "I'll take the over-reporting of the state lobbying for the narrower reporting of the executive branch lobbying." Again, here, the senior executive service is not included here, and other exempted employees are not included as well, like they were under the Lobby Disclosure Act. So those are all the different methods for capturing the amount spent on lobbying. So now, and that's what goes on to the LD-2 report. We talked a little bit before about the LD-203 report. The LD-203 report is different from the LD-2 report. The LD-2 report is filed quarterly, and it discloses just the amount spent on lobbying, the issue areas lobbied, and the name of each of the lobbyist. The LD-203 report is a little bit different. It's filed both by the company, either a lobbying firm or the lobbyist employer, the company that employs the lobbyist, but then each individual who's listed as a lobbyist on the LD-2 report also has to file an LD-203. So there's a personal filing obligation. So as a practice pointer, if you're in charge of compliance for in-house lobbyists, you wanna make sure you've got a list of all the people who are on the LD-2 have a system in place to make sure that they've filed their LD-203 reports on time. Otherwise, they face repercussions for not filing themselves. And it can kind of blow back on the employer so you wanna make sure all of them have filed. It also includes a Gift Rule certification on the LD-203 report in addition to the information that gets disclosed that we'll talk about in a second. The Gift Rule certification is interesting. It says that the filer, meaning neither the company or the individual has read and is familiar with the House and Senate gift and travel rules, and that the filer has not provided a gift, including travel to a House or Senate member or Congressional employee with knowledge that the gift would violate the Gift Rules. So it's a bit of a self-certification that you've complied with those Gift Rules and haven't given a prohibited gift. So what gets reported on the LD-203 report? At the end of the day, it's not super complicated. It generally includes things that are already disclosed in other places for the most part. So the first thing it includes are contributions by either the individual or by a company's political action committee to federal candidates, federal parties, and federal leadership acts that aggregate $200 or more during the six-month reporting period. Again, the LD-203 report is filed in July for the January to June period, and then in January for the August to December, or July to December time period. So most of these political contributions are already gonna be disclosed by the candidates in PACs that are receiving them. It's a bit of belt and suspenders reporting. It also includes what are called the honoring and recognizing payments. So payments to honor or recognize covered officials. If a company or a trade association puts on an event where they give a legislator of the year award, for example, that would be considered to be a payment that honors and recognizes. There are payments for meetings or events held by in the name of a covered official. Never seen those disclosed because people just don't do that. It includes contributions to Presidential Library Foundations, as well as Presidential Inaugural Committee contributions. So again, fairly limited set of things that have to be disclosed. But if you're a company, you need to make sure you've got systems in place to understand what these different kinds of payments are, who might be making those payments, and how to be tracked so that they can be disclosed. If you're an individual lobbyist, odds are the only thing you're gonna be disclosing here would be contributions to candidates, PACs and parties. So any political giving you'd wanna keep close tabs on. So that's our overview of sort of federal lobbying compliance. Now, we'll take a slightly different turn and look at state lobbying. Unlike the federal rules, there are obviously 50 different state rules, and actually 51 when you look at the District of Columbia there. State laws do not align with the federal definitions, and there's no uniformity among the states. I always say what requires registration in one state may be prohibited in another state when it comes to giving gifts, or an extraordinary amount of lobbying in one state may not require registration, whereas a tiny amount in another may require registration. All the rules apply in a wide range. So sometimes, they cover a broad range of activities. Other times, very pointed in its legislation, or regulations, or executive orders. It just really depends. The impact that this has means that there's public reporting on your activity and expenses for organizations that have to register and report. It imposes recordkeeping requirements. Once you're registered, you're gonna have to track what the statute requires you to disclose, whether it be amounts spent on lobbying or specific contacts. It really depends. And the other thing is that unlike the federal government, which, I will admit, has a fairly lax enforcement toward lobbying, if you don't file a report, you'll get a notice, and you can file it up to 60 days after you get that notice. The states take a different view. They subject entities to audits on a regular basis, kind of random audits. They notice if people don't register. And part of that is because in many states, you can't enter a state, the State House or a State House office building without a badge that says you're lobbyists so people notice. And many states also require specific ethics trainings for lobbyists before they can be granted that badge or sometime within the year. So there are real consequences. And a lot of people pay attention and notice, and people do get in trouble for missing the state lobbying disclosure rules. One of the really interesting areas of state lobbying is whether selling to the state government is considered to be lobbying. In general, as we've talked, communicating with government officials to influence legislation or regulations is included as lobbying. But some states define lobbying to include purchasing decisions. And a lot of localities, cities, counties and the like have their own ordinances that say that efforts to influence purchasing are considered to be lobbying. Now, there's a distinction between sort of routine sales where you're selling the government copy your paper or other kind of off the shelf items versus shaping a procurement. So some states say if you're just selling routine stuff kind of off the shelf, that's not lobbying. But if you're going in to talk about how an agency should shape an RFP, or going in to try and convince the agency that they should award the RFP to you or include you, then that's considered to be lobbying. So this chart kind of shows where there are good chunk of states where procurement lobbying is not included at all. Then there are some states where it's almost always covered, kinda the lighter teal color. And then there are a host of states in the gray, that are in the gray where sometimes, procurement efforts are considered to be lobbying, and other times they aren't. What this means really is that you have to think about not just the government affairs team, not just the people who are going into influence legislation, but your sales team, if you have a public sector sales team. I hear a lot of companies that have what they call the SLED, state, local, and education sales. Those kind of people may need to register as lobbyists in certain states because they are selling to the government, or they're engaged in procurement lobbying. So these are some really important points that you have to think about and think about how you engage with those teams and work with the sales teams to make sure that they're covered. So let's talk about some of the lobbying terms that come into play here, and how these work in the different states. So many states have both grassroots and direct lobbying statutes. What this means is that in just about every state, you're gonna have a statute that says if you engage in direct lobbying, however that may be defined, you're gonna have to register. Others say that even if it's just grassroots lobbying, if you're launching a campaign to convince others to write letters to the state legislature or to the governor, that will require separate registration and reporting, even if there's not direct lobbying that goes with it. The staff time, and again, we spent a lot of time talking about staff time at the federal level, but staff time at the state level is generally gonna go into the lobbying disclosure report, but it's gonna have a lot of different constructs. So in some states, the lobbying activity like we talked about, where all the planning, the preparation, the research goes into it, but other states say it's really just the time you spend on direct lobbying that has to be reported. So you have to understand where your staff is active, where the government affairs team is active, and report there, and know what kind of staff time is required. So you could have employee A who lobbies in two different states. In one state, they may have to track all of their lobbying activity time, the planning, the preparation, the research. In another states, it may be they just have to track their actual time spent with legislators. So how you track lobbying expenses also goes to this. In some states, you're gonna have to report your expenses, others you're not. And then, of course, whether it's actually a lobbying contact or not will depend on whether you're tracking something as a lobbying expense. So all of these things are important to make sure that you're going correctly, and that you have registered, and have a system in place to track this that's accurate. So I know, again, sort of a couple of different definitions that come into play here that we wanna talk about and how this works. So the way I look at this, you have your legislative lobbying. In certain states, it's just legislative. And others, there's executive branch lobbying. And then in other places, it's grassroots or indirect lobbying as well. And so it's important to make sure that you understand what applies in what place. So I've got a couple of slides now to kind of just walk through a few different states to understand what it means to lobby to kind of show you some of the differences. So let's talk about California, which is obviously a large state where there's a lot of lobbying. Lobbying is considered to be communicating directly, which includes verbal, written, email, video, chat, phone, or soliciting others to communicate the grassroots lobbying with a covered official for the purpose of influencing government action. So government action is a pretty broadly defined term in California. And covered officials include both the legislator and their staff, as well as many executive branch officials, elected or appointed officials and their staff. Now, California is interesting. You think of that as a state that has a lot of regulation. But it looks to a full 1/3 of your compensated time in a month. If you're not engaged in lobbying for 1/3 of your time in California, then you wouldn't be considered to be a lobbyist. Now, this is a little different for outside lobbyists. If a company hires a firm to lobby in California, there's not that 1/3 threshold, but it does give you room. If you've got an employee who covers California, Washington and Oregon, for example, they may not spend 1/3 of their time on California lobbying. In particular, the direct communication as opposed to sort of all the planning and preparation, it's kind of hard to get 1/3 of your time. Illinois is different. Illinois says it's also direct communication. So there's not that grassroots component here. The covered officials are narrower. It's just the legislators, right? It's not the staff as well. And then the executive tends to be a shorter list of the elected officials, high level agency officials. Now, what's interesting here is that it's a smaller set of individuals who are considered to be covered officials. But in Illinois, you have to register before you start lobbying. There's no 1/3 of your time test, then lets you register. You have to register before you're lobbying. So if you're not a lobbyist who plans to engage in direct communications, you have to figure out what you're gonna be doing and do the registration before the time comes. New York is another interesting state. New York looks not to time, not to register before, but looks for pro-rata compensation for lobbying. So what this means is when you look at here, the definition of lobbying in New York and who the covered officials are, you then have to say, "Well, how much time am I spending on lobbying? And what does that look like on my salary?" So if you spend 10 hours on lobbying, you need to find your hourly rate and multiply that out by 10 to figure out whether it's $5,000 or more in a calendar year. What that means is that you could have individuals who are very senior in the company, highly compensated, may not have a whole lot of time before they hit that $5,000 threshold, whereas you could have a lower level junior lobbyist who has more time before they hit the $5,000 per-rata compensation. So that's something else to keep in mind. What it also means is that for those senior employees, the CEO of a company who goes in for one meeting, they may hit that $5,000 threshold. So there's not a whole lot of time there. So that's kind of our broad-based overview of the state rules in how they apply. Obviously, as I said, each one is different. You wanna make sure you're thinking about where you are, where you're going to be, and what the rules are in those states. Now, we'll talk about the Gift Rules. So the Gift Rules apply both personally and also to organizations. So the first thing to think about is, what is a gift? And again, we're focused here primarily on the Federal Gift Rules. The state rules have similar definitions, but they also have way different thresholds, very different exemptions. So what we're talking about here only applies to the Federal Gift Rules. So in general, a gift is anything of value. So anything that you pay for, anything that you provide free of charge that has a cost to it would all be considered to be a gift. Whether it's food, travel expenses, invitations to other events, charitable events, or theater tickets, sporting events, giving commemorative items to people, or even giving someone a book is considered to be a gift. And so the question is, what does that mean? If I'm making a gift, what are the rules to apply? So in the federal government, there's sort of two different sets of Gift Rules. There's one rule for members of Congress and their staff, the legislative branch, and there's another rule for the executive branch. The legislative rule applies to gifts from lobbyists, as well as organizations that employ or retain lobbyists. Generally speaking, lobbyists and organizations that retain lobbyists may not give gifts to covered legislative branch officials. Now, there are over 20 exceptions that apply. We're gonna talk about a couple of the common exceptions because they're important for sort of how a company, or an association, or nonprofit might interact with government officials, but they're all complicated. And it's important to remember that the House and the Senate may have different rules. They don't necessarily track with one another on exactly how they work. The executive branch has a slightly different set of rules, and that also depends on whether they are career officials or political appointees. So the past three administrations have had an executive order that requires lobbyists to, or that requires political appointees to sign a pledge that they won't accept any gifts from lobbyists or their employers with very few exceptions. On the other hand, general executive branch officials. People who are career employees may not receive gifts from just prohibited sources. Now, prohibited sources are anyone who's doing business with the government or whose interests may be substantially affected by the performance or non-performance of an employee's duties. And so what the government has said is that, most people who are interacting with government officials are going to be prohibited sources, but those individuals may give gifts worth up to $20 per year, or $50, or $20 per occasion, $50 per year, plus some other exceptions. So what are some of these exceptions? Both the executive branch and the legislative branch have an exemption for gifts given out of friendship. On the legislative branch side in particular, you can thank the House and Senate Ethics Committees for designing a three-part test for whether someone is a friend. You have to look to whether there's a mutual exchange of gifts. What they mean by that is, do you buy lunch? Meaning a lobbyist by lunch sometimes for your friend, your friend who's a Chief of Staff to a member of Congress. Do they buy lunch sometimes? Do you exchange gifts at the holidays together? Or is it all you lobbyist giving gifts to that person? That would suggest not a true friendship. Probably, the most important part is looking at the duration and formation of the relationship. So I always describe it as your college roommate who is now a covered official, that's gonna be a friendship. Compared to the legislative director that the lobbyist walked in and met yesterday during a lobbying visit, that's not gonna be a friend. Somewhere in between, that person can become a friend based on their relationship. One of the things is sort of, do you reach out to this person? Do you text them? Do you call them to see how they're doing outside of work-related purposes? If every time you text them, it's because you're trying to figure out whether a piece of legislation is moving or something like that, probably not a true friendship. But if you check in with them just to see how they're doing, probably a good chance that you would consider that to be a friend. And then the other prong is whether the person gives similar gifts to others. What that means is if you give a box of chocolates to every scheduler at the holidays, that suggests that it's being given for business reasons as opposed to you're giving a particular present to a true friend. One of the important things about the friendship exemption is that it applies individually. It does not apply to an organization. So any gift that's being expensed to an employer is not a gift given out a friendship. So as long as you're paying for it yourself, if you're a registered lobbyist, not allowed to give a gift unless an exception applies, the friendship exception applies, as long as you're paying for it yourself and not dispensing it to an employer, then it's okay. What this means is that for the legislative branch, you can give gifts of up to $250 without any kind of pre-approval under this exemption. There's no particular limited post on the executive branch. If you're not a lobbyist, there's also an exemption for personal hospitality where you can give food, lodging, entertainment at your house to a covered official. But if you're a lobbyist, you can't use that exemption. So I wanna now talk about some organizational exemptions. These are things that apply to companies, associations, nonprofits that employ lobbyists. In particular events, how do you engage with covered officials? How do you have covered officials attend your events? And there are a couple of different categories. In particular, I wanna start with what are called receptions and then widely attended events. These are key to sort of how Washington works, how people get invited to different events. Receptions, the way to think about it is the food that you serve matters. And we'll talk about what that food can look like in a second. But there's no particular format. It really can be a cocktail party. It doesn't have to have any particular content to the program or anything like that. Widely attended events or the opposite. You can serve any kind of food, including sit down dinner that's expensive. But the format matters. And we'll talk about that format of sort of both the attendees and also the subject matter. So let's talk about receptions for a second. The rules differ between the executive branch and the legislative branch. So on the executive branch side, modest food and refreshments other than part of a meal, such as soft drinks, coffee, donuts, things like that. The executive branch, the Office of Government Ethics has said that alcohol is never food or drink of nominal values. So what that means is if you're hosting a reception and someone from the executive branch is going to attend, they either are not supposed to drink the alcohol that might be served, or they should say when they attend, "Hey, I'm gonna attend. I need to pay for my attendance here and pay for the drinks that they consume." It's a rule that I probably see honored more in the breach than in reality, but it is the rule. And so if you're designing an event, whether you're gonna have executive branch employees, you wanna make sure there's an option for how they can pay for their drinks to comply with the Gift Rules. The big difference with the legislative branch is that the ethics committees have never said that alcohol is not permissible. So it's food or drink of nominal value other than as part of a meal so you can serve hors d'oeuvres, pastries, juice, and alcohol at an evening reception. It really can't be sit down kind of food. So a mini crab cake that's passed on a platter is fine, but a big crab cake that you sit down at a table and eat would not be acceptable. And again, when you're doing a reception, it really can just be a reception. It does not require any particular format. That contrasts with widely attended events. And with widely attended events, you're allowed to provide a full meal, but it has to meet this particular set of rules. So again, who's invited depends on what the specific rules are. If you're inviting members of Congress or their staff to attend, then they can either be the speaker at the event, or they have to determine that it's related to their official duties to attend. Here, there's a specific number. They say more than 25 non-Congressional attendees are expected. So if you're a trade association hosting an event, you need to have at least 25 non-Congressional attendees in order to invite one or more Congressional attendees. The audience has to be from throughout industry or profession or represent a wide range of interests. What that means is that the trade association can host an event like this because you've got multiple companies in attendance, but a single company can't use the widely attended event to have someone at their own event, like a board meeting or an internal meeting if they're gonna be serving any kind of food or providing something of value. The rules differ for the administration as to whether you've signed the ethics pledge. So if you're a career official, you can either be a speaker, or it can be in the interest of the agency. There's no set number of people that have to be there. There's just sort of a widely attended means more than a few. And there have to be a diversity of views present. If it's someone who assigned the Ethics Pledge, the Biden Ethics Pledge, then really the only way they can come to a widely attended event is if they're the speaker. So if they want to eat the food for free, they would've to be a speaker. Otherwise, they're gonna have to pay the cost to attend the event. So you're gonna have to make sure that you know the per person plate amount. Doing a widely attended event can include any kind of food, including a seated meal, waiver of conference fees. It does not include separate entertainment. So if there's music with dinner, that's fine, but you can't take everybody to a ballgame or a concert after the dinner. There's also different set of events for charity events. If you're gonna have a charitable fundraising event, the way this works is the 501 would have to say, let's say, a company buys a table at that event, the 501 would have to do the invitation. So Company X buys a table. They tell the charity, "Hey, we'd really like to invite the Chief of Staff to so-and-so. Can you do that?" And they will allow the charity to make the invitation to the member, but the non-sponsored is not allowed to make the invitation. Their other rules for business site visits. Now, these are not long distance travel. There's a whole separate set of rules for travel that we're even not gonna get into today because it's kind of too much to cover at once. But business and site visits, the key here is you can always have someone tour your factory. The question is whether you can provide them transportation or whether you can provide them with a meal, house allows food or refreshments on site, as long as it's in a group setting with employees, not sort of like an executive dining room. You can provide local transportation as long as the trip is related to the official duties, and federal lobbyists can attend. Senators, again, you can take tours of factories, facilities, whatever it may be without any issue. But if you're gonna provide them with food, then it has to be the senator's home state. There have to be at least five constituents there. And federal lobbyists aren't allowed to be a part of the meal. Crazy set of rules, but that's how the thing works. There are other exemptions for informational materials, books, periodicals, but not like a software subscription. And then there's a great one that is items of nominal value. So ball caps, tee-shirts, greeting cards, and then anything worth less than $10. The reason I find this funny is because of the way the statutory construction works. Ball caps, tee-shirts, and greeting cards can be of any value. It could be $100 ball cap, but technically it's allowed because it's listed. Anything else, it's key chain, a flash drive, whatever it may be has to be worth less than $10 or a pen. So you can give someone a logoed ball cap with your company name on it without a problem. The pen has to be worth less than $10. These are all things that are allowed. So that is the kind of the broad overview of the Federal Gift Rules. As I said, the State Gift Rules are different and provide different requirements as well so you have to be worried about that if you're engaged in the states. So with that, we'll round up our overview of lobbying disclosure for the day. Thank you for your time. It's been a pleasure being with you.