Political contributions play an important role in American politics with the share of adults donating directly to candidates doubling since 1992. Data by the Center for Responsive Politics shows that political donations from individuals represent a significant share of election funding in the United States. In a bid to maintain transparency and fairness in the government decision making process and prevent officials from being unfairly influenced by contributors, regulators have enacted Pay-to-play laws. These laws cover contributions made by individuals and entities who are affiliated with government contractors. The adoption of these laws by several US states and the tough penalties outlined for violations makes it mandatory for people and firms to comply with them. Expert law firms can help you remain abreast with the applicable laws, identify violations, if any, and guide you about timely corrections.
Purpose of Pay-to-Play Laws
The Pay-to-Play laws are aimed at severing the relationship or its appearance between a contribution made by an entity and the award of a government contract. While some laws put contribution restrictions, others mandate registration and reporting to state election boards. The violation of these laws can lead to bidding disqualifications, voided contracts, and damaging publicity. So, identification of the applicable laws and adherence to them is a must for individuals and corporate entities in the United States. The purpose of these laws is to ensure fair and open public contracting without any kind of influence from political interests.
The Extent of These Laws
The extent and nature of these laws vary in effectiveness and scope across 20 states and municipalities that have adopted them. Some prominent states where Pay-to-Play laws have been adopted include Los Angeles, Philadelphia, and New York plus several cities in California and New Jersey. The key elements of the Pay-to-Play laws are:
- A broad definition of contractors who are subject to restrictions.
- Special disclosure requirements for easy monitoring of compliance.
- Forfeiture of the contract ad future business in case of serious violations.
- Provisions to clean inadvertent mistakes.
Some laws apply only to certain types of businesses such as state licenses, companies getting contracts from retirement funds, casino operators, or redevelopment authorities. Again, some laws apply to all types of contracts while others apply to only the contracts that are awarded through a non-competitive bidding process. Many laws cover contracts or grants above a certain threshold amount.
Some laws also cover contributions made by individuals and entities affiliated with government contractors, such as officers, salespersons, directors, and family members.
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Adherence to the Pay-to-Play Laws
A business needs to identify which pay-to-play law applies to it. Once this is done, it needs to identify which affiliated individuals and entities will be affected. A business that operates in multiple cities needs to make a list of individuals and affiliates subject to these laws in at least one or more states. This should be followed up by adequate education to the affected individuals and affiliates about the laws.
A proper record and disclosure of the contributions made by the people covered by these laws is a must. Some pay-to-play laws call for no impositions if unlawful contributions are identified and refunded within a specific period.
Prohibitions and Reporting Requirements
Apart from educating the affected people, the business entity should ensure that all the political contributions that have been made are reported on time and to the requisite authorities. The period of restriction of political contributions varies from one jurisdiction to another. Laws in New Jersey and New Mexico include a look-back provision where contributions that have been made during a specific period before the contract have to be reported or may even result in disqualification from the bidding process. Laws in other jurisdictions call for a contribution ban for a specific period based on the completion of the contract or the completion of the term of the official who has awarded the contra
Although the US federal law prohibits contractors from making any contributions to candidates for the US senate or president, they allow corporations that are contractors to form political action committees and seek voluntary contributions from their executives. This option is not available to sole proprietors, individual contractors, partnerships, and LLCs. Failure to comply can lead to criminal charges as well as civil penalties. The penalties are much higher if the violations are willful.