FPPC makes changes to fundraising-related payment reporting

The Fair Political Practices Commission (FPPC) recently amended Regulations 18424, 18424.1, 18424.2, and 18424.3, which govern how elected officials must report “behested payments.” Beginning Dec. 22, 2021, elected officials who fundraise for legislative, governmental, or charitable causes may need to change how they report payments that result from those fundraising efforts.

What are behested payments?

Behested payments are donations made to an individual, a government agency, or a nonprofit payee at the request of an elected official for a legislative, governmental, or charitable purpose. Generally, a payment is considered behested, and subject to reporting, if:

• The payment is made at the request, suggestion, or solicitation of, or in cooperation, consultation, coordination, or concert with an elected official
• The behesting official does not provide full and adequate consideration in exchange for the payment
• The payment is made for a legislative, governmental, or charitable purpose
• The payment does not qualify as a gift (made for personal purposes) or a contribution (made for election-related activity) to the elected official
• The value of the payment meets or exceeds the reporting threshold of $5,000

When must behested payments be reported?

Elected officials must report behested payments when donations from a single source meet or exceed $5,000 in a calendar year. Officials must report the behested payments within 30 days of the payments totaling $5,000 or more. Any additional payments made by that same source in the same calendar year must also be reported within 30 days after the payment is made.

Who must report behested payments?

Only elected officials and California Public Utilities Commission members need to comply with the behested payment reporting requirements. All other public officials subject to the Fair Political Practices Act are not required to file the reports.

What does this mean for elected officials?

Officials must be aware when their actions meet the definition of having made a behest for payment. An official must also track behested payments from a single source over a calendar year to know when reporting requirements are triggered. Finally, because the regulations require an official to properly characterize and disclose the parties to, and the purpose of, behested payments, officials must work with an organization receiving behested payments to report the required information.

What needs to be included in the report?

The report must include the name and address of the payor; the amount of the payment(s); the date(s) the payment(s) were made; the name and address of the payee; a brief description of the goods or services provided or purchased, if any; and a description of the specific purpose or event for which the payment or payments were made.

What specific changes do the newly adopted regulations make to behested payment reporting?

Following a review of behested payment reporting issues, the FPPC identified four

areas they wanted to address through regulatory action. In updating these four regulations, the FPPC directed staff to balance timely, informative, and accurate public disclosure of behested payments with the need to not discourage the important charitable and governmental purposes that these payments support.

Regulation 18424

To promote transparency, Regulation 18424 requires additional disclosures about a reportable behested payment where, to the extent known by the elected official: (1) the official or a member of their immediate family has a relationship of control over, or is employed by, the payee; or (2) the payor of a behested payment is involved in a proceeding before the official’s agency at the time the behested payment is made or within the past 12 months.

Although California law does not prohibit an official from having either type of relationship, the FPPC determined that these are relationships that the public would want to have disclosed because they raise concerns about the payment transaction, potential self-interest of the official, and the possibility of undue influence over the official.

Regulation 18424.1

Regulation 18424.1 addresses situations where an official has a behested payment reporting duty, but a payee has not complied promptly with the official’s request for payment information.

Under existing law, an official may file a behested payment report with the verification that states the official “has used all reasonable diligence in its preparation,” and that it is “true and complete” to the best of the official’s knowledge. A behested payment report can then be amended by the official if they later become aware that the report was incorrect. Moreover, an official may note in a behested payment report that the information in the report is incomplete. However, they must comply with the 30-day filing requirement, explain why the information is incomplete, and file an amended report when more information is obtained.

Regulation 18424.1 is intended to make this process easier and more transparent by allowing an official to provide a “good faith estimate” of the information, as long as the official makes reasonable efforts and is unable to obtain the necessary information from a payee. It also requires the official to amend the report with corrected information within 10 days of receiving the information from the payee.

Regulation 18424.2

Regulation 18424.2 clarifies that, when an official acts in concert with a charitable organization in a fundraising solicitation and is featured in the solicitation, the official must report resulting payments on a behested payment report. Thus, the regulation clarifies that being featured in a solicitation, by itself, does not raise behested payment reporting duties for an official.

The regulation provides that a solicitation “features” an elected official (1) where the solicitation includes the official’s photograph or signature, or the solicitation singles out the official’s name or office in the layout of the document; or (2) when the solicitation includes a roster or letterhead listing its governing board, the official’s name is included in the list, and the board includes a majority of elected officers or Public Utility Commission members.

Regulation 18424.3

Regulation 18424.3 addresses a specific type of charitable giving that presents additional challenges in understanding behested payments: donor-advised funds. A donor-advised fund is a separately identified fund maintained and operated by a section 501(c)(3) organization known as a sponsoring organization. Each donor-advised fund account is composed of contributions made by individual donors. Once the donor makes the contribution, the sponsoring organization has legal control over it. However, the donor, or the donor’s representative, retains advisory privileges with respect to the distribution of funds and the investment of the assets in the account.

Regulation 18424.3 requires that when a behested payment is made from a donor-advised fund, that the “name of the payor” on the behested payment report includes the name of the sponsoring organization, the name of the donor-advised fund, and the name of the donor to the extent the information is known to the official. The regulation places a duty on the official to inquire with the sponsoring organization as to the parties’ identities. If the official learns the identity of the donor or donor-advised fund with greater specificity after a behested payment report is filed, the official must amend the report with the information within 10 days of receiving the additional information.

As always, city officials should seek advice from either their city attorney or the FPPC on how these requirements apply in particular situations.