Regulatory: How to play by the pay-to-play rules

10 things to consider if your company does business with the government.

It used to be that personal political activity was personal, as long as it did not involve company resources, and corporate political activity was corporate. Companies that do business with state and local governments, however, often can no longer make this distinction because of the ever-growing list of federal, state and local pay-to-play laws. These laws, which often apply to contributions given both by the company and by certain senior employees, restrict contributions that may be made and often require additional detailed disclosures.

These pay-to-play laws come from a variety of sources. A number of states have enacted them in response to various scandals involving awards of contracts to companies that were politically active. Many of these contracts involved investment management services, so the Securities and Exchange Commission (SEC) has issued its own pay-to-play rule. Ironically, this federal rule generally restricts contributions to state officeholders (or federal candidates who are current state officeholders).

5. Consider disclosure requirements

Various legal entities have different donor disclosure requirements. For example, contributions to individual candidates, leadership PACs, national committees and 527 organizations are disclosed while contributions to 501(c)(3) and 501(c)(4) organizations generally are not disclosed. If a donor wants to avoid public disclosure, the donor should ensure that any contribution is made to an entity that does not disclose its donors. In addition, many state and local pay-to-play laws impose additional disclosure obligations. Disclosures may be done through the campaign finance system.

Contributing Author

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Ronald Jacobs

Ronald M. Jacobs is a Washington-based partner in Venable’s regulatory group. He co-chairs the political law practice at Venable LLP, and counsels clients on all...

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Contributing Author

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Scott Gluck

Scott Gluck’s legal practice focuses on helping investment advisers, corporations, and individuals comply with federal, state, and municipal "pay-to-play" rules regulating political involvement.  Prior to...

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