More On

Regulatory: Lobbying, registration and reporting requirements

What’s required in different jurisdictions

Interacting with the government has become more and more prevalent in all sectors of the economy, whether through the use of outside lobbyists or a company’s own employees. The rules governing lobbying disclosure vary widely from state to state, so an interaction in one state may require registration and reporting and an identical interaction in another state may not. For example, in some states, efforts to secure a government contract are considered to be lobbying, while in other states lobbying means only attempting to influence legislation.

Moreover, there are complex gift and ethics rules that limit whether a company can take a government official to lunch, provide tickets to a sporting event or simply allow an official to attend a trade show. The limits on gifts may change depending on whether your organization is registered to lobbying or whether it has a contract with a state.

What is lobbying?

Federal lobbying: At the federal level, a company must register if it spends more than $11,500 on federal lobbying, and if one of its employees meets the definition of a lobbyist. A lobbyist is someone who makes more than one lobbying contact (such as a phone call to a congressional office or a meeting with someone at the Office of Management and Budget) and spends more than 20 percent of his or her time on lobbying activities in a three month period. If a company just hires outside lobbyists, then the outside lobbyist is responsible for registering and reporting, but the company does not have to do so.

State and local lobbying: State laws differ greatly as to how they define lobbying and when registration and reporting are required. Some ways in which the laws differ include whether the law covers:

  • Legislative lobbying or executive branch activities
  • Interactions with certain officials or all government employees
  • Few procurement activities (e.g., efforts to obtain sole-source contract) or all procurement efforts

States also differ as to whether a company must register when it retains outside lobbyists and whether individual employees or the company registers. The thresholds for when registration is required vary considerably as well from registration before lobbying, or within a few days of lobbying, to upon meeting a time or money trigger such as when a lobbyist spends 25 hours and earns $2,500 during a six-month reporting period.

What gets reported?

At the federal level, entities report their activities every quarter. At the state and local level, reporting periods vary from biweekly to annually and may depend on whether the legislature is in session. Reports generally require disclosing some mix of:

  • Lobbyists’ names
  • Amount spent (company) or earned (individual or outside firm) for lobbying
  • Issues (bill numbers, government contracts, agency programs)
  • Contacts (agency name and occasionally individual name)
  • Campaign contributions
  • Gifts provided to government officials

How do we account for lobbying activities?

Counting lobbying costs is central to disclosure in any jurisdiction. At the same time, the process to capture costs also can help collect other information required for reporting. An accounting system should allow the company to:

  • Know when the company or its employees approach a registration threshold
  • Disclose the right amount of expenses in disclosure reports
  • Identify nondeductible lobbying expenditures for federal income tax compliance (the tax code denies a deduction for the amount a company spends on lobbying)

Tracking lobbyists’ activity in real time helps to avoid failing to register on a timely basis, especially where the threshold is low. It also improves reporting accuracy, which mitigates the risk of enforcement proceedings and embarrassing press stories.

What internal controls do we need?

Navigating the ever-changing disclosure landscape requires advance planning and ongoing maintenance. Choosing the ideal set of internal controls will depend on the scope of a company’s activities, the number of jurisdictions in which it operates, each jurisdiction’s specific requirements and how sensitive the company is to public scrutiny. The internal controls below are common to many successful compliance plans:

  • Ascertaining the jurisdictions in which the company is, will or potentially may lobby (do not overlook lobbying at the local level)
  • Identifying each jurisdiction’s registration triggers and reporting requirements
  • Building an inventory of the employees and outside firms who are registered or may potentially register
  • Compiling a calendar of key disclosure dates for the jurisdictions in which the company is registered (annual registration, pre-filing conference calls and report due dates)
  • Requiring employees to obtain prior approval before lobbying in a new state, retaining an outside lobbying firm, providing gifts to government officials or making campaign contributions
  • Training lobbyists, potential lobbyists and their supervisors on the applicable requirements and company policy
  • Training finance personnel and administrative assistants on prohibited expenditures (gifts or campaign contributions subject to pay-to-play laws) and tracking lobbying costs
  • Identifying an internal point of contact for compliance support
  • Inserting terms into contracts with outside lobbying firms to require full compliance with applicable lobbying disclosure, campaign finance, gifts, ethics, contingency fee bans and pay-to-play requirements, and to provide for indemnification for their compliance violations assistance with the company’s disclosure compliance (such as submitting draft reports for preapproval) and acceptance of the company’s refusal to reimburse improper expenditures
  • Retaining all disclosure-related documents (expense receipts, contracts, lobbyist emails) for the duration of the jurisdiction’s document retention period with a copy of the relevant filing (generally three years to six years).

Interacting with the government is an important tool for many companies and they should not shy away from doing so simply because of the registration and reporting requirements. Rather, organizations must develop the right mix of controls and accounting procedures to be certain that they always put their best foot forward and make accurate and timely disclosures. In addition, they can use these procedures to protect from improper gifts or campaign contributions that might draw unwanted attention to their efforts.

Contributing Author

author image

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...

Bio and more articles

Contributing Author

author image

Jeffrey Hunter

Jeff Hunter advises clients on all aspects of federal and state political compliance law. His background in presidential election campaigns and national advocacy groups brings...

Bio and more articles

Join the Conversation

Advertisement. Closing in 15 seconds.