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What You Don’t Know About the Federal Ethics Rules Could Derail Your Fundraising

By Tom Watson on November 6, 2008No Comment

By now, you have almost certainly heard that the ethics bill passed by Congress in 2007 – the Honest Leadership and Open Government Act (“HLOGA”) – placed new restrictions on lobbyists and required more reporting and disclosure from the organizations that employ them.  Charitable and other section 501(c)(3) organizations are not exempt from federal lobbying laws, so it is vitally important that your organization understands its new obligations.
Practice Tip: The new lobbyist reporting requirements mean a new type of recordkeeping for your organization. You must devise a way to carefully collect, track, and maintain records of all reportable payments made by your organization and its lobbyists. A centralized system is recommended.

New Reporting Requirement Thresholds

Whether your organization is subject to the new law’s additional reporting and disclosure requirements depends on whether your organization is subject to the Lobbying Disclosure Act in the first place.  If your organization did not hire or employ “lobbyists” or engage in “lobbying activities” prior to 2007, then in all likelihood, the new reporting requirements of HLOGA do not apply to your organization. Generally speaking, an employee or contract lobbyist is considered a “lobbyist” if she spends 20 percent or more of her time in a quarterly reporting period on “lobbying activities” and meets a minimal compensation threshold.

HLOGA lowered the financial activity thresholds that trigger registration and reporting obligations. If your organization employs an in-house “lobbyist” and spends $10,000 or more during a quarterly reporting period to lobby covered federal officials, then your organization must register and file lobbying reports.  Prior to HLOGA, this threshold was higher – $24,500 over a six-month semi-annual reporting period. Comparatively, if your organization contracts with an outside lobbying firm, that lobbying firm incurs reporting obligations if it receives $2,500 in lobbying income in a quarterly filing period.

New Reporting Requirements: More Frequent Form LD-2 Filings; New Form LD-203; Audits

Organizations required to file lobbying reports will notice two significant changes:  more frequent reporting and more disclosure.  First, the lobbying activity expenditure report (Form LD-2) must now be filed quarterly, rather than twice per year.  Second, the new Form LD-203, which discloses certain contributions and payments made in connection with covered legislative and executive branch officials, must be filed on July 30 and January 30.   Your organization’s lobbyists must also file LD-203 reports disclosing their own personal contributions and lobbying payments. 

If your organization is required to file lobbying reports, the new law requires you to disclose virtually any activity you undertake that involves the payment of money and covered officials.  For example, you must disclose all amounts paid in connection with events held to “honor or recognize” a covered official.  While discussed in more detail below, suppose your organization co-sponsors a conference about adult literacy programs, and at the conference, a Senator is presented with an award to honor his efforts to expand literacy programs.  The costs of this event and the identity of the honoree must be disclosed on the new Form LD-203.   Additionally, lobbyists and organizations that employ lobbyists would also be required to report any donations made to the event, including “sponsorship” payments or the purchase of tickets to attend the event. 

The Government Accountability Office (GAO) is now required to conduct regular and random audits of both LD-2 and LD-203 filings.  These audits are ongoing, and include a review of records along with personal interviews.  The goal of an audit is to substantiate the information included on the reporting forms and to gather information about how organizations are carrying out their compliance responsibilities.  The GAO’s first audit report – a public document – included a list of all of the organizations audited for that time period.

Practice Tip: To make your system of data collection current and to ensure good faith compliance, all of your employees should be made aware of what is expected of them. You should organize training sessions for everyone in your organization to familiarize employees with the law’s requirements and provide written materials to your staff, outlining applicable gift and ethics rules.

Gift Rules Certification

HLOGA’s new reporting requirements require each filer to make the following certification:

“I certify that I have read and am familiar with the provisions of the Standing Rules of the Senate and the Standing Rules of the House of Representatives relating to the provisions of gifts and travel.  I have not provided, requested or directed a gift, including travel, to a Member of Congress or an officer or employee of either House of Congress with knowledge that receipt of the gift would violate rule XXXV of the Standing Rules of the Senate or rule XXV of the Rules of the House of Representatives during this filing period.”

Even if your organization and its lobbyists have no reportable activity, Form LD-203 must still be filed for the purpose of making this certification. Since criminal liability could flow from a false certification or illegal gift, you must ensure that your organization’s staff is aware of and understands basic lobbying and ethics rules in order to avoid problems. We note that House and Senate ethics guidebooks occasionally address issues differently, and in some instances, the two chambers have substantially different rules on the same subject. Additionally, both guidebooks are subject to frequent changes. Together the two guides currently total over eight hundred pages.

Gifts & Travel

The most publicized provision of HLOGA prohibits members of the Senate and their staffs from accepting gifts and travel from lobbyists and organizations that employ or retain lobbyists.  The House of Representatives adopted the same rule in January 2007.  Previously, lobbyists and their employing organizations were treated no differently than anyone else and could give gifts valued at less than $50, limited to an annual aggregate of less than $100.  The new lobbyist gift prohibition, however, is far from absolute and significant exemptions – 24 in all – exist.  For example, a variety of situations exist in which organizations that employ or retain lobbyists may still provide gifts of food and beverage to Members of Congress and their staffs, including at certain receptions, so-called “widely attended events,” charity fundraising events (more on this below), and educational events.  As the House Committee on Standards of Official Conduct explained in a June 2007 memorandum, “[t]he new prohibition . . . does not restrict Members and staff from accepting, even from registered lobbyists and entities that retain or employ them, gifts under the existing exceptions to the gift rule round in House Rule XXV, clause 5(a)(3).”

Practice Tip: Requiring pre-approval for all spending involving covered officials is an advisable method of avoiding the most basic ethics problems.

Charitable Events – Fundraisers

HLOGA affects the fundraising events of charitable organizations with ties to covered officials, either formal, such as when a covered official sits on the organization’s Board of Directors (more on this below), or informal, such as when the organization extends  invitations to supportive covered officials, such as a U.S. Representative.  Unfortunately, the extent of regulation depends on a variety of factors and details.  While determining the HLOGA restrictions applicable for your next event always requires a case-by-case analysis, we can systematically walk through the most common scenarios. 

Assume that your organization employs in-house lobbyists and is an LDA lobbying registrant.  May your organization invite a U.S Representative to a charitable fundraising event when HLOGA prohibits you from making any gifts to her, such as free attendance at your event?  While the attendees are all making sizable donations to the organization, you want to invite the Representative because she is a longtime supporter of your cause, but do not want to ask her for a donation.  In this case, the longstanding exemption to the gift ban for charity fundraising events applies, HLOGA’s lobbyist gift prohibition notwithstanding.  Thus, if the primary purpose of the event is to raise funds for your 501(c)(3) organization, and all net proceeds go to that organization, the Representative may freely attend.  The Representative’s staff and family may also accept free attendance at the charity event, eat the meal provided to the other attendees, and even accept travel and lodging reimbursement. However, only one family member may attend and staff must be independently invited by the sponsoring organization without any “suggestion” from the elected official to make such an invitation.

On the other hand, assume your organization does not employ or hire lobbyists.  Your organization would not be subject to the lobbyist gift ban with respect to the invited Representative.  Instead, the non-lobbyist gift restriction rules would apply, limiting your organization to giving a gift to a covered official of less than $50, and less than $100 in the aggregate per year.  However, the charitable fundraising exemption still renders the Representative’s free attendance not a “gift” at all.

One of the many caveats in this area of which you need to be aware is that the covered official must be a guest of the sponsoring organization and the sponsoring organization must be a not-for-profit, charitable organization.  Be especially careful if your organization has named sponsors underwriting your event – those “financial sponsors” are not the 501(c)(3) “sponsoring organization” authorized to extend invitations to covered officials.  Indeed, a request from a financial sponsor to invite certain covered officials can be viewed as a subterfuge and possibly generate an enforcement action.  Furthermore, a tacit agreement that your organization will invite and seat a certain covered official with a sponsor, in exchange for a donation from that sponsor, could also open your organization to an investigation and enforcement action, and risk creating a public relations problems for both the Representative and your financial supporter.

What if your fundraising event is substantially recreational, such as a golf outing?  If the golf outing is integral to the charity event and all attendees are participating, then the elected official may also play. However, if only “VIP’s” are invited to play golf or it is an “optional activity,” then the elected official would not be allowed to participate.  If your charity golf event requires travel by a covered official whom you wish to attend, you must be aware of a host of travel rules that changed after the enactment of HLOGA.  In many cases, a covered official will not be permitted to accept a gift of travel from a private entity where that travel is not connected to official duties.  For example, the Senate Ethics Committee has explained that “Senate invitees must demonstrate that any proposed privately-sponsored travel relates to their official duties and will not create the appearance that they are using their public office for private gain.”  On the other hand, the House Ethics Committee advises that “Members and staff may accept a sponsor’s unsolicited offer of transportation and lodging in connection with their attendance at a charity event when certain criteria are met.”  The Ethics Committees of both the House of Representatives and the Senate have private travel review processes.  Members of Congress are required to submit to these reviews and receive prior approval for privately-sponsored travel. 

Practice Tip: Familiarize yourself with the House and Senate travel rules and proposed travel review processes before inviting a Congressman to your event.  Do not assume that the Member of Congress is intimately familiar with these rules.

Next, having established that you may invite the Representative to the event without violating any gift rules, whether your organization is subject to LDA reporting or not, and given that the Representative has a long relationship with your organization, you may further wish to list the Representative as an “honorary co-host” on the invitations.  Does this qualify as the sort of honoring or recognizing an official that triggers HLOGA disclosure requirements for your guests and supporters who happen to be lobbyists?  At first, the Congressional Ethics Committees said yes.  However, after quickly backtracking, the most recent Congressional guidance indicates that a covered official may be listed as an “honorary co-cost” of a charitable fundraising event without triggering the HLOGA disclosure requirements for lobbyist donors.  Additionally, the Representative may speak at the event without changing this analysis.

Lastly, instead of listing the Representative as an “honorary co-host,” your organization may wish to formally honor or otherwise recognize the Representative’s efforts to aid your organization and its cause.  What happens under HLOGA if your organization presents the Representative with a plaque or other similar award?  First, the event would then become “an event to honor or recognize a covered legislative branch official,” meaning any major sponsor or substantial ticket purchaser that is a lobbyist, or organization that employs a lobbyist, would be required to report those costs on its next semi-annual LD-203.  Second, you should recognize that an award given to a covered official raises gift issues, but a plaque or other commemorative award is exempt from the gift rules.

Changing the facts slightly makes the analysis much simpler. If your organization is a 501(c)(4) social welfare organization that employees a lobbyist and files federal lobbying reports, the House member cannot accept the gift of a ticket to your event – because a 501(c)(4) organization does not qualify for the charitable fundraising event exemption – unless another exception to the gift rules applies. 

Practice Tip: Consult an attorney with expertise in Federal Ethics and not-for-profits before organizing an event involving covered officials. Keep in mind who your likely guests and supporters will be.  It is the lobbyist, not the charity, that will be responsible for filing the LD-203 report.

Charities Linked to Elected Officials

For the first time, HLOGA requires disclosure of donations from lobbyists and the organizations that employ them to charities that are formally linked to elected officials.  These disclosure obligations can arise in two distinct ways. 

First, any funds paid to an entity established, financed, maintained, or controlled by a covered official must be reported on Form LD-203.  Thus, donations to a charitable organization founded by (or named after) a covered official, or to a charitable organization on whose board of directors the covered officials sits, must now be disclosed.  This reporting requirement applies to contributions to entities such as the Charles B. Rangel Center for Public Service and the Richard B. Lugar Center for Renewable Energy. 

Second, a donation made to a charitable organization “in honor of” a covered official must also be reported.  The New York Times recently ran an article about this practice, reporting that “during the first six months of 2008, lobbyists, corporations and interest groups gave approximately $13 million to charities and nonprofit organizations in honor of more than 200 members of the House and Senate” (Raymond Hernandez and David W. Chen, New York Times, Gifts to Pet Charities Keep Lawmakers Happy, 10/19/2008).  The article also discusses how Department of Defense contractors have donated hundreds of thousands of dollars to support the Johnstown, Pennsylvania Symphony Orchestra a favorite charity of Congressman John P. Murtha, Chairman of the House Appropriations Defense Subcommittee, which is the committee that disburses lucrative defense contracts. 
Remember, even buying tickets to or sponsoring a charity event “honoring” a covered official could trigger reporting requirements for registered lobbyists and their employing organizations.

These new reporting requirements place a spotlight on certain charitable donations, as the New York Times article makes plain.  This spotlight may serve as a disincentive to firms and lobbyists that might otherwise support charitable organizations that honor or are favored by elected officials, but that do not want to create a public record of their support. 

In addition, if a charity is controlled by a covered Senate official, such as a charity that has a covered official as a member of the Board and an officer then it may not accept any contributions from a registered lobbyist, lobbying firm or foreign agents.

Practice Tip: Don’t organize joint fundraising events with a charity linked to a covered official if your donor base is largely corporate and therefore likely to contain many lobbying firms. If your organization is linked to a covered official, it would be a good practice to note prohibited donors on the donor form.


Many charitable organizations receive federal funding in the form of earmarks.  Under HLOGA, Senate Rule XLIV, and House Rule XXI, legislation up for consideration is supposed to be accompanied by a list of all requested earmarks included in the legislation.  As a result, your organization may be subject to more public scrutiny than in the past if it seeks earmarked funding from Members of Congress.

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