As 2016 draws to a close, the holiday reading list for those involved with political action committees (PACs), mega political action committees (Mega PACs) and others in politics may include the comprehensive rewrite of Arizona’s campaign finance code (84 pages!) now in effect, and may yet include rule changes to the Arizona Citizens Clean Elections Commission’s rules (30 pages!).

In the event your reading list includes other items as well, we hit the highlights below, including changes you may wish to consider in 2017 and in upcoming elections seasons.

• Declaration, Not Affidavit: Numerous references to affidavits of qualification in the nomination and vacancy-filling statutes have been replaced with references to a “declaration” of qualification and eligibility (A.R.S. § 16-311(D)) that nominees must file instead. The form is to be prescribed by the Secretary of State’s Office. (Also gone, but not replaced, is a “five hundred dollar threshold exemption statement” that used to be used by candidates and committees who intended to accept contributions or make expenditures totaling $500 or less.)
• Hello, New Words: The definitions section for the Campaign Contributions and Expenses section was repealed and replaced with a restyled and revamped glossary for the modern era of campaign finance.^[i] The entire fifty-definition section is worth a read, but a top-ten list of the new favorites includes:

“Advertisement” means information or materials, other than nonpaid social media messages, that are mailed, e-mailed, posted, distributed, published, displayed, delivered, broadcasted or placed in a communication medium and that are for the purpose of influencing an election.

“Agent” means any person who has actual authority, either express or implied, to represent or make decisions on behalf of another person.

“Best effort” means that a committee treasurer or treasurer’s agent makes at least one written effort, including an attempt by e-mail, text message, private message through social media or other similar communication, or at least one oral effort that is documented in writing to identify the contributor of an incomplete contribution.

“Committee” means a candidate committee, a political action committee or a political party.

“Control” means to possess, directly or indirectly, the power to direct or to cause the direction of the management or policies of another organization, whether through voting power, ownership, contract or otherwise.

“Earmarked” means a designation, instruction or encumbrance between the transferor of a contribution and a transferee that requires the transferee to make a contribution to a clearly identified candidate.

“Expenditure” means any purchase, payment or other thing of value that is made by a person for the purpose of influencing an election.

“Family contribution” means any contribution that is provided to a candidate’s committee by the parent, grandparent, aunt, uncle, child or sibling of the candidate or the candidate’s spouse, including the spouse of any of the listed family members, regardless of whether the relation is established by marriage or adoption.

“Mega PAC status” means official recognition that a political action committee has received contributions from five hundred or more individuals in amounts of ten dollars or more in the four-year period immediately before application to the secretary of state.

“Social media messages” means forms of communication, including internet sites for social networking or blogging, through which users create a personal profile and participate in online communities to share information, ideas and personal messages.

• Committees, Committees, Committees: Committees now exist in three broad categories: (1) candidate committees, (2) political action committees (PACs and Mega PACs) and (3) political parties.
• Candidate Committees: A candidate now will be registered as a candidate committee if the candidate receives contributions or makes expenditures of at least $1,000 (up from $500 previously). In making such an increase, the concept of “exploratory committee” was removed, automatically making such a committee a candidate committee once it hits the $1,000 level.
• PACs: Entities now only need to register as a PAC ^[ii] once they reach $1,000 in contributions or expenditures (also up from $500). To be considered a PAC, the entity must be organized for the primary purpose of influencing the result of an election. An entity will be rebuttably presumed to be organized for such a purpose if any of the following are true:
• Except for a religious organization, the entity claims tax-exempt status but had not filed IRS Forms 1023 or 1024 before making the contribution/expenditure;
• The entity made a contribution/expenditure but at the time: (a) the IRS had revoked its tax-exempt status; (b) it failed to file Form 990 with the IRS (if required); (c) it was not registered with the Arizona Corporation Commission (ACC) (if required), or (d) was registered with the ACC but not in good standing.
• Mega PACs: Super PACs are now “Mega PACs,” which now have four years (instead of two) immediately preceding an application to the Secretary of State’s Office to receive at least 500 contributions of $10 to qualify as a Mega PAC.
• Threshold Amounts: The Secretary of State’s Office is required to increase the threshold amounts noted above for registration by $100 every two years starting with an increase in January 2018.
• Recordkeeping: The committee treasurer’s authorization is required for a contribution, expenditure, or disbursement, and committee bank accounts must be segregated as follows: (1) personal monies in separate accounts from committee monies; (2) individual, candidate committee, PAC, partnership and political party contributions separate from all other contributions; (3) candidate support contributions separate from contributions to a political party to defray operating expenses/support party-building activities; and (4) contributions for a recall election separate from those for any other election.
• And, More Recordkeeping: Committees must use best efforts to obtain the required information for a contribution for which the contributor isn’t fully identified. And the record preservation timeline has been decreased from three years to two. But a committee hitting the qualifying threshold ($1,000) must still (1) report all contributions, expenditures and disbursements that occurred before qualifying as a committee, and (2) maintain and produce records as required.
• Disclosure Statements: A person that makes an expenditure for an advertisement or fundraising solicitation shall include the words “paid for by” followed by the name of the person making the expenditure, instead of the name of the committee that appears on its statement of organization or exemption statement.^[iii] Disclosures are not necessary for certain communications, including among them social media or texts and solicitations of contributions by separate segregated funds.
• Contributions: The law excludes a host of items from the definition of “contribution” and clarifies that transactions not specifically excluded still must meet the law’s definition of “contribution” in A.R.S. § 16-901 to be deemed one. The Secretary of State is required to increase the contribution limits by $100 in January of odd-numbered years. Candidates committees are required to refund (or if certain conditions apply, reattribute) any excess contributions within 60 days after receipt. And special statutory requirements apply in the event separate segregated funds, trade associations, and partnerships are involved.
• A Contribution is a Contribution is a Contribution . . .: The law prohibits transfers from the candidate committee for a city or town candidate to that same candidate’s committee for statewide or legislative office. It allows transfers from a city or town candidate’s committee to that candidate’s committee for a county office, but it then prohibits the candidate committee for the county office from transferring contributions to a committee for statewide or legislative office for the same candidate during the 24 months following the transfer to the committee for the county office. Contributions transferred to another committee count as contributions to that committee.
• Expenditures: The following are among those items clarified as not expenditures: volunteer services, unpaid media coverage, funds to defray a political party’s operating expenses or party building, earned interest, transfers between committees due to a joint fundraising effort, legal and accounting expenses, and payments for arguments appearing in a publicity pamphlet.
• Coordination: The new law changes and clarifies the definition of coordination and requires that there be “actual coordination” between a candidate and the person making an expenditure before it would be deemed not to be an Independent expenditure (IE). The investigating filing officer may consider certain circumstances enumerated in the statute to be rebuttable evidence of coordination.
• Expenditure Reporting: IE and ballot measure expenditure reporting and disclosures have been modified. An entity that makes IEs or ballot measure expenditures in excess of $1,000 during a reporting period must file an expenditure report identifying the candidate (including the office sought) or ballot measure supported or opposed, election date, mode of advertising and first date of publication, display, delivery or broadcast.
• Enforcement: The filing officer (public official in charge of the election as designated by statute) alone is authorized to initiate investigations into alleged violations of the campaign finance code, but is authorized to refer it out if there is a conflict of interest. A reasonable cause determination is made, after the subject of the investigation has time to respond, and if reasonable cause is found, the filing officer must refer the matter to the appropriate prosecuting authority.
• Initiative, Referendum, Recall: Invalid signatures on initiative and referendum petitions now include those signed before the date a serial number was assigned to the committee filing the petition (instead of those signed before the date the committee’s statement of organization was filed).
• Revised Statutes, Restyled: S.B. 1516 updated cross-references to statutes involving: PACs for or against the formation of new counties (A.R.S. § 11-138); political exemptions to the criminal prohibition on raffles (A.R.S. § 13-3302(D)); elections for school district governing boards (A.R.S. §§ 15-424, -1442); payroll deductions for political purposes (A.R.S. § 23-361.02); limitations on running for multiple offices (A.R.S. § 38-296.01); violations for failure to file financial disclosures (A.R.S. § 38-544); standing political committee administrative funds (A.R.S. § 41-128) and officeholder expense types and limits (A.R.S. § 41-133).
• What Might Have Been: A three-quarter majority of each house of the Legislature was required to pass certain portions of the bill, due to the Arizona Constitution’s Voter Protection Act section, art. 4, pt. 1, § 1(6)(C), which protects voter-initiated or -referred measures from amendment absent a vote of that increased majority. The voter-protected sections addressed various provisions of the Citizens Clean Elections Act. Although they failed to pass, they were primarily cross-referencing and clarification changes.
• Clean Elections Commission Rule Changes: Even though the Clean Elections statutes are not changing, the Commission is considering amendments to its rules that govern its operations. The open comment period ended November 14, 2016 and the rules, if adopted, would take effect on January 1, 2017. The Secretary of State’s Office was among those submitting comments to the proposed rules, and the Commission meets on December 15, 2016.
• Meanwhile, Online…: The Secretary of State’s Office is in the process of updating its campaign finance website. During the transition, transactions between October 28 and November 8 must be reported through the Secretary of State’s current website. This portion of the post-election reporting is not due until January 15, but it can be filed immediately. For those transactions between November 9 and December 31, they must be reported in the new website. These transactions must be filed between January 1 and January 15.

Notes:

^[i] Goodbye, Old Friends: In addition to repeal-and-replace of the definitions section, previous versions of the following statutes were repealed, effective November 5, 2016: A.R.S. §§ 16-902 (political committee organization); 16-902.01 (political committee registration); 16-902.02 (out-of-state political committee registration); 16-903 (candidate’s campaign committees); 16-904 (treasurer); 16-905 (contribution limitations); 16-906 (loans, repayments); 16-907 (prohibited contributions); 16-911 (IEs); 16-912 (candidates and IEs); 16-912.01 (ballot measure committees); 16-913 (campaign finance reports); 16-913.01 (additional reporting by committees); 16-914 (termination statement); 16-914.01 (ballot measure committee contribution reporting); 16-914.02 (corporate, LLC, and labor IEs); 16-915 (contents of campaign finance reports); 16-915.01 (disposal of surplus monies); 16-916 (filing statements of contributions and expenditures); 16-916.01 (electronic filing of statements); 16-916.02 (electronic filing for counties, cities, towns, school districts, and special districts); 16-917 (IEs and penalties); 16-918 (reports and penalties); 16-919 (prohibition of contributions by corporations, LLCs, and labor); 16-920 (permitted expenditures by corporate and labor); 16-921 (unlawful contributions from a corporate or labor fund); 16-922 (non-registration for religious assemblies or institutions); 16-923 (volunteering services for expected compensation); 16-924 (civil penalties); and 16-925 (deceptive mailings).

^[ii] All specialized PACs and funds created by a corporation, LLC, labor organization, or partnership that are established by corporations to influence an election (e.g., IEs, ballot measure or recall committees, separate segregated funds) will now simply become general PACs going forward. Current committees do not have to make any changes themselves on the Secretary’s campaign finance website, however. Over the next couple of weeks, the Secretary of State’s Office will administratively convert committees into one of the three foregoing committee types and has said it will reach out to committees if it has questions.

^[iii] The legislation also removed specific disclosure requirements for political committees that make expenditures in support of or opposing ballot propositions (i.e., four largest major funding sources).