March 21, 2011

New Jersey Pay-to-Play Report Due March 30, 2011

Holland & Knight Alert
Joel E. Roberson | Christopher DeLacy

Government Contractors Are Affected: Other States Have Similar Laws

New Jersey is among a growing number of states and local governments with a "pay-to-play" law on the books. Pay-to-play laws vary by jurisdiction, but most ban, restrict or require disclosure of campaign contributions or gifts to public officials made by government contractors or potential government contractors, and in many cases apply to contributions made by certain affiliated individuals, subsidiaries and political committees (including political action committees). New Jersey is also among a smaller group of states, which includes Illinois, Maryland and Pennsylvania, that require pay-to-play filings outside of the procurement process. A full list of current pay-to-play states is below.

New Jersey's pay-to-play law applies to state and local contractors, requires disclosure of certain campaign contributions and bans certain campaign contributions. In addition to the state law, many local governments in New Jersey also have pay-to-play laws.

The following are several questions and answers regarding compliance with the New Jersey law:

Is my company required to file a pay-to-play disclosure in New Jersey?

Any business entity with New Jersey state or local contract(s) totaling $50,000 or more during the calendar year must submit a Business Entity Annual Statement (Form BE) by March 30 each year. In addition, business entities seeking New Jersey government contracts may also be required to disclose certain contributions made during the past year when making a bid for a new government contract.

What types of campaign contributions must be reported?

Cash contributions in any amount and non-cash campaign contributions over $300 to candidates, parties, legislative leadership committees, political committees and continuing political committees must be disclosed. This requirement applies to contributions made by the business entity itself as well as contributions made by certain individuals (including spouses and in some cases children), subsidiaries and political committees affiliated with the business entity.

What if no campaign contributions were made?

Form BE must be submitted annually even if no reportable campaign contributions were made.

What happens if my company does not file?

Failure to file Form BE may result in fines imposed by the New Jersey Election Law Enforcement Commission based upon the amount of contributions not reported. Violations of other portions of the New Jersey pay-to-play law may result in a penalty of up to the value of its government contract and debarment by the State Treasurer from contracting with any public entity for up to five years.

Which contributions are banned?

New Jersey's contribution ban applies to entities that have or are seeking state contracts in excess of $17,500 or entities that have or are seeking no-bid local or legislative branch contracts in excess of $17,500. Covered contributions include cash contributions in any amount and non-cash contributions over $300 to the Governor or candidates for Governor; Lt. Governor or candidates for Lt. Governor; state, county, municipal political party committees; and legislative leadership committees.

Does my company need a pay-to-play compliance program?

Yes, if your company has or is pursuing government contracts in New Jersey or is subject to any other pay-to-play laws.

Which other states have pay-to-play laws?

Other states with some form of pay-to-play law include: California, Connecticut, Florida, Hawaii, Illinois, Indiana, Kentucky, Louisiana, Maryland, Missouri, Nebraska, New Mexico, Ohio, Pennsylvania, Rhode Island, South Carolina, Vermont, Virginia and West Virginia.

In addition, certain state investment funds and quasi-governmental entities have enacted pay-to-play restrictions, including:

  • California Public Employees Retirement System
  • California State Teachers Retirement System
  • California State Lottery
  • Los Angeles County Metropolitan Transit Authority
  • New Mexico State Investment Council, Private Equity Investment Advisory Committee, and State Investment Office
  • New York Comptroller and Common Retirement Fund
  • Texas Teacher Retirement System

The scope of state pay-to-play laws vary. Many states regulate only one industry. Laws may prohibit certain contributions or require disclosure of contributions or both. Penalties may include fines, cancellation of current government contracts, and disqualification from future government contracts. In some cases, state law applies at the local level. Localities may have separate pay-to-play ordinances that apply in addition to state law.

Which local governments have pay-to-play laws?

Localities with some form of pay-to-play law include:

Arkansas: Little Rock

California: Culver City, Los Angeles City/County, Oakland, Pasadena, San Diego County, San Francisco

Colorado: Denver

Hawaii: Honolulu

Illinois: Chicago, Cook County, DuPage County

Indiana: Indianapolis

Louisiana: Jefferson Parrish, New Orleans

Massachusetts: Boston

Michigan: Grand Rapids

New Jersey: Over 160 localities in New Jersey

New Mexico: Albuquerque

New York: Buffalo, New York City, Suffolk County

Pennsylvania: Philadelphia

Texas: Dallas, Houston, San Antonio

Utah: Salt Lake County

West Virginia: Charleston

Does the federal government have a pay-to-play law?

The Federal Election Campaign Act of 1971, as amended, bans contributions by federal government contractors to federal political committees, including federal candidates (candidates for election to the U.S. House of Representatives, U.S. Senate, or for President). In addition, the Securities and Exchange Commission (SEC) and Municipal Securities Rulemaking Board (MSRB) have pay-to-play rules; the Commodity Futures Trading Commission (CFTC) is considering a pay-to-play rule.

Where can I download Form BE?

All Business Entity Annual Statements must be filed electronically.

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