Reporting Compensation Paid to Employees Who Lobby
Indiana Lobby Registration Commission
(Ratification vote taken at public meeting of June 2, 1998)
VOTES ON RATIFICATION:
Chairman Bepko - yes
Vice-Chairman Krahulik - yes
Commissioner Abbs - no
Commissioner Hicks - yes
Questions and written comments may be directed to:
Indiana Lobby Registration Commission,
115 W. Washington, Suite 1375, Indianapolis, IN 46204
The statute requires that a lobbyist employer must report the salary it pays its employee when lobbying services are performed in exchange for that salary. Historically, the Commission has required that the hourly, salary, bonus and other reportable employee benefits (as recognized by Final Advisory Opinion 97-04) of such employees be pro-rated, based on the percentage of time spent performing lobbying services. In Example A, the lobby firm would report $7,500.00 as a lobbying expenditure. In Example B, the corporation would report $40,000 as a lobbying expenditure.
NOTE: The Commission has not been presented with the issue of how to reflect expenditures made to partners who perform lobbying services for entities which lobby. Thus, the determination of this Proposed Advisory Opinion is restricted to the facts surrounding non-partner employee lobbyists of lobby / law firms and non-partner employee lobbyists of entities otherwise registered as employer lobbyists.
Lobby firm "A" hires an employee to lobby for A's clients. The employee is paid $10,000 annually and spends 75% of her time performing lobbying services. The lobby firm must report $7,500 of the employee's salary as a lobbying expenditure.
Corporation "C" is already registered as an employer lobbyist and hires two employees to lobby on behalf of C. The first employee is employed as corporate counsel, is paid $100,000, and spends only 10% of her time lobbying for C. The second employee is paid $30,000 and spends 100% of his time lobbying for C. C would report a $10,000 lobbying expenditure with regard to the first employee and a $30,000 lobbying expenditure with regard to the second employee.
I.C. 2-7-3-3(a)(2)(A) states that "the activity reports of each lobbyist shall include the following: total expenditure on lobbying (pro-rated, if necessary) broken down to include at least the following categories: Compensation to others who perform lobbying services." This section of the statute requires each lobbyist to report such an expenditure, which means that both compensated and employer lobbyists must report how much they pay others to perform lobbying services.
There are two types of scenarios wherein this query becomes relevant.
In the first scenario, as depicted by Example (A), the employee lobbyist is lobbying for the lobby firm's clients, and not for the lobby firm. The Commission determined in Proposed Advisory Opinion (PAO) 97-08, that such an employee lobbyist would list the lobby firm, and not the lobby firm's clients, as the employer lobbyist. The Commission recognized that the lobby firm is not lobbying for itself and that the employee and contract lobbyists the lobby firm hires are not lobbying for the lobby firm. They are lobbying for the clients of the lobby firm, yet the statute requires only that the employee and contract lobbyists disclose who directy compensates them for their lobbying efforts. Consistent with that determination would be a determination that any compensation paid to the employee lobbyist by the lobby firm would be reportable as "compensation paid to others." Many lobby firms hire independent contractor lobbyists and report the compensation paid to those independent contractors as "compensation paid to others."
Whether a lobbyist who works for a lobby firm is an employee or an independent contractor is not a material distinction, in terms of the reportability of the compensation paid. Both the employee and the independent contractor are performing the same task of lobbying for the lobby firm's clients, though the employee's time may be pro-rated if the employee performs other, non-lobbying duties for the employer.
If a lobby firm is currently registered as an employer lobbyist, it must report on its employer lobbyist activity report the compensation it paid to its employees to perform lobbying services. This includes expenditures made to compensate employees who perform non-lobbying activities, but who, nonetheless, perform non-statutorily exempt lobbying services.
In the second scenario, as depicted in Example (B), the Commission has determined whether a corporation which engages in lobbying through its employees must report the compensation to the employee who lobbies on behalf of the corporation.
The distinction from the first scenario is that a corporation which is registered as an employer lobbyist and which employs certain individuals (in-house) to perform lobbying services on behalf of the corporation is, in essence, lobbying for itself.
Accordingly, an examination of certain statutory exemptions under the lobby disclosure law is necessary. However, because this POA presumes the corporation is already a registered lobbyist, we analyze the statutory exemptions to determine only whether certain expenditures made by the corporation employer lobbyist are reportable, and not whether the corporation has a duty to register as an employer lobbyist.
Indiana Code § 2-7-2-6 (c ) states that "[t]he provisions of this chapter are not applicable to an individual invited, by any member of the general assembly, to testify before the general assembly or a legislative commitee at the time the individual is testifying." Thus, to the extent the employee has been invited by a member of the general assembly to testify, any expenditures related to providing said testimony is not reportable as a lobbying activity, regardless of whether the individ ual testifies as to the facts and circumstances of the employer.
Indiana Code § 2-7-2-6 (f) states that "notwithstanding the definition of "lobbying" as specified in IC 2-7-1-9, in no instance shall the language of this chapter be construed to prohibit in any way free and open communication between any citizen of this state and members of the general assembly." A corporation, though considered to be a "person", is not a "citizen" and, therefore, would not receive this exemption. Moreover, mere disclosure of said communication activities does not pr ohibit in any way the communication. The communication is not what is disclosed, but rather, disclosure of the expenditures made pursuant to the communication is what is required by Indiana's lobby disclosure statute.
Indiana Code § 2-7-2-6 (e) states that "[t]his chapter does not apply to a person whose lobbying services are performed without compensation." For purposes of this opinion, the "person" in question is the employee who is compensated for lobbying.
The threshold question is whether an employee can be a "person" separate from the employer for purposes of lobby disclosure requirements. In other words, is a corporation merely paying itself to lobby when it pays its employee to lobby o n behalf of the corporation and are such expenditures reportable under the lobby disclosure statute?
The Commission determined in Final Advisory Opinion (FAO) 97-01, that "only the corporate entity which hires the lobbyist or incurs the lobbying expenditure must report and register." Because it is the employer-corporation which has hire d the lobbyist, and not the employee, the Commission's determination might be read to support having only the employer-corporation register.
However, the issue before the Commission when it reached its determination in FAO 97-01, was whether a parent or a subsidiary must register as an employer lobbyist. The issue before the Commission in this PAO is not whether a corporation must register as an employer lobbyist, but whether expenditures paid to an employee-lobbyist are reportable lobbying expenditures and, hence, whether said employee-lobbyist must therefore register as a compensated lobbyist. To that extent, the Commissio n determination in FAO 97-01 is not dispositive on this issue, or in any issue before the Commission wherein the question relates to the reporting requirements of a lobbyist whose [potential] status is that of a compensated lobbyist.
The issue is whether, when the legislature included the term "to others", it meant for that term to include an employee who lobbies on behalf of his/her employer. If the employer lobbyist is not required to disclose compensation expendit ures related to the in-house lobbying efforts of its employees, then disclosure of compensation as a lobbying expenditure could be avoided altogether in Indiana by conducting all employer lobbyist activities in-house. It is doubtful that the legislature intended that there be no duty to disclose compensation as a lobbying expenditure, simply by virtue of the fact that the lobbyist is in-house.