FINAL ADVISORY OPINION 98-09:
Pro-rating Among Clients on the Report of Legislative Gift or Purchase
Indiana Lobby Registration Commission
(Ratification vote taken at public meeting of October 20, 1998)
Chairman Bepko - yes
Vice-Chairman Krahulik - yes
Commissioner Abbs - yes
Commissioner Hicks - yes
Questions and written comments may be directed to
Indiana Lobby Registration Commission,
115 W. Washington, Suite 1375, Indianapolis, IN 46204
If the gift/purchase was made directly by the client, then the client reports the value of the gift/purchase on the Report of Legislative Gift or Purchase. If the gift was not made directly by the client, regardless of whether the lobbyist is reimbursed for the value of the gift/purchase, then the value of the gift is reportable solely by the lobbyist, and not the lobbyist's clients. The lobbyist may list the clients who benefit from the gift, however.
It is important to note that the value of the gift/purchase is reportable on the lobbyist's activity report in the same manner. If the client paid for the gift/purchase, then the gift is reportable on the client's activity report. However, if the lobbyist was directly reimbursed for the gift/purchase, then the lobbyist must report the value of the gift on his activity report, but may report the value of the gift among the client(s) who were responsible for the reimbursement, at their actual rate of reimbursement. However, if the gift/purchase was not directly reimbursed, but is attributable to certain clients, A may pro-rate the value of the gift/purchase among those client.
If the gift/purchase made by A is made to generate goodwill for A, and is not directly attributable to any given client(s), A must report the value of the gift himself. A would file a compensated lobbyist activity report, disclosing himself as the client, and A would report the entire gift/purchase on A's Report of Legislative Gift or Purchase.
Lobby firm "A" has 5 clients. A spends $100.00 on a gift to a legislator. A is reimbursed $20.00 from each client for the gift. A is responsible for reporting the gift because A's clients did not directly make the gifts. A must report the gift on the Report of Legislative Gift or Purchase. A may, however, pro-rate the value gift on A's compensated activity reports and A may back out the value of the gift in arriving at a net lobbying figure on A's activity report. A's clients would report the amount reimbursed to A on their respective employer activity reports.
Lobby firm "A" has 5 clients. A spends $500.00 on a noncash gift to a legislator. A is reimbursed $100.00 from each client for the gift. A is responsible for reporting the gift because A's clients did not directly make the gifts. A must report the gift on the Report of Legislative Gift or Purchase. A may, however, pro-rate the value gift on A's compensated activity reports and A may back out the value of the gift in arriving at a net lobbying figure on A's activity report. A's clients would report the amount reimbursed to A on their respective employer activity reports.
I.C. 2-7-3-3(a)(3) requires that a lobbyist report on his activity report "a statement of expenditures and gifts that equal one hundred dollars ($100) or more in one (1) day, or that together total more than five hundred dollars ($500) during the calendar year, if the expenditures and gifts are made by the registrant or his agent to benefit: (A) a member of the general assembly; (D) a member of the immediate family of anyone included in clause (A) . . . ."
When a lobbyist has made a gift described in IC 2-2.1-3-2(8) to a member of the general assembly, the lobbyist must report the gift on the legislative gift or purchase form. I.C. 2-7-3-6(a)(2). The gift described in IC 2-2.1-3-2(8) is (A) Any gift of cash from a lobbyist; (B) Any single gift other than cash having a fair market value in excess of one hundred dollars ($100); (C ) any gifts other than cash having a fair market value in the aggregate in excess of two-hundred fifty dollars ($250).
The statute gives little guidance on this matter. There are some practical considerations:
First, all gifts of cash made from a lobbyist are reportable on the report of legislative gift or purchase. I.C. 2-2.1-3-2(8)(A). It is not allowable, therefore, to avoid disclosure of gifts of cash, regardless of whether the amounts are prorated.
However, non-cash gifts present a more perplexing matter.
If a gift which is made by a lobbyist but reimbursed by a client is reportable by the client, and not the lobbyist, the following scenario could arise: A lobbyist may be reimbursed by 25 clients for a non-cash gift of $2,475.00 (25x$99) made to each legislator, which gifts are not reportable unless the aggregate $250.00 threshold is met. The lobbyist could, in fact, make such a gift to each legislator on two separate occasions without crossing the aggregate threshold and triggering a duty of disclosure on behalf of the clients. The lobbyist could even make a third non-cash gift of $1,225.00 (25x$49), and not cross the $250.00 threshold. Thus, each legislator could get total non-cash gifts valued at $6,175.00 from the lobbyist, which aggregate gift would go unreported because the lobbyist has prorated the value of the non-cash gift among the 25 clients, has spread out the non-cash gift to 3 giving events, and has gifted an amount just under the aggregate threshold amount of $250.00.
This "loophole" is enhanced when a lobbyist increases the number of clients on whose behalf the non-cash gifts are made. A lobbyist could give significantly larger non-cash gifts if a lobbyist is able to pro-rate the value of the gift among 100 clients ((100x$99)x2+(100x$49))=$24,700.00. A multi-client lobbyist who represents several clients could gift a large non-cash gift without triggering a disclosure requirement on behalf of the clients.
The clients, who are presumably registered as employer lobbyists, would nonetheless be required to report their portion of the non-cash gift(s) on their respective activity reports.
However, there is a difference in disclosure with regard to the two reports. The activity report has a higher threshold of $500.00. Because of the increased threshold and the fact that none of the client's total non-cash gifts exceeded an aggregate value of $250.00, it is possible that the gifts would go unreported altogether.
Another significant difference in disclosure between the two reports relates to the timing of the disclosure. The Report of Legislative Gift or Purchase must be made within 30-days of the making of the gift or purchase. Thus, large gifts would be reportable in a timely fashion. This is particularly relevant when gifts are made during session. Whereas, the activity reports are filed only bi-annually.
One final interesting distinction between the two forms of disclosure and that is gifts/expenditures made to legislator's family members and staff are not reportable on the Report of Legislative Gift or Purchase, but are reportable on the activity report.