Reporting Requirements for Gift & Entertainment Expenses

1. Reporting Requirements for Gift & Entertainment Expenses Charles W. Harris, JD Executive Director & General Counsel Indiana Lobby Registration Commission

2. Reporting Gift & Entertainment Expenses—Basic Requirements The activity report of each lobbyist shall include total expenditures on lobbying ………broken down to include at least the following: • Entertainment, including meals. [Source is IC 2-7-3-3(a)(2)(D)] • Gifts made to a legislative person. [Source is IC 2-7-3-3(a)(2)(E)]

3. Section E Reporting—Gift & Entertainment Expenses that Reach Specific Thresholds More detailed reporting is required for gift & entertainment expenses that benefit a specific legislative person and that reach one of the following thresholds: • $50 or more in one day. • More than $250 in a registration/reporting year. [Source is IC 2-7-3-3 (a)(3)]

4. Section E Reporting if Daily Threshold is Reached A lobbyist is required to have a separate entry for expenditures for entertainment (including meals and drink) or a gift, or both, that benefit a particular “legislative person” and that total $50 or more in one day.

5. Daily Threshold Examples • Lobbyist A invites Representative Wonder Woman to tour Lobbyist A’s employer’s facilities in Utopia, Indiana on September 22, 2015. Lobbyist A spends $15.40 for her breakfast and $38.39 for her lunch. On October 15, 2015 Lobbyist A takes Senator Mighty Man to dinner in Indianapolis. Lobbyist A pays $63.75 for the Senator’s dinner. • How should Lobbyist A report these transactions?

6. Reporting Illustration for Entertaining the two Legislators

7. Annual Threshold Example • Lobbyist A entertains Representative Flat Stanley in Utopia, Indiana on August 19, 2015. Lobbyist A pays the following amounts with respect to Representative Stanley: $150 for his green fees, $39.99 for a gift of a dozen golf balls, $35.75 for his lunch, and $85.40 for his dinner. • How should Lobbyist A report these expenditures?

8. Reporting Illustration for Representative Stanley Transactions

9. Annual Threshold Exceeded During 2nd Reporting Period • During the first reporting period that ended on April 30, 2015, Lobbyists A also had entertained Senator Mighty Man on five other occasions. The following is a list of those transactions:

10. Annual Threshold Exceeded During 2nd Reporting Period--Continued • From this information, we know that Lobbyist A spent $192.95 entertaining Senator Mighty Man during the first reporting period and that none of the five expenditures for that entertainment reached the daily reporting threshold. • We also know that the $63.75 that Lobbyist A spent entertaining Senator Mighty Man during the second reporting period combined with the $192.95 from the first reporting period exceeds the annual threshold of $250.00 • What does Lobbyist A need to do to comply with the Section E reporting requirements?

11. Lobbyist A & Senator Mighty Man—the Rest of the Story • Since the $250 annual threshold has been exceeded, Lobbyist A will need to amend his 1st period report to include a Section E entry for the $192.95 that he spent entertaining Senator Mighty Man during that period. • Lobbyist A also will need to amend Line 4 of Section C of his 1st period report to show an offsetting reduction of $192.95 since that amount will now be included in his Section E total and carried over to Line 7 of Section C.

12. Lobbyist A—Illustration of Section E Amendment-Expenditures that Benefited Senator Mighty Man-1st Reporting Period

13. Annual Threshold Exceeded Plus Other Expenses < $50 During Same Reporting Period • For our next illustration, let’s assume that that the date on which Lobbyist A paid $63.75 for Senator Mighty Man’s dinner was April 25, 2015 instead of October 15, 2015. • How should Lobbyist A report his entertainment expenditures that benefited Senator Mighty Man during the first reporting period?

14. Lobbyist A—Illustration of Section E Entries for 1st Reporting Period that Benefited Senator Mighty Man

15. Reporting Rules Under IC 2-7-3-3.5 IC 2-7-3-3.5 contains a number of special rules that impact how a lobbyist should report gift & entertainments expenses. Subsection (a)—Requires specific tracking of expenses. Subsection (b)—Limits the allocation of expenses. Subsection (c)—Specifies aggregate reporting for an “all members” function or activity. Subsection (d)—Provides direction on how to report where 2 or more lobbyists split an expenditure. Subsection (e)—Mandates a reduction in the amount to be reported where a legislative person contributes toward the expenditure. Subsection (f)—Prohibits reporting if a legislative person pays the same amount for goods or services that any purchaser would pay in the ordinary course of business. Subsection (g)—Generally prohibits reporting expenditures or gifts made between relatives. Subsection (h)—Prohibits reporting of gift or entertainment expenses related to a legislative person’s performance of official duties.

16. Requirements for Specific Tracking of Entertainment Expenses • Expenditures that can clearly & reasonably be attributed to a particular legislative person must be reported with respect to that legislative person. [Source is IC 2-7-3-3.5 (a)] • A report of an expenditure with respect to a particular legislative person: • Must report actual amounts; • May not allocate to the legislative person a prorated amount derived from an expense made with respect to several legislative persons; to the extent practical. [Source is IC 2-7-3-3.5 (b)]

17. Reporting Entertainment Expenses for an “All Members” Function or Activity • Expenses for such a function or activity are to be reported. (Line 6 of Section C) • The expenditures for such a function or activity may not be allocated and reported with respect to a particular legislative person. (No Entry in Section E) [Source is IC 2-7-3-3.5 (c)]

18. Reporting Where Two or More Lobbyists Contribute to an Expenditure • The total amount of the expenditure determines whether the expenditure is to be reported in Section E. • Each lobbyist shall report the actual amount the lobbyist contributed to the expenditure. [Source is IC 2-7-3-3.5 (d)]

19. Section E Illustration-Shared Expense[Source IC 2-7-3-3 (a)(3) & 2-7-3-3.5 (d)] • Hypothetical Facts. Compensated Lobbyists A and B take Representative Mighty Man to dinner. They shared equally in the cost of his $70.00 dinner, with each paying $35.00 by separate charges to their personal credit cards. • How to Report. Lobbyists A and B should each report in Section E an expenditure of $35.00 for entertainment of Mighty Man on the applicable date and note that the amount reported is the lobbyist’s share of a total expenditure of $70.00

20. Section E Reporting Illustration—Lobbyist A

21. Special Reporting Rules When a Legislative Person Contributes or Pays • The report of an expenditure with respect to a particular legislative person may not include any amount that the legislative person contributed to the expenditure. [Source is IC 2-7-3-3.5 (e)] • An activity report may not include an expenditure or gift related to property or services received by a legislative person if he or she paid the same amount for the property or services that any purchaser would be charged in the ordinary course of business. [Source is IC 2-7-3-3.5 (f)]

22. Expenditures or Gifts Between Relatives • The definition of “relative” includes a spouse and a parent, child, sibling, aunt or uncle, niece or nephew, grandparent, grandchild, great-grandparent, or great-grandchild of either the individual or the individual’s spouse. A relative by adoption, half-blood, marriage, or remarriage is considered as a relative of whole kinship. [Source is IC 2-7-1-16.5 and IC 2-2.2-1-17] • An activity report may not include an expenditure or gift made between relatives unless the expenditure or gift is made in connection with legislative action. [Source is IC 2-7-3-3.5 (g)]

23. Expenditures or Gifts Related to Performance of Official Duties An activity report may not include expenditures or gifts related to the performance of a legislative person’s official duties, including the legislative person’s service as a member of any of the following: • Legislative Council. • Budget Committee. • A standing committee or other committee established by the rules of the House or Senate. • A study committee established by statute or the Legislative Council. • A statutory board or commission. [Source IC 2-7-3-3.5 (h)]

24. Separate Gift Reports • If a lobbyist makes a gift or gifts to a legislative person the value of which reaches either of the Section E reporting thresholds, the lobbyist must file a separate gift report with the Commission & provided a copy of the report to the legislative person. • The separate gift report is due not later than 15 business days after the gift that triggers the reporting requirement is made. [Source is IC 2-7-3-3.3]

25. Late Registration Statement or Report • In addition to a late registration statement or activity report, the statutory late fee of up to $100 per day with a maximum of $4,500 now applies to late gift reports and late purchase reports. [Source IC 2-7-2-2, IC 2-7-3-2, IC 2-7-3-3.3, and IC 2-7-3-7] • The criminal provision for failure to file a timely statement or report only applies if a lobbyist does not correct the situation within 10 business days after the Commission notifies the lobbyist by certified mail. [Source IC 2-7-6-2]