§ 163-278.19. Violations by corporations, business entities, labor unions, professional associations and insurance companies.
Overview of Statute
Section makes it unlawful for any corporation, business entity, labor union, professional association or insurance company to make any contribution to a candidate or political committee, to use its money or property for any contribution to a candidate or political committee, to compensate any person for money or property used or for any contribution made, and to aid or abet any contribution or for any individual to solicit or knowingly receive any such contribution.
Statute
(a) Except as provided in subsections (c), (d), (f), (g), (h), and (i) of this section it shall be unlawful for any corporation, business entity, labor union, professional association or insurance company directly or indirectly do any of the following:
(1) To make any contribution to a candidate or political committee.
(2) To pay or use or offer, consent or agree to pay or use any of its money or property for any contribution to a candidate or political committee.
(3) To compensate, reimburse, or indemnify any person or individual for money or property so used or for any contribution or expenditure so made.
It shall also be unlawful for any officer, director, stockholder, attorney, agent or member of any corporation, business entity, labor union, professional association or insurance company to aid, abet, advise or consent to any such contribution, or for any person or individual to solicit or knowingly receive any such contribution. Supporting or opposing the election of clearly identified candidates includes supporting or opposing the candidates of a clearly identified political party. Any officer, director, stockholder, attorney, agent or member of any corporation, business entity, labor union, professional association or insurance company aiding or abetting in any contribution made in violation of this section shall be guilty of a Class 2 misdemeanor, and shall in addition be liable to such corporation, business entity, labor union, professional association or insurance company for the amount of such contribution and the same may be recovered of him upon suit by any stockholder or member thereof.
(b) A transfer of funds shall be deemed to have been a contribution made indirectly if it is made to any committee, affiliated party committee, or political party account, whether inside or outside this State, with the intent or purpose of being exchanged in whole or in part for any other funds to be contributed or expended in an election for North Carolina office or to offset any other funds contributed or expended in an election for North Carolina office.
(c) Proceeds of loans made in the ordinary course of business by financial institutions may be used for contributions made in compliance with this Subchapter. Financial institutions may also grant revolving credit to political committees and referendum committees in the ordinary course of business.
(d) It shall, however, be lawful for any corporation, business entity, labor union, professional association or insurance company to communicate with its employees, stockholders or members and their families on any subject; to conduct nonpartisan registration and get-out-the-vote campaigns aimed at their employees, stockholders, or members and their families; or for officials and employees of any corporation, insurance company or business entity or the officials and members of any labor union or professional association to establish, administer, contribute to, and to receive and solicit contributions to a separate segregated fund to be utilized for political purposes, and those individuals shall be deemed to become and be a political committee as that term is defined in G.S. 163-278.6(74) or a referendum committee as defined in G.S. 163-278.6(84); provided, however, that it shall be unlawful for any such fund to make a contribution or expenditure by utilizing contributions secured by physical force, job discrimination, financial reprisals or the threat of force, job discrimination or financial reprisals, or by dues, fees, or other moneys required as a condition of membership or employment or as a requirement with respect to any terms or conditions of employment, including, without limitation, hiring, firing, transferring, promoting, demoting, or granting seniority or employment-related benefits of any kind, or by moneys obtained in any commercial transaction whatsoever.
(e) A violation of this section is a Class 2 misdemeanor. In addition, the acceptance of any contribution, reimbursement, or indemnification under subsection (a) shall be a Class 2 misdemeanor.
(f) Whenever a candidate or treasurer is an officer, director, stockholder, attorney, agent, or employee of any corporation, business entity, labor union, professional association or insurance company, and by virtue of his position therewith uses office space and communication facilities of the corporation, business entity, labor union, professional association or insurance company in the normal and usual scope of his employment, the fact that the candidate or treasurer receives telephone calls, mail, or visits in such office which relates to activities prohibited by this Article shall not be considered a violation under this section.
(g) Notwithstanding the prohibitions specified in this Article and Article 22 of this Chapter, a political committee organized under provisions of this Article shall be entitled to receive and the corporation, business entity, labor union, professional association, or insurance company designated on the committee’s organizational report as the parent entity of the employees or members who organized the committee is authorized to give reasonable administrative support that shall include record keeping, computer services, billings, mailings to members of the committee, membership development, fund-raising activities, office supplies, office space, and such other support as is reasonably necessary for the administration of the committee.
The approximate cost of any reasonable administrative support shall be submitted to the committee, in writing, and the committee shall include that cost on the report required by G.S. 163-278.9(a)(4). Also included in the report shall be the approximate allocable portion of the compensation of any officer or employee of the corporation, business entity, labor union, professional association, or insurance company who has devoted more than thirty-five percent (35%) of his time during normal business hours of the corporation, business entity, labor union, professional association, or insurance company during the period covered by the required report. The approximate cost submitted by the parent corporation, business entity, labor union, professional association, or insurance company shall be entered on the committee’s report as the final entry on its list of “contributions” and a copy of the written approximate cost received by it shall be attached.
The reasonable administrative support given by a corporation, business entity, labor union, professional association, or insurance company shall be designated on the books of the corporation, business entity, labor union, professional association, or insurance company as such and may not be treated by it as a business deduction for State income tax purposes.
(h) This section does not prohibit a contribution by an [a] person or entity that:
(1) Has as an express purpose promoting social, educational, or political ideas and not to generate business income;
(2) Does not have shareholders or other persons which have an economic interest in its assets and earnings; and
(3) Was not established by a business corporation, by an insurance company, by a business entity, including, but not limited to, those chartered under Chapter 55, Chapter 55A, Chapter 55B, or Chapter 58 of the General Statutes, by a professional association, or by a labor union and does not receive substantial revenue from such entities. Substantial revenue is rebuttably presumed to be more than ten percent (10%) of total revenues in a calendar year.
(i) If a political committee has as its only purpose accepting contributions and making expenditures to influence elections, and that political committee incorporates as a nonprofit corporation to shield its participants from liability created outside this Subchapter, that political committee is not considered to be a corporation for purposes of this section. Incorporation of a political committee does not relieve any individual, person, or other entity of any liability, duty, or obligation created pursuant to any provision of this Subchapter. To obtain the benefits of this subsection, an incorporating political committee must state exactly the following language as the only purpose for which the corporation can be organized: “to accept contributions and make expenditures to influence elections as a political committee pursuant to G.S. 163-278.6(74) only.” No political committee shall do business as a political committee after incorporation unless it has been certified by the State Board as being in compliance with this subsection.
(1973, c. 1272, s. 1; 1975, c. 565, s. 6; 1979, c. 517, ss. 1, 2; 1985, c. 354; 1987, c. 113, s. 3; c. 565, s. 16; 1993, c. 539, ss. 1115, 1116; c. 553, s. 69; 1994, Ex. Sess., c. 24, s. 14(c); 1999-31, ss. 4(d), 5(a), 6(b); 2001-487, s. 97(a); 2002-159, s. 57.3(a), (b); 2006-195, s. 3; 2006-262, ss. 4.1(a), (b), 4.3; 2010-170, s. 5; 2015-258, s. 3(o); 2017-6, s. 3; 2018-146, s. 3.1(a), (b).)
- Cross-References:
- Campaign Finance
- Corporation Contributions
- Legal Expense Funds
1. Definition for contribute
The terms “contribute” or “contribution” mean any advance, conveyance, deposit, distribution, transfer of funds, loan, payment, gift, pledge or subscription of money or anything of value whatsoever, made to, or in coordination with, a candidate to support or oppose the nomination or election of one or more clearly identified candidates, to a political committee, to a political party, to an affiliated party committee, or to a referendum committee, whether or not made in an election year, and any contract, agreement, or other obligation to make a contribution. An expenditure forgiven by a person or entity to whom it is owed shall be reported as a contribution from that person or entity. These terms include, without limitation, such contributions as labor or personal services, postage, publication of campaign literature or materials, in-kind transfers, loans or use of any supplies, office machinery, vehicles, aircraft, office space, or similar or related services, goods, or personal or real property. These terms also include, without limitation, the proceeds of sale of services, campaign literature and materials, wearing apparel, tickets or admission prices to campaign events such as rallies or dinners, and the proceeds of sale of any campaign-related services or goods. Notwithstanding the foregoing meanings of “contribution,” the word shall not be construed to include services provided without compensation by individuals volunteering a portion or all of their time on behalf of a candidate, political committee, or referendum committee. The term “contribution” does not include an “independent expenditure.” If:
a. Any individual, person, committee, association, or any other organization or group of individuals, including but not limited to, a political organization (as defined in section 527(e)(1) of the Internal Revenue Code of 1986) makes, or contracts to make, any disbursement for any electioneering communication, as defined in this section; and
b. That disbursement is coordinated with a candidate, an authorized political committee of that candidate, a State or local political party or committee of that party, an affiliated party committee, or an agent or official of any such candidate, party, or committee that disbursement or contracting shall be treated as a contribution to the candidate supported by the electioneering communication or that candidate’s party and as an expenditure by that candidate or that candidate’s party.
§ 163A-1411 (13). Definitions.
2. Definition for individual
The term “individual” means a single individual or more than one individual.
3. Definition for referendum
The term “referendum” means any question, issue, or act referred to a vote of the people of the entire State by the General Assembly, a unit of local government, or by the people under any applicable local act and includes constitutional amendments and State bond issues. The term “referendum” includes any type of municipal, county, or special district referendum and any initiative or referendum authorized by a municipal charter or local act. A recall election shall not be considered a referendum within the meaning of this Article.
4. Definition for Referendum
“Referendum” means the event in which voters cast votes for or against ballot questions other than the election of candidates to office.
5. Definition for corporation
The term “corporation” means any corporation established under either domestic or foreign charter, and includes a corporate subsidiary and any business entity in which a corporation participates or is a stockholder, a partner or a joint venturer. The term applies regardless of whether the corporation does business in the State of North Carolina.
6. Definition for expenditure
The terms “expend” or “expenditure” mean any purchase, advance, conveyance, deposit, distribution, transfer of funds, loan, payment, gift, pledge or subscription of money or anything of value whatsoever, whether or not made in an election year, and any contract, agreement, or other obligation to make an expenditure, to support or oppose the nomination, election, or passage of one or more clearly identified candidates, or ballot measure. An expenditure forgiven by a person or entity to whom it is owed shall be reported as a contribution from that person or entity. Supporting or opposing the election of clearly identified candidates includes supporting or opposing the candidates of a clearly identified political party. The term “expenditure” also includes any payment or other transfer made by a candidate, political committee, or referendum committee.
7. Definition for labor union
The term “labor union” means any union, organization, combination or association of employees or workmen formed for the purposes of securing by united action favorable wages, improved labor conditions, better hours of labor or work-related benefits, or for handling, processing or righting grievances by employees against their employers, or for representing employees collectively or individually in dealings with their employers. The term includes any unions to which Article 10, Chapter 95 applies.
8. Definition for Expenditure
Expenditure. – An expenditure means any purchase, advance, conveyance, deposit, distribution, transfer of funds, loan, payment, gift,pledge, subscription of money, anything of value whatsoever, and any contract, agreement, promise, or other obligation to make an expenditure, by a legal defense fund for a permitted use as provided in G.S. 163A-1570. An expenditure forgiven by a person or entity to whom it is owed shall be reported as a legal expense donation.
9. Definition for contribution
The terms “contribute” or “contribution” mean any advance, conveyance, deposit, distribution, transfer of funds, loan, payment, gift, pledge or subscription of money or anything of value whatsoever, made to, or in coordination with, a candidate to support or oppose the nomination or election of one or more clearly identified candidates, to a political committee, to a political party, to an affiliated party committee, or to a referendum committee, whether or not made in an election year, and any contract, agreement, or other obligation to make a contribution. An expenditure forgiven by a person or entity to whom it is owed shall be reported as a contribution from that person or entity. These terms include, without limitation, such contributions as labor or personal services, postage, publication of campaign literature or materials, in-kind transfers, loans or use of any supplies, office machinery, vehicles, aircraft, office space, or similar or related services, goods, or personal or real property. These terms also include, without limitation, the proceeds of sale of services, campaign literature and materials, wearing apparel, tickets or admission prices to campaign events such as rallies or dinners, and the proceeds of sale of any campaign-related services or goods. Notwithstanding the foregoing meanings of “contribution,” the word shall not be construed to include services provided without compensation by individuals volunteering a portion or all of their time on behalf of a candidate, political committee, or referendum committee. The term “contribution” does not include an “independent expenditure.” If:
a. Any individual, person, committee, association, or any other organization or group of individuals, including but not limited to, a political organization (as defined in section 527(e)(1) of the Internal Revenue Code of 1986) makes, or contracts to make, any disbursement for any electioneering communication, as defined in this section; and
b. That disbursement is coordinated with a candidate, an authorized political committee of that candidate, a State or local political party or committee of that party, an affiliated party committee, or an agent or official of any such candidate, party, or committee that disbursement or contracting shall be treated as a contribution to the candidate supported by the electioneering communication or that candidate’s party and as an expenditure by that candidate or that candidate’s party.
§ 163A-1411 (13). Definitions.
10. Definition for Compensation
Compensation. – Any money, thing of value, or economic benefit conferred
on or received by any covered person or filing person in return for services
rendered or to be rendered by that covered person or filing person or another.
This term does not include campaign contributions properly received and,
reported as required by Article 23 of this Chapter.
11. Definition for business entity
The term “business entity” means any partnership, joint venture, joint-stock company, company, firm, or any commercial or industrial establishment or enterprise.
12. Definition for political party
The term “political party” means any political party organized or operating in this State, whether or not that party is recognized under the provisions of G.S. 163A-950. A special definition of “political party organization” that applies only in Part 2 of this Article is set forth in G.S. 163A-1475. An affiliated party committee is deemed a political party for this Article as set forth in G.S. 163A-1416 and G.S. 163A-1417.
13. Definition for insurance company
The term “insurance company” means any person whose business is making or underwriting contracts of insurance, and includes mutual insurance companies, stock insurance companies, and fraternal beneficiary associations.
14. Definition for political committee
The term “political committee” means a combination of two or more individuals, such as any person, committee, association, organization, or other entity that makes, or accepts anything of value to make, contributions or expenditures and has one or more of the following characteristics:
a. Is controlled by a candidate;
b. Is a political party or executive committee of a political party or is controlled by a political party or executive committee of a political party;
c. Is created by a corporation, business entity, insurance company, labor union, or professional association pursuant to G.S. 163A-1436(d); or
d. Has the major purpose to support or oppose the nomination or election of one or more clearly identified candidates; [or]
e. Is an affiliated party committee. Supporting or opposing the election of clearly identified candidates includes supporting or opposing the candidates of a clearly identified political party. If the entity qualifies as a “political committee” under sub-subdivision a., b., c., or d. of this subdivision, it continues to be a political committee if it receives contributions or makes expenditures or maintains assets or liabilities. A political committee ceases to exist when it winds up its operations, disposes of its assets, and files its final report. The term “political committee” includes the campaign of a candidate who serves as his or her own treasurer. Special definitions of “political action committee” and “candidate campaign committee” that apply only in Part 2 of this Article are set forth in G.S. 163A-1475.
§ 163A-1411 (74). Definitions.
15. Definition for referendum committee
The term “referendum committee” means a combination of two or more individuals such as a committee, association, organization, or other entity or a combination of two or more business entities, corporations, insurance companies, labor unions, or professional associations such as a committee, association, organization, or other entity the primary purpose of which is to support or oppose the passage of any referendum on the ballot. If the entity qualifies as a “referendum committee” under this subdivision, it continues to be a referendum committee if it receives contributions or makes expenditures or maintains assets or liabilities. A referendum committee ceases to exist when it winds up its operations, disposes of its assets, and files its final report.
16. Definition for professional association
The term “professional association” means any trade association, group, organization, association, or collection of persons or individuals formed for the purposes of advancing, representing, improving, furthering or preserving the interests of persons or individuals having a common vocation, profession, calling, occupation, employment, or training.
17. Definition for affiliated party committee
The term “affiliated party committee” means a General Assembly affiliated party committee as established by G.S. 163A-1416 or Council of State affiliated party committee as established by G.S. 163A-1417.
18. Definition for made
A contribution is “made” during regular session if the check or other instrument is dated during the session, or if the check or other instrument is delivered to the limited contributee during session, or if the limited contributor pledges during the session to deliver the check or other instrument at a later time.
§ 163A-1426. Limitation on fund-raising during legislative session. (a) Definitions (4)
19. Definition for board
The term “board” means the State Board with respect to all candidates for State, legislative, and judicial offices and the county board of elections with respect to all candidates for county and municipal offices. The term means the State Board with respect to all statewide referenda and the county board of elections conducting all local referenda.
20. Definition for Board
Board. – Any State board, commission, council, committee, task force,
authority, or similar public body, however denominated, created by statute or
executive order, as determined and designated by the State Board, except for
those public bodies that have only advisory authority.
21. Definition for State
“State” means a state of the United States, the District of Columbia, Puerto Rico, the United States Virgin Islands, or any territory or insular possession subject to the jurisdiction of the United States.
22. Definition for expend
The terms “expend” or “expenditure” mean any purchase, advance, conveyance, deposit, distribution, transfer of funds, loan, payment, gift, pledge or subscription of money or anything of value whatsoever, whether or not made in an election year, and any contract, agreement, or other obligation to make an expenditure, to support or oppose the nomination, election, or passage of one or more clearly identified candidates, or ballot measure. An expenditure forgiven by a person or entity to whom it is owed shall be reported as a contribution from that person or entity. Supporting or opposing the election of clearly identified candidates includes supporting or opposing the candidates of a clearly identified political party. The term “expenditure” also includes any payment or other transfer made by a candidate, political committee, or referendum committee.
23. Definition for person
The term “person” means any business entity, corporation, insurance company, labor union, or professional association.
24. Definition for Office
(4) Office. – The elected office for which the candidate has filed or petitioned.
(2006-155, s. 1; 2006-259, s. 48(a); 2017-6, s. 3.)
25. Definition for election
The term “election” means any general or special election, a first or second primary, a run-off election, or an election to fill a vacancy. The term “election” shall not include any local or statewide referendum.
26. Definition for Election
“Election” means the event in which voters cast votes in ballot items concerning proposals or candidates for office in this State or the United States. The term includes primaries, general elections, referenda, and special elections.
27. Definition for Business
Business. – Any of the following organized for profit:
a. Association.
b. Business trust.
c. Corporation.
d. Enterprise.
e. Joint venture.
f. Organization.
g. Partnership.
h. Proprietorship.
i. Vested trust.
j. Every other business interest, including ownership or use of land for
income.
28. Definition for candidate
The term “candidate” means any individual who, with respect to a public office listed in G.S. 163A-1411(80), has taken positive action for the purpose of bringing about that individual’s nomination, retention, or election to public office. Examples of positive action include any of the following:
a. Filing a notice of candidacy, filing a notice to be retained, or a petition requesting to be a candidate.
b. Being certified as a nominee of a political party for a vacancy.
c. Otherwise qualifying as a candidate in a manner authorized by law.
d. Making a public announcement of a definite intent to run for public office in a particular election.
e. Receiving funds or making payments or giving the consent for anyone else to receive funds or transfer anything of value for the purpose of bringing about that individual’s nomination or election to office. Transferring anything of value includes incurring an obligation to transfer anything of value. Status as a candidate for the purpose of this Article continues if the individual is receiving contributions to repay loans or cover a deficit or is making expenditures to satisfy obligations from an election already held. Special definitions of “candidate” and “candidate campaign committee” that apply only in Part 2 of this Article are set forth in G.S. 163A-1475.
29. Definition for treasurer
The term “treasurer” means an individual appointed by a candidate, political committee, or referendum committee as provided in G.S. 163A-1412 or G.S. 163A-1496. (1973, c. 1272, s. 1; 1975, c. 798, ss. 5, 6; 1979, c. 500, s. 1; c. 1073, ss. 1-3, 19, 20; 1981, c. 837, s. 1; 1983, c. 331, s. 6; 1985, c. 352, ss. 1-3; 1997-515, ss. 4(a)-(c), 7(b)-(d); 1999-31, ss. 1(a), (b), 2(a)-(c), 3, 4(a); 1999-424, s. 6(a), (b); 2002-159, s. 55(n); 2003-278, s. 5; 2004-125, s. 3; 2004-127, s. 15; 2004-203, s. 12(b); 2005-430, s. 10; 2006-264, s. 23; 2007-391, s. 3; 2008-150, s. 6(a); 2008-187, s. 33(a); 2009-534, ss. 1, 3(a), (b); 2010-170, s. 1; 2011-31, s. 20; 2013-381, s. 50.1; 2015-66, s. 8(a); 2015-258, ss. 3(b), (b1); 2015-264, ss. 81(c), (d); 2017-6, s. 3.)
30. Definition for Committee
Committee. – The Legislative Ethics Committee as created in Part 3 of Article
14 of Chapter 120 of the General Statutes.
31. Definition for Candidate
“Candidate” means any individual who, with respect to a public office listed in G.S. 163A-1411(80), has filed a notice of candidacy, notice of retention, or a petition requesting to be a candidate, or has been certified as a nominee of a political party for a vacancy, or has otherwise qualified as a candidate in a manner authorized by law, or has filed a statement of organization under G.S. 163A-1412 and is required to file periodic financial disclosure statements under G.S. 163A-1418.
Cases
North Carolina Cases
Case Name: Louchheim, Eng & People, Inc. v. Carson
Citation: 241 S.E.2d 401, 35 N.C.App. 299
Year: 1978
Case PDF: Louchheim, Eng & People, Inc. v. Carson
Case Summary: Statute making it unlawful for corporations or labor unions to make any contribution or expenditure to aid or oppose any candidate was constitutional.
Case Name: State v. Charlotte Liberty Mut. Ins. Co.
Citation: 251 S.E.2d 867, 39 N.C.App. 557
Year: 1978
Case PDF: State v. Charlotte Liberty Mut. Ins. Co.
Case Summary: Where election of public officer had been certified at time contribution was made by insurance company to breakfast held in his honor, the officer was no longer a "candidate" for political office and therefore summons were insufficient to charge criminal offense under the statute. Affirmed 258 S.E.2d 343, 298 N.C. 270.
Out-of-State Cases
Federal Cases
Case Name: North Carolina Right to Life, Inc. v. Bartlett
Citation: 168 F.3d 705
Federal Circuit Court: 4th Circuit Court
Year: 1999
Case PDF: North Carolina Right to Life, Inc. v. Bartlett
Case Summary: North Carolina statutes prohibiting corporate expenditures or contributions for political purposes were substantially overbroad and unconstitutionally vague because there was no exception for non-profit corporations that presented a minimal risk of distorting the political process. Certiorari denied 120 S.Ct. 1156, 528 U.S. 1153, 145 L.Ed.2d 1069.