Are You Not Entertained?!
How often have you had this debate in your office? Is the “thing” you provided to a lawmaker or staff member a gift or hospitality?
In this coffee break with your friends at CCS, we explore some definitions (yeah, we have to be kinda official) as well as some examples and scenarios to help answer some of those questions. Keep Russell in your mind as we go through some of the jargon to keep you distracted. As always, your particular circumstance may vary, so it’s always advisable to ask an expert specifically to get the best advice possible.
Seriously, what the heck is the difference between gift and transportation, hospitality, lodging - collectively referred to as entertainment expenses? Let’s break it down.
Gift: i) anything that is received without consideration of equal or greater value; ii) The term does not include: a) a political contribution otherwise reportable as required by law; b) a commercially reasonable loan made in the ordinary course of business; c) hospitality, transportation, or lodging.
Long story short - something that is given without reciprocity. Now, let’s think about some examples.
A gift could be a pen, a coffee mug, a bobble head, flowers, a bottle of alcohol, or some knickknack with your company or association logo. An “exception” exists within the regulations to permit gifts valued at less than $10, but that doesn’t necessarily mean the filing responsibilities go out the window with that exemption.
And the lesson endeth here: always read the fine print.
So that $10 limit pretty much covers those tchotchkes most companies and organizations hand out to lawmakers and staff members for the holidays or a “day on the hill”, however, the totality of that gift when given to multiple members, staffers, etc. must be included on the appropriate quarterly expense report in the aggregate. Note, an expense report need not disclose the name, date, description, and exact dollar amount of a gift until it exceeds the $250 calendar year threshold (per recipient).
Regardless of the exemption, it’s ALWAYS, always, always (did we say ALWAYS?) a prudent practice to keep records of any and all expenses related to lobbying in Pennsylvania.
In the event of an audit or an Ethics Commission inquiry, your case is stronger with evidence to support your compliance practices and records, and prove your activities are what they are...and not what someone else perceives them to be.
As a side note, the law specifically reminds registrants that political contributions are a separate issue...more on that in another blog post coffee and compliance fans…
Don’t be “that guy” and get caught in a compliance nightmare.
Moving on…don’t worry Russell, we haven’t forgotten about you…
Don’t pretend you haven’t bought into the typical description of lobbying firms and lobbyists - all they do is take lawmakers out to dinner or out for drinks. Surprise! They do, but it’s not ALL they do, so don’t admonish them too harshly. Admit it, sometimes it’s more effective to do business outside the office and get people on neutral ground.
But first, definitions...
Hospitality: i) the term includes the following: a) Meals. b) Beverages. c) Recreation and entertainment. ii) The term does not include: a) Gifts. b) Transportation or Lodging.
The stereotypical lobbyist activities described fall into the hospitality category. If you think about it, makes sense, right? If someone is sharing food and drink with you in their home, traditionally that’s referred to providing hospitality to someone.
Registrants must keep track of these activities, including the “who”, “how much”, and “when” for expense reporting purposes. When it’s time to file that expense report, the registrant reports the total amount of hospitality activities for the quarter, but may not necessarily provide the details for those expenses. How is that possible?
For some of the more prominent lobbying entities, the dollar figure in the hospitality category is on the larger side, and the cynics and inquisitorial of us wonder who all received those goodies. The truth is that while the dollar amount is public information, the recipient of the hospitality may never be disclosed. Why? The threshold for disclosing that information in an itemized fashion is $650 for the calendar year (per recipient).
Registrants are responsible for keeping an internal record of all their hospitality expenses on a per person basis in the event a particular lawmaker or staff member individually exceeds the $650 threshold. Until that point, the registrant only reports the grand total of spending, which presents an interesting little side note for those companies or firms that have the ability to spread out expenses to other clients or subsidiary companies...but that’s a topic for another day.
Back on point here…
The last stage in this entire process is a biggie - COMMUNICATION!
Throughout the entire process, registrants should be communicating with lawmakers and staff members on the totality of the hospitality or gift spending. Within the law, there is a procedure in place for the recipient of a gift or hospitality to reimburse the registrant, however, the recipient must do so within 30 days of the date the gift or hospitality occurred.
While this sounds strange, it’s a process for the lawmaker or staff member to take ownership over what they will and will not accept from lobbyists, for them to properly disclose the receipt of these things on their annual financial interest forms, and, frankly, to avoid some of the stigma that “comes with the job” with respect to the lobbying industry.
Registrants must not only be aware of this process, but adhere to the provisions in the law that require notification - within 10 days of filing an expense report - to a lawmaker or staff member that they have reached either annual threshold and their name along with the dates, dollar amounts, and descriptions will be disclosed on an expense report.
Essentially, the lesson today is record keeping.
For those of us who abhor paperwork, this is a nightmare; for those of us who might have a touch of OCD, this is a dream. No matter which category describes you, HAVE A PLAN!
An effective compliance strategy will save you heartache and time in the short and long term.
And if you truly hate all of these particulars as much as we despise old Commodus, talk to a professional today and get yourself, your company, your organization on the right path.