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
Rationale: 1. Background
We begin by restating a commitment that is shared by all Commissioners. The LRC is committed to ensuring that the public has ample and accurate information concerning the activities of those who lobby the Indiana General Assembly and their financial relationships with its members. At the same time, the LRC does not have discretion in determining what information must be put on the public record. Instead, it is charged with administering the Indiana Lobby Registration Act (Act), and issuing advisory opinions on its requirements.
The Act was enacted in 1981 and has been amended in seven subsequent sessions of the General Assembly. These amendments, coupled with the inherent complexity of the Act's subject matter, have raised questions concerning the interpretation of the Act and the status of early interpretations, especially those rendered prior to the amendments.
Many of these questions relate to the reporting of information required by the Act. To clarify reporting requirements, the LRC has begun the process of compiling and reconciling advisory opinions and other interpretations of the Act. In the course of this work, and in keeping with the LRC's commitment to a thoroughly public process, there have been some frank and open public discussions about several provisions of the Act. In these discussions, concerns have been expressed about the different transactional characteristics and implications of reporting lobbyists' gifts to legislators, on the one hand, and lobbyists' payments to legislators for goods or services made in the regular course of business, on the other. Many lobbyists are large companies that consume and provide significant volumes of goods and services. In a state such as Indiana, which mandates a citizen legislature, it is not surprising that those lobbyist companies would buy goods and services from entities that are owned by or include members of the General Assembly, or engage in other transactions with legislators -- transactions that may be unrelated to any legislative action. A concern about certain of these transactions caused the Indiana General Assembly in 1992 to exclude from the Act credit card agreements, insurance policies, recorded mortgages, and investment accounts when made in the ordinary course of business. See Indiana Code Section 2-7-2-6(g).
In addition, several other provisions of the Act make a clear distinction between giving gifts and making payments for goods and services. Indiana Code Section 2-7-3-6(a) distinguishes between and requires lobbyists to make separate reports of purchases [(a)(1)] and gifts [(a)(2)]. This distinction also is found in the statement of economic interest required of legislators under Indiana Code Section 2-2.1-3-2(a)(7) (purchases) and (8) (gifts).
During the meeting on May 22, 1996, Commissioner Jerry Bepko posed a question about whether the distinction between gifts and other transactions should guide interpretation of the reporting requirements of Indiana Code Section 2-7-3-3(a)(3) which requires lobbyists to file a statement of expenditures and gifts to any member of the General Assembly. First, there is a minor threshold point. Buried in the expression expenditures and gifts is a drafting or interpretation issue. The word expenditures is defined in the broadest terms. It specifically includes gifts. (See Indiana Code Section 2-7-1-11(a).) As a result, the expression expenditures and gifts is redundant and seems to call for further interpretation.
In accordance with LRC practice and prevailing interpretations of subsection (a)(3), the dollar value of expenditures and gifts is to be reported. Subsection (a)(7) of Indiana Code Section 2-7-3-3 provides for an additional report that refers to Indiana Code Section 2-2.1-3-3.5. Under the latter section, a member of the General Assembly must file an affidavit with any lobbyist who has provided more than one-third of the member's non-legislative income. In turn, under subsection (a)(7), the lobbyist must include in the activity report the name of each member from whom the lobbyist has received an affidavit under Indiana Code Section 2-2.1-3-3.5. The question posed on May 22 was whether (a)(3) should be interpreted to require only the reporting of gifts and voluntary expenditures, while non-legislative income, such as may be received in exchange for goods or services, was to be addressed only in subsection (a)(7).
With Commissioner Jan Abbs' concurrence, Commissioner Bepko asked that counsel, Annette Fancher, work with him to develop an interpretive statement using this line of reasoning so that the Commission could explore this possibility. Primary emphasis was placed on the interpretation of the language of the Act and its internal consistency. Ms. Fancher had already indicated that she, too, saw some merit in this reasoning and agreed that it should be explored as part of the continuing effort to compile guidelines and clarify reporting requirements.
In asking that counsel work with him to develop such a statement, Commissioner Bepko noted that there was no proposal before the LRC, that there would have to be much more study and discussion, that he and the others were only "leaning" in the direction of this interpretation as a way of achieving the goal of internal consistency in the Act and avoiding the inclusion of some transactions that have no relationship to legislative action, that he was far from certain about the conclusion that should be reached, and that counsel and other Commissioners were uncertain as well. In addition, he expressed a concern that the narrow reading of 2-7-3-3(a)(3) could reduce the information available to the public and asked that we develop the statement in a way that did not significantly reduce the information now filed. He specifically referred to the problem of not requiring reporting of some transactions that, by virtue of their intent or volume, would relate to, or likely influence, legislative action.
It should be noted that, no matter what interpretation is placed on Indiana Code Section 2-7-3-3, there are other provisions of the Indiana Code that require reporting regarding these types of transactions. As mentioned earlier, Indiana Code Section 2-2.1-3-2(a)(7) requires a legislator to provide a statement of economic interest, which is to be filed with the principal clerk of the House or Secretary of the Senate. It must be in the form of a written statement for the preceding calendar year and must report the name of any lobbyist who purchased from the member or the member's family business, goods or services for which the lobbyist paid in excess of $100, or purchased from the member's partner goods or services for which the lobbyist paid in excess of $1,000. Also, pursuant to subsection (a)(8), the legislator must report the name of any lobbyist from whom the member received any gift of cash or any single gift other than cash having a fair market value in excess of $100. In correlated reporting requirements found in the Act at Indiana Code Section 2-7-3-6, a lobbyist must file a written report with respect to a member of the General Assembly when the lobbyist has made a purchase described in Indiana Code Section 2-2.1-3-2(a)(7) or the lobbyist has made a gift described in Indiana Code Section 2-2.1-3-2(a)(8). According to Indiana Code Section 2-7-3-6(b), this written report must include the name of the lobbyist and whether the report covers a purchase or gift. The LRC's practice is to require, in addition, the dates of purchases or gifts and the amount of cash gifts, but not the amount of purchases. It was through these requirements that we thought the public might be accorded adequate information, even if Indiana Code Section 2-7-3-3(a)(3) was construed narrowly.
The Indiana Code references and analysis set forth thus far in this memo serve as a foundation for one final thought on the minds of some Commissioners. We have noted that the Act makes a distinction between gifts and other transactions in which there is an exchange of value between a lobbyist and a member of the General Assembly. There is a further distinction that prompted an exploration of the interpretation of Indiana Code Section 2-7-3-3(a)(3), which requires reporting of expenditures. The other reporting provisions, such as those found in the requirement for a legislator's statement of economic interest and the correlated lobbyist reporting requirements, apply to purchases of goods or services from members. Subsection (a)(3) covers much more ground; it may apply both to the purchase of goods and services from, and the sale of goods or services (for present value or on credit) to a member of the General Assembly. In other words, if a legislator buys online computer services from a company registered as a lobbyist, the transaction may have to be reported as an expenditure under subsection (a)(3). It is the potential breadth of transactions in this latter category that has troubled many observers, caused the Indiana General Assembly to exclude some transactions, and served as an additional basis for looking at the potential limiting relationship between the requirements of Indiana Code Section 2-7-3-3(a)(3) and (a)(7).
2. Result of the Review
Since the discussion on May 22, we have conducted a more thorough study of the particular language of the Act. That study has made it increasingly clear that the word expenditure in 2-7-3-3(a)(3) is not to be limited to voluntary transactions and is not affected by 2-7-3-3(a)(7). The conclusion is based on several factors:
- The word expenditure is defined expansively in the Act and includes the word payment in its definition, which itself is defined in an even more inclusive way. See Indiana Code Sections 2-7-1-3 and 2-7-1-11(a). There is no suggestion in any of thes e definition sections that the word expenditures is to be limited to voluntary or gratuitous transfers.
- The intent of legislation is often determined by the manner in which persons have responded to the law. Many who have been responsible for interpreting the Act have presumed, over a considerable period of time, that the word expenditure in (a)(3) is to be interpreted broadly, not narrowly. On this point, it is instructive that the Indiana General Assembly enacted amendments to 2-7-2-6 in 1992 and 1993. Those amendments added subsection (g), which provides that the Act does not apply to an insurance policy, a credit card agreement, a recorded mortgage secured by real property, or a written agreement with a financial institution. This language of exclusion was intended to eliminate from activity reports some information that had been required by an A ttorney General's interpretations of (a)(3). [See Official Opinions 90-15 and 90-23.] If the General Assembly had intended an inherent limitation on the meaning of the word expenditure so that only voluntary expenditures were included, it would not have b een necessary to provide the additional exclusionary language of subsection (g).
- A narrower reading of Indiana Code Section 2-7-3-3(a)(3) would result in a reduction of information now available to the public, and there does not appear to be a good alternative basis for its reporting, as we had speculated that there might be in the meeting on May 22. The LRC currently requires lobbyists to report the dollar amount of the gifts and expenditures made under Section 2-7-3-3(a)(3). Other provisions of the Act do not appear to require the amount involved in transactions. Indiana Cod e Section 2-7-3-6(a) requires a written report with respect to purchases and gifts that are described in Indiana Code Section 2-2.1-3-2(7) and (8). At a minimum, this report requires the lobbyist to report the name of the lobbyist and whether the report covers a purchase or a gift. As noted earlier, the LRC's practice also requires the dates of purchases or gifts and the amount of cash gifts, but LRC's practice has not required the amount of purchases.
- As noted by Commissioner Bepko in the meeting on May 22, the separate report required by 2-7-3-3(a)(7) of those cases in which a lobbyist has provided one-third of the legislator's non-legislative income is important in its own right, and therefore was not necessarily meant to imply that non-legislative income should be excluded from 2-7-3-3(a)(3). Payments for services could be reported under (a)(3), but the impact of those expenditures may not be easily evaluated. The reporting of the transferre d amount alone would not reveal the relationship between the payment and the legislator's total income. It is reasonable to assume that a payment which represents a small percentage of a legislator's total income would have less potential for influencing legislative action than a payment that represents a substantial percentage. It is only under (a)(7) that this information is reported and adds an additional dimension to the report of expenditures.
- Throughout the analysis we have been mindful of the public's expectation for information about all economic relationships between lobbyists and legislators, including those seemingly unrelated to legislative action. There is at least the appearance that those who do business with members of the General Assembly and contribute to their livelihoods may expect special attention if and when they have interests at stake.
Accordingly, we recommend that the LRC publish in the Indiana Register a proposed interpretation that would reaffirm that under Indiana Code Section 2-7-3-3(a)(3) all expenditures, whether purchases, gifts or other payments, would have to be reported. The conclusion is that the definition of "expenditure" is not limited by Indiana Code Section 2-7-3-3(a)(7). This answers the question that was raised at the meeting on May 22.
Under our current practices, these reports are to be made in Section "C" of the LRC's Activity Report form. Lobbyists can designate in Section "C" whether the transfers made to members of the General Assembly are for expenditures or gifts. Nevertheless, there is still some potential for a misleading commingling of different types of transactions in this section of the Activity Report form. To address this potential, we recommend that the Activity Report form be modified so that reports of expenditures will be made in one section of the form, and reports of gifts will be made in another section.
Finally, we also may wish to have a third section of the Activity Report form for transactions that would be otherwise excluded by Indiana Code Section 2-7-2-6(g) but where the transaction is not made in the ordinary course of business. An example might be where a mortgage loan is issued to a legislator for a significantly lower interest rate on significantly more favorable terms than are provided to the general public.
Our revised Activity Report form might then have three sections to substitute for existing Section "C":
- transfers that constitute gifts to a member of the General Assembly;
- transfers that constitute expenditures pursuant to some exchange relationship;
- credit card transactions, insurance policies, recorded mortgages, and written agreements with a financial institution if not made in the ordinary course of business.
These proposals were discussed in the meeting of the LRC held on July 10, and were approved by the LRC. In accordance with LRC policy, these conclusions are now published for comment in the Indiana Register by way of this memo. Any comments from the public on these proposals will be discussed at the first LRC meeting held at least 30 days following publication, and these conclusions will automatically become final absent further action taken by the LRC at that meeting.
4. Recommendations for Future LRC Consideration
The conclusions set forth above do not resolve all of the vexing questions that gave rise to this study. For example, these conclusions do not resolve the question of whether reports must be made when legislators purchase goods and services in the regular course of business from corporations that are lobbyists, such as in the case of a legislator who buys online computer services from a company registered as a lobbyist. The delivery of the services would likely be the "rendering... of anything...of value" within the meaning of Indiana Code Section 2-7-1-11 (defining the word payment), which would cause it to be an expenditure (the word expenditure includes payments under Indiana Code Section 2-7-1-3) and thus reportable under Indiana Code Section 2-7-3-3(a). This issue has not been raised for the Commission and is not before the Commission in a formal sense. Nevertheless, we believe we should take this opportunity to address the matter in preliminary fashion as part of the effort to develop helpful guidelines.
In analyzing the issue, it is useful to refer to House Concurrent Resolution 7, adopted in 1991, which expressed an intent to exclude some transactions from the definition of lobbying. The resolution states:
That individuals and institutions who make commitments with members of the Indiana General Assembly in the ordinary course of the members' normal personal, religious, business, cultural and other affairs and who later keep those commitments are not "lobbying" within the meaning of the statute.
The language of this concurrent resolution is similar to a distinction made by the Indiana Attorney General in Official Opinion 90-23. In that opinion a distinction was made between transactions in the ordinary course of business and oth er transactions. This also accords with new federal rules enacted in 1995. House Rule 52 and Senate Rule 35 both allow for purchases if the recipient pays the market value. Both also allow congressional members to take advantage of "opportunities and b enefits" that are either available to the general public, to large segments of the general public, or are offered to members of an organization in which membership is unrelated to congressional employment.
In defining its intent in House Concurrent Resolution 7, the General Assembly states, "That to expand the meaning of the word "lobbying" beyond the literal statutory words goes beyond the proper construction of the statute and is contrary to the intent of the Indiana General Assembly."
The word expenditure, while almost limitless in its definition, nevertheless should be applied in light of the definition of lobbying, which requires "the purpose of influencing any legislative action." [The language of an act must be presumed to be applied in a logical manner, consistent with the legislation's underlying goals and policies. See Collins v. Thakker, 552 N.E.2d 507, Ind.Ct.App. (1990).] Read together with the word lobbying, the word expenditure seems limited to transactions which are intended to influence legislative action or which have a strong potential to do so.
Unfortunately, this formulation leaves some considerable uncertainty for persons seeking guidance on reporting requirements. To provide an appropriate measure of certainty we propose for discussion the following guidelines for interpreting Indiana Code Section 2-7-3-3(a). When a lobbyist purchases goods or services from a member of the General Assembly, even if those purchases are made in the regular course of business on terms that are available to the General public, the amount paid must be reported. It is an "expenditure." The lobbyist is contributing to the business by which the member of the General Assembly earns a living. To that extent, we would presume an intent to influence, or at least a strong potential to influence, legislative action. The case is different if the member of the General Assembly purchases goods or services from a lobbyist, such as the online services purchase cited earlier. If the terms of this purchase are more favorable than those offered to the general public, then it seems that the more favorable terms would be designed to influence legislative action or would have the strong potential to do so. In such a case, the matter should be reported. If, however, the terms are identical to the terms offered to the public in general, then there does not seem to be the requisite intent or potential for influencing legislative action and the expenditure (by way of transferring goods or services) would not have to be reported. If the LRC adopts this approach, we may wish to create a separate part of the activity report form that provides for reporting these types of expenditures to members of the General Assembly.