Concern Over Gaping Loopholes in NYC Independent Expenditure Law

We believe loopholes in state and NYC independent expenditures (IE) laws and rules severely undermine New York’s efforts to amplify small donors and increase transparency so as to reduce the influence of big money on NYS and NYC elections. 

Unfortunately, current state and NYC laws and rules allow independent spenders to keep the existence of independent expenditures and their contributors hidden until long after they start spending to produce communications and pay for airtime or social media placement. 

Under current laws and rules an independent spender could unleash a surprise last minute barrage of media and separately keep hidden the identities of people or entities contributing less than $25,000. 

To close major loopholes in IE law, new state laws should require:

1. Earlier disclosure triggers for IE expenditures that are based on when an independent spender encumbers or spends on a communication rather than when the public sees a communication. 
2. Disclosure of contributors of $1,000 or more to entities contributing to Major Contributors to Independent Spenders. 
3. Disclosure of contributors to independent expenditure and entities contributing to it further back than twelve months before an election. 
4. Allowing imposition of penalties on an independent spender of up to three times the amount of a contribution or expense that was misrepresented in a Verification Report. Currently, the maximum penalty is $10,000, which is absurdly low given known contributions to IEs of half a million to a million dollars. (In NYC, setting an allowable penalty at three times the amount at issue would create parity with penalties for campaign finance violations.) Honest Verification reporting is the cornerstone of IE compliance, because without it regulators have a hard time seeing coordination between a campaign and an Independent Expenditure.

Scenario

Under current state and NYC IE laws, an independent spender supporting a candidate for the Democratic Party nomination for mayor in the June 24, 2025 primary election could have – as of Feb 20, 2025 – already raised $50 million and spent $10 million producing communications and $40 million buying “air time” for those communications without the NYC Campaign Finance Board (NYCCFB), their competitors, or the public knowing. 

Let’s say the independent spender/IE “broadcasted” or mailed these communications on June 2, 2025. The IE would then have to disclose to NYCCFB by June 9th, 2025 their spending and all entities contributing $1,000 or more to the IE and major contributing entities giving $50,000 to the IE. The IE would also have to disclose aggregate contributions to the major contributing entity of $25,000 or more received within twelve months of the election date. The IE would NOT have to disclose contributors giving less than $25,000 to the major contributor or contributions of any amount older than twelve months before the covered election. 

Let’s say the independent spender was unscrupulous and deliberately misidentified a person who gave $250,000 to the major contributing entity. Fortunately, the NYCCFB catches them; unfortunately, the most the NYCCFB can fine them is $10,000 – which is odd since the NYCCFB can fine a campaign three times the amount of a misreported contribution or expenditure. Honest Verification reporting is the cornerstone of IE compliance, because without it regulators have a hard time seeing coordination between a campaign and an independent expenditure. 

Major Loopholes in Disclosure Requirements

1. No expenditure disclosure until IE communication is distributed, broadcast, or published. Independent expenditures do not have to report their support for a candidate or expenditures and contributions until after the first communication they pay for is seen by the public. Therefore, an IE’s contributions are not subject to the disclosure requirement until covered communications totaling $5,000 or more are seen by the public. (§14-02(C))
2. “Major Contributor” Loophole. An IE does not have to disclose contributions to an entity it is receiving contributions of $50,000 or more from unless those contributions are for $25,000 or more a year for a covered election (§14-02(d)ii.b contributions).
3. Expenditure Disclosures. Each covered communication must be disclosed in the reporting period in which it is first published, aired, or otherwise distributed (§14-02(B)).
   Each expenditure must be disclosed in the reporting period in which the expenditure is incurred, except that no expenditure is required to be disclosed prior to the reporting of its associated communication. (§14-02(c)).
4. Contribution Disclosures. Per 14-02(D), an IE triggers contribution disclosure if it makes “covered expenditures” (totaling) $5,000 or more for a single candidate in the twelve months prior to an election. However, Per 14-02(C) the expense for a covered communication does not have to be disclosed until the communication is seen by the public.
   Verification 14-02(e)
   Max penalty for misrepresentation is $10,000.