It used to be that personal political activity was personal, as long as it did not involve company resources, and corporate political activity was corporate. Companies that do business with state and local governments, however, often can no longer make this distinction because of the ever-growing list of federal, state and local pay-to-play laws. These laws, which often apply to contributions given both by the company and by certain senior employees, restrict contributions that may be made and often require additional detailed disclosures.

These pay-to-play laws come from a variety of sources. A number of states have enacted them in response to various scandals involving awards of contracts to companies that were politically active. Many of these contracts involved investment management services, so the Securities and Exchange Commission (SEC) has issued its own pay-to-play rule. Ironically, this federal rule generally restricts contributions to state officeholders (or federal candidates who are current state officeholders).

If your company has contracts with state or local governments, you should be certain to understand the applicable rules for your jurisdiction, put in place a compliance program and be certain to file necessary disclosure reports. Because of the look-back period on these rules, companies should undertake these efforts if they have plans to bid on state or local contracts.