Section 6: Semiannual Reporting of Lobbying Activities

When and Why a Report is Needed

Each registrant must file a semiannual report on Form LD-2 no later than 45 days after the end of the semiannual period beginning on the first day of each January and the first day of July of each year in which a registrant is registered. If a registrant engaged in lobbying activities during the semi-annual period preceding their registration, a Form LD-2 should be filed disclosing such activities. Lobbying firms file separate reports for each client for each semiannual reporting period, while organizations employing in-house lobbyists file one report covering their in-house lobbying activities each semiannual reporting period. The Clerk and Secretary consider reports as filed timely if they are postmarked by February 14 or August 14. In the event that either of the aforementioned dates occur on a weekend or a federal holiday, the next business day postmark is also considered timely. Registrants should keep in mind that their reports are date-stamped by the House Legislative Resource Center and the Senate Office of Public Records on the dates they are actually received, and that inquiries regarding any discrepancy between the date stamp and the mailing date will be directed to the registrant.

The Secretary and Clerk do not have the authority under the LDA to grant extensions to registrants.

The obligation to report under the LDA arises from active status as a registrant (i.e., a registration on file that has not been validly terminated). Section 5(a) of the LDA requires a registrant to file a report for the semiannual period in which it incurred its registration requirement, and for each semiannual period thereafter, through and including the reporting period for which it terminates its registration. A timely report using Form LD-2 is required even though the registration was in effect for only part of the reporting period. So long as a registration is on file and has not been terminated, a registrant must report its lobbying activities even if those activities during a particular semiannual period would not trigger a registration requirement in the first instance (e.g., a lobbying firm's income from a client amounted to less than $5,000 during a particular semiannual period). A registrant with no lobbying activity during a semiannual period completes, signs, and files the first page (only) of Form LD-2.

Preparing to File the Semiannual Report - Income or Expense Recording

The LDA does not contain any special record keeping provisions, but requires, in the case of an outside lobbying firm (including self-employed individuals), a good faith estimate of all income received from the client, other than payments for matters unrelated to lobbying activities. In the case of an organization employing in-house lobbyists, the LDA requires a good faith estimate of the total expenses of its lobbying activities. As long as the registrant has a reasonable system in place and complies in good faith with that system, the requirement of reporting bottom line expenses or income would be met. Since Section 6(5) requires the Secretary and Clerk to "retain registrations for a period of at least 6 years after they are terminated and reports for a period of at least 6 years after they are filed," we recommend registrants retain copies of their filings and supporting documentation for the same length of time.

Lobbying Firm Income

Lobbying firms report income earned or accrued from lobbying activities during a semiannual period, even though the client may not be billed or make payment until a later time. For a lobbying firm, gross income from the client for lobbying activities is reportable, including costs or disbursements that are in addition to fees and separately invoiced. Line 12 of LD-2 provides boxes for a lobbying firm to report income of less than $10,000, or of $10,000 or more. If lobbying income is $10,000 or more, a lobbying firm must provide a good faith estimate of the actual dollar amount rounded to the nearest $20,000.

Organization Expenses using LDA Expense Reporting Method

Organizations that employ in-house lobbyists may incur lobbying-related expenses in the form of employee compensation, office overhead, or payments to vendors which may include lobbying firms. Organizations must report expenses as they are incurred, though payment may be made later. Line 13 of LD-2 provides for an organization to report lobbying expenses of less than $10,000, or $10,000 or more. If lobbying expenses are $10,000 or more, the organization must provide a good faith estimate of the actual dollar amount rounded to the nearest $20,000. Organizations using the LDA expense reporting method mark the "Method A" box on Line 14.

To ensure complete reporting, the Secretary and Clerk have consistently interpreted section 5(B)(4) to require such organizations to report all of their expenses incurred in connection with lobbying activities, including all payments to outside entities, without considering whether any particular payee has a separate obligation to register and report under the LDA. Logically, if an organization employing in-house lobbyists also retains a lobbying firm, the expense reported by the organization should be greater than the fees reported by the lobbying firm of which the organization is a client.

All employee time spent in lobbying activities must be included in determining the organization's lobbying expenses, even if the employee does not meet the statutory definition of a "lobbyist."

Example: The CEO of a registrant, "Defense Contractor," travels to Washington to meet with a covered DOD official regarding the renewal of a government contract. "Defense Contractor" has already determined that its CEO is not a "lobbyist," because he does not spend 20 percent of his time on "lobbying activities" during a semiannual period. Nonetheless, the expenses reasonably allocable to the CEO's lobbying activities (e.g., plane ticket to Washington, salary and benefit costs, etc.) will be reportable.

Similarly, all expenses of lobbying activities incurred during a semiannual period are reportable. The Section 3(7) definition of lobbying activities is not limited to lobbying contacts.

Example: A research assistant in the Washington office of the registrant, "Defense Contractor" (described in the example above) researches and prepares the talking points for the CEO's lobbying contact with the covered DOD official. Likewise, the expenses reasonably allocable to the research assistant's lobbying activities will be included in "Defense Contractor's" expense estimate for the semiannual period.

The examples below are intended to be illustrative of the possibilities of LDA expense reporting, and are not intended to require detailed accounting rules.

Example 1: An organization employing in-house lobbyists might choose to estimate lobbying expenses by asking each professional staffer to track his/her percentages of time devoted to lobbying activities. These percentages could be averaged to compute the percentage of the organization's total effort (and budget) that is devoted to lobbying activities. Under this example the organization would include salary costs (including a percentage of support staff salaries), overhead, and expenses, including any third-party costs attributable to lobbying.

Example 2: Another organization, which lobbies out of its Washington office, might avoid the need for detailed breakdowns by including the entire budget of its Washington office.

Organizations Reporting Expenses under Section 15 (Optional IRC Reporting Methods)

Section 15(a) of the LDA allows entities that are required to report and do report lobbying expenditures under section 6033(b)(8) of the Internal Revenue Code ("IRC") to use IRC definitions for purposes of LDA Sections (4)(a)(3) and 5(b)(4). Charitable organizations, as described in IRC Section 501(c)(3), are required to report their lobbying expenditures under Section 6033(b)(8) of the IRC. They may treat as LDA expenses the amounts they treat for "influencing legislation" under the IRC.

Section 15(b) of the LDA allows entities that are subject to section 162(e) of the IRC to use IRC definitions for purposes of LDA Sections (4)(a)(3) and 5(b)(4). The eligible entities include for-profit organizations (other than lobbying firms) and tax-exempt organizations such as trade associations that calculate their lobbying expenses for IRC purposes with reference to Section 162(e) rules. We believe that this reporting option is available to include a small number of trade association registrants not required by the IRC to report non-deductible lobbying expenses to their members (i.e., those whose members are tax-exempt).

If an eligible organization elects to report under Section 15, it must do so consistently for both reports covering a calendar year. The electing organization also must report all expenses that fall within the applicable Internal Revenue Code definition. The total that is ultimately reportable to the Internal Revenue Service is the figure that would be used for Line 13 reporting. Line 13 of LD-2 would require any organization to report if the amount of lobbying expenses were less than $10,000, or $10,000 or more. If the expense amount is $10,000 or more, it should be rounded to the nearest $20,000. Line 14 of LD-2 requires the electing organization to mark as applicable, either the "Method B" box (IRC Section 6033(b)(8)) or the "Method C" box (IRC Section 162(e)). The Secretary and Clerk are aware that IRC and LDA are not harmonized in terms of expense reporting, and registrants are advised that backing out grass roots and state and local lobbying expenses that would alter the IRS reportable total is not permitted.

Semiannual Reporting of Lobbying Activities - Contents of Report

The two core disclosures required by Section 5(b) and © of the LDA and incorporated into Form LD-2 are: (1) lobbying income or expenses; and (2) lobbying issues. LD-2 has been designed to allow registrants the greatest flexibility in terms of document length to correspond with varying amounts of information relating to the core disclosures. The following examples illustrate how the nature of the core disclosures build the form.

Example 1: Registrant "A" represents Client "B" to monitor an issue of interest to B and make occasional lobbying contacts as necessary. During the Mid-Year 1998 reporting period, "A" received $7,000 from "B," but had no lobbying activity because "B's" issue was dormant. "A" would complete the top portion of page 1 of LD-2, mark the boxes labeled "No Lobbying Activity" and"Less than $10,000," sign and date the first page, and file the report.

Example 2: Same circumstances as above, except that "A" has two lobbyists who make lobbying contacts on a single lobbying issue with the Senate and the House. In this case, the second page of LD-2 would have to be completed, "A" would sign and date page 2, and file the report.

Example 3: Same circumstances as example 2, but one of the lobbyists retires during the reporting period. In this case, a third page of LD-2 would be required as well as the first two completed pages reflecting the removal of the lobbyist's name (his/her retirement) from A's registration and reports.

Section 5(b) requires specific information on the nature of the lobbying activities. Page 2 of Form LD-2 requires the registrant to:

• Disclose the general lobbying issue area code (list 1 code per page)

• Identify the specific issues in which the lobbyist(s) engaged in lobbying activities

• Identify the Houses of Congress and Federal Agencies contacted

• Disclose the lobbyists who had any activity in the general issue area

• Describe the interest of a foreign entity if applicable

When reporting specific lobbying issues, some registrants have listed only House or Senate bill numbers on the issues page without further indication of their clients' specific lobbying issues. Such disclosures are not adequate, for several reasons. First, Section 5(b)(2)(A) of the LDA requires disclosure of "specific issues upon which a lobbyist employed by the registrant engaged in lobbying activities, including ... bill numbers[.]" As we read the law, a bill number is a required disclosure when the lobbying activities concern a bill, but is not in itself a complete disclosure. Further, in many cases, a bill number standing alone does not inform the public of the client's specific issue. Many bills are lengthy and complex, or may contain various provisions that are not always directly related to the main subject or title. If a registrant's client is interested in only one or a few specific provisions of a much larger bill, a lobbying report containing a mere bill number will not disclose the specific lobbying issue. Even if a bill concerns only one specific subject, a lobbying report disclosing only a bill number is still inadequate, because a member of the public would need access to information outside of the filing to ascertain that subject. In our view, the LDA contemplates disclosures that are adequate to inform the public of the lobbying client's specific issues from a review of the LD-2, without independent familiarity with bill numbers or the client's interest in specific subject matters within larger bills. The disclosures on Line 16 must include bill numbers, where applicable, but must always contain information that is adequate, standing alone, to inform the public of the specific lobbying issues.

Example: Client "A's" general lobbying issue area is "Environment." During the second half of 1997, lobbyists for "A" made contacts concerning the Department of Defense appropriations for environmental restoration. For fiscal 1998, the Department of Defense Appropriations Act was part of the Omnibus Consolidated Appropriations Act for 1998, H.R. 3610, a lengthy and complex bill that did not have numbered sections throughout. Title II contained separate but unnumbered provisions making appropriations for "Environmental Restoration, Army," "Environmental Restoration, Navy," "Environmental Restoration, Air Force," "Environmental Restoration, Defense-Wide," and"Environmental Restoration, Formerly Used Defense Sites." Lobbying contacts for Client "A" addressed all environmental restoration funding within the Defense Department bill. An appropriate disclosure of the specific lobbying issue would read as follows: H.R. 3610, Department of Defense Appropriations Act for 1998, Title II all provisions relating to environmental restoration.

The Houses of Congress and Federal agencies contacted by lobbyists during the reporting period must be disclosed on Line 17 of Form LD-2. The LDA adopts the Administrative Procedure Act definition of agency found in 5 U.S.C. 551(1). Therefore, disclose the specific agency contacted whether or not it is part of an executive branch department. It is not necessary to report the offices within the agency that were contacted. If lobbyists were engaged in lobbying activities that did not involve lobbying contacts, then the registrant must mark the "Check if None" box.

Previously identified lobbyists and new lobbyists for this reporting period must be listed on Line 18 of LD-2 if they had any lobbying activities during the reporting period, whether or not they made lobbying contacts. The issue page is only intended to reflect lobbying activity by lobbyists, and not activity of those who are not lobbyists. Once an individual has met the definition of a lobbyist and has been disclosed or identified as such, he or she does not need to meet that standard every reporting period in order to trigger disclosure of his or her lobbying activities. The registrant does not report the names of individuals who may perform some lobbying activities, but who do not and are not expected to meet the LDA definition of a lobbyist.

Example: Lobbying Firm "A" filed its initial registration for Client "B" on February 14, listing Lobbyists "X," "Y" and "Z." From January through June, Lobbyists "W" (hired in April) and "X" and "Y" made contacts for "B," while Lobbyist "Z" was assigned work for other clients. Lobbyist "Z" is expected, however, to be active on behalf of Client "B" after Labor Day until adjournment. In its Form LD-2 for Client "B," filed on or before August 14, Lobbying Firm "A" lists "W," "X" and "Y" on Line 18. "W" is also identified as "new," and Firm "A" would disclose if "W" occupied a covered position within the last two years. "Z" is not listed on the Form LD-2 filed for Client "B" for the January - June semiannual period, but because of the current expectation that he will lobby during the July - December period, his name is not deleted as a lobbyist for "B."

New lobbyists should be disclosed on the appropriate issue(s) page(s) for the reporting period in which the individual first meets the definition of lobbyist. We are aware that there will be situations in which a registrant expects an individual to become a lobbyist and wishes to disclose the name of that individual for a matter of public record. Section 5 of the LDA, however, provides that updated registration information is contained in the registrant's next semiannual report. Therefore, there may be a period of time in which an individual is legitimately making lobbying contacts but is not be identified on the public record until the next semiannual report is filed. In such cases, the registrant reports updated information as the LDA requires.

A foreign entity is reported on Line 19 if both of two circumstances apply: 1) the foreign entity must be an entity that is required to be identified on Form LD-1 or on the registration information update page. That, in turn, depends on whether the entity meets one of the three conditions of Section 4(b)(4) of the LDA; and 2) the entity must have an interest in the specific lobbying issues listed on Line 16. If a foreign entity has an interest in the specific issues, Line 19 requires a description of that interest. For the sake of clarity the registrant should indicate whether the foreign entity(s) is/are the same as identified on the registration.

Example: "[Name of foreign entity], identified on LD-1, exports [type of product] to United States and would benefit from [specific desired outcome]."

Section 8: Relationship of LDA to Other Statutes

LDA and FARA

The technical amendments to the LDA reflected a determination that the FARA standards are appropriate for lobbying on behalf of foreign governments and political parties, but that LDA disclosure standards should apply to other foreign lobbying (also refer to the section in this document entitled "What is New?"). An agent of a foreign commercial entity is exempt under FARA if the agent has engaged in lobbying activities and registers under the LDA. An agent of a foreign commercial entity not required to register under the LDA (such as those not meeting the de minimis registration thresholds) may voluntarily register under the LDA. The amendments reaffirm the bright line distinction between governmental and non-governmental representations, and are not meant to shroud foreign government enterprises. Questions relating to the Foreign Agents Registration Act must be directed to the Department of Justice Foreign Agent Registration Unit at (202) 514-1231.

LDA and IRC

The LDA and the IRC intersect in three different ways. Restrictions on lobbying by tax-exempt organizations are governed by the definitions in the IRC, not those of the LDA.

First, Section 15 defines which registrants are eligible for the "safe harbor." Section 15 allows entities that are required to report and do report lobbying expenditures under section 6033(b)(8) of the IRC to use IRC definitions for purposes of LDA Sections (4)(a)(3) and 5(b)(4). Section 15(b) of the LDA allows entities that are subject to section 162(e) of the IRC to use IRC definitions for purposes of LDA Sections (4)(a)(3) and 5(b)(4).

Second, Section 15 advises registrants regarding how they should use IRC definitions. Prior to the technical amendments the statute was not clear as to the extent to which eligible organization could use IRC definitions for other reporting and disclosure requirements of the LDA. As a result of the amendments, registrants who make the Section 15 election must use IRC definitions (including the IRC definition of a covered executive branch official) for executive branch lobbying, and LDA definitions for legislative branch lobbying.

Third, Section 15 allows electing registrants to plug in the amount that is ultimately reportable to the Internal Revenue Service for LDA semiannual reports.

LDA and False Statements Accountability Act of 1996

The False Statements Accountability Act of 1996, amending 18 U.S.C. § 1001, makes it a crime knowingly and willfully (1) to falsify, conceal or cover up a material fact by trick, scheme or device; (2) to make any materially false, fictitious, or fraudulent statement or representation; or (3) to make or use any false writing or document knowing it to contain any materially false, fictitious, or fraudulent statement or entry; with respect to matters within the jurisdiction of the legislative, executive, or judicial branch. The False Statements Accountability Act does not assign any responsibilities to the Clerk and Secretary.

LDA and Prohibitions on the Use of Federal Funds For Lobbying

The LDA does not itself regulate lobbying by federal grantees, or contractors, though other laws, as well as contractual prohibitions, may apply. Questions concerning lobbying activities of federal grantees or contractors should be directed to the appropriate agency or office administrating the contract or grant.

Note, however, that Section 18 of the LDA prohibits 501(c)(4) organizations who engage in lobbying activities from receiving federal funds through an award, grant or contract.

Section 9: Public Availability

The Act requires the Secretary of the Senate and the Clerk of the House of Representatives to make all registrations and reports available to the public as soon as practicable after they are received.

Section 10: Review and Compliance

The Secretary of the Senate (Office of Public Records) and the Clerk of the House (Legislative Resource Center) must review, verify, and request corrections in writing to ensure the accuracy, completeness, and timeliness of registrations filed under the Act.