Demystifying Amendment 54: Impacts to Local Business

January 1, 2010

By: Rita M. Connerly and John M. Tanner

Beginning December 31st, the recently-passed Amendment 54 will provide a new layer of compliance confusion for local Colorado companies. In just days, innocuous transactions may be deemed political activities.

Amendment 54 will create accounting and disclosure requirements for businesses and will significantly impact the political, speech and privacy rights of company officers and directors and business owners.

Under Amendment 54, the holder of a "sole source" government contract (and its officers, directors and owners) cannot make political contributions. The holder of a sole source government contract is any person or business that provides goods and/or services to the state of Colorado (or any city, county, special district, school district or other public entity that receives a majority of its funding from Colorado taxpayers) collectively valued at more than $100,000 in any calendar year.

For any business with multiple locations or serving multiple public entities Amendment 54 has broad implications:

Consider a grocery store chain
Local fire stations and city agencies buy groceries and deli platters throughout the year. This is an ordinary and innocent transaction. Beginning December 31, however, if these purchases total $100,000 or more in a calendar year from all locations statewide, then these transactions are presumed political, requiring the store chain to give up its rights to engage in our country’s political processes and to participate in expensive and time-consuming reporting.

As the contract holder in this case, the grocery store chain is prohibited from making a contribution to any political party or political candidate running for an elected office. Further, the officers, directors and trustees of the grocery store and all persons controlling ten percent or more of an interest in the business are under the same restrictions. The language even extends to an employee’s spouse or family.

Political fundraising
Due to the Amendment’s prohibition against indirectly inducing another person to contribute to a political candidate or party, a director of a company covered by Amendment 54 should be cautioned before circulating an invitation to a political fundraising event, assisting with mailings or speaking in support of a contribution to a political cause.

The definition of "contribution" extends not only to financial payments, but also to loans of money or property, gifts, expenditures, guarantee of a loan or "anything of value given, directly or indirectly, to a political candidate or political party." (Services provided without compensation are excluded.)

So consider a bank. If a bank makes loans to any governmental entity (or extends lines of credit) exceeding $100,000 in total statewide, Amendment 54 applies unless the loans were the result of a public bid process. If there was not a public bid, then the bank, its officers and owners cannot contribute to their political party and candidates for the term of the loan plus two years thereafter.

The breadth of the new law restricts political speech, impinges on a person’s fundamental right of association, intrudes into one’s privacy, and encroaches into contractual rights to a level that provokes questions surrounding the law’s constitutionality.

For Colorado businesses, the penalties for violating the law include monetary liability and ineligibility to hold any sole source government contract or public employment with the state or any of its political subdivisions for three years.

In maneuvering through the impacts of Amendment 54, Colorado companies or potential contract holders should be aware of these and other scenarios. They should be proactive in understanding the specifics of exactly what it means for them to comply and where to turn if they do not comply.

Some companies may want to consider revising their employment manual to advise officers and directors of their related rights and/or obligations. Whatever the action, Colorado companies should work to clear up any lingering concerns or confusion caused by Amendment 54.

This Article is published for general information, not to provide specific legal advice. The application of any matter discussed in this article to anyone's particular situation requires knowledge and analysis of the specific facts involved.

Copyright © 2008 Fairfield and Woods, P.C., ALL RIGHTS RESERVED.

Comments or inquiries may be directed to:
Rita M. Connerly or John M. Tanner.