S.F. _____ SUBCHAPTER VIII 1 Section 1. NEW SECTION . 68A.801 Short title —— declaration 2 of policy. 3 1. This subchapter shall be known and may be cited as the 4 “Corporate Political Accountability Act” . 5 2. The general assembly finds and declares as follows: 6 a. Although corporations cannot vote, corporations make 7 significant political contributions and expenditures that 8 directly or indirectly influence the election of candidates and 9 support or oppose political causes at the federal, state, and 10 local levels. Decisions to use corporate treasury funds for 11 political contributions and expenditures are currently made by 12 corporate boards and executives, often without the knowledge or 13 consent of shareholders. 14 b. Corporations acting through their boards and executives 15 have a fiduciary duty to conduct business in the best interests 16 of the shareholders. Corporate boards and executives that use 17 corporate funds to support and oppose political candidates, 18 political parties, and political causes in opposition to the 19 interests of many or all of their shareholders may not be 20 acting in the best interests of the shareholders. 21 c. Historically, shareholders of corporations in the United 22 States have not had a way to know of, or to influence, the 23 political activities of corporations they own. Shareholders 24 and the public have a right to know how these corporations 25 are spending their funds to make political contributions or 26 expenditures benefiting candidates, political parties, and 27 political causes. 28 d. Corporations should be accountable to their shareholders 29 prior to making political contributions or expenditures 30 affecting federal, state, and local governance and public 31 policy. Requiring the express approval of a corporation’s 32 shareholders prior to making political contributions or 33 expenditures and requiring reporting to shareholders of such 34 expenditures will help establish accountability. 35 -1- LSB 5213XC (5) 84 jr/sc 1/ 11

S.F. _____ Sec. 2. NEW SECTION . 68A.802 Definitions. 1 For purposes of this subchapter unless the context otherwise 2 requires: 3 1. “Contribution” or “expenditure” includes any 4 contributions and expenditures not deductible under section 5 162(e)(1)(B) of the Internal Revenue Code including but not 6 limited to contributions to or expenditures on behalf of 7 political candidates, political parties, political committees, 8 and other political entities organized and operating under 9 section 527 of the Internal Revenue Code, and any portion of 10 any dues or similar payments made to any organization exempt 11 from taxation under section 501(a) of the Internal Revenue 12 Code that is used for an expenditure or contribution and if 13 made directly by the corporation would not be deductible 14 under section 162(e)(1)(B) of the Internal Revenue Code, any 15 contribution or expenditure, as those terms are defined in 16 section 302 of the Federal Election Campaign Act of 1971, as 17 codified at 2 U.S.C. § 431, as well as any contribution defined 18 in section 68A.102. The term also includes any direct or 19 indirect payment, distribution, loan, advance, deposit or gift 20 of money, or any services, or anything of value, except a loan 21 of money by a national or state bank made in accordance with 22 the applicable banking laws and regulations and in the ordinary 23 course of business, to any candidate, campaign committee, 24 or political party or organization in connection with any 25 election to any office. “Contribution” or “expenditure” does 26 not include: 27 a. Communications by a corporation to its shareholders and 28 executive or administrative personnel and their families or by 29 a labor organization to its members and their families on any 30 subject. 31 b. Nonpartisan registration and get-out-the-vote campaigns 32 by a corporation aimed at its shareholders and executive or 33 administrative personnel and their families or by a labor 34 organization aimed at its members and their families. 35 -2- LSB 5213XC (5) 84 jr/sc 2/ 11

S.F. _____ c. The establishment and administration of a separate 1 segregated fund and the solicitation of contributions to such 2 separate segregated fund to be utilized for political purposes 3 by a corporation, labor organization, membership organization, 4 cooperative, or corporation without capital stock. 5 2. “Corporation” means any corporation formed under the 6 laws of this state or a foreign corporation if section 68A.808 7 applies. 8 3. “General treasury funds” means funds in possession of a 9 corporation in the normal course of business, including funds 10 from sales, accounts payable, loans, investments, bonds or debt 11 instruments. 12 4. “Internal Revenue Code” means the same as defined in 13 section 422.3. 14 5. “Issue advocacy campaign” means contributions or 15 expenditures for any communication to the general public 16 intended to encourage the public to contact a government 17 official regarding pending legislation, public policy, or a 18 government rule or regulation. The term does not include 19 contributions or expenditures for registered lobbyists or other 20 persons employed by the corporation to lobby directly federal 21 or state government officials. 22 6. “Known at the time of the authorization vote” means at 23 the time the corporation seeks authorization from shareholders 24 to spend corporate funds for political activities, all of the 25 following have occurred: 26 a. The corporation’s officers, directors, or employees have 27 identified a specific political activity for the corporation to 28 support or oppose. 29 b. Corporate officers, directors, or employees have taken 30 steps to obligate funds to a political activity. 31 c. The corporation has a regularly scheduled payment to 32 a trade association or other entity to pay for a political 33 activity in the next twelve months. 34 7. “Majority of shareholders” means fifty percent plus one 35 -3- LSB 5213XC (5) 84 jr/sc 3/ 11

S.F. _____ of all outstanding voting securities. Shareholders not casting 1 votes shall not count toward affirmative authorization under 2 this subchapter. 3 8. “Political activities” means any contributions or 4 expenditures made directly or indirectly to, or in support of 5 or opposition to, any candidate, political party, committee, 6 electioneering communication, ballot measure campaign, or an 7 issue advocacy campaign. 8 9. “Separate segregated fund” means a fund established 9 by a corporation for the purpose of soliciting contributions 10 to the fund for the purpose of funding political activities 11 by the corporation. A separate segregated fund that makes 12 expenditures in federal elections shall have the same meaning 13 and limitations as that found in 2 U.S.C. § 441b. 14 10. “Shareholders” means: 15 a. In the case of a foreign corporation described in section 16 68A.808, all shareholders of the corporation residing in the 17 state. 18 b. In the case of a corporation incorporated in this state, 19 all shareholders of the corporation. 20 Sec. 3. NEW SECTION . 68A.803 Corporate political activity 21 —— notification to shareholders and public report required. 22 1. Shareholder vote on corporate political activities. 23 a. Annual vote. 24 (1) Any corporation that spends in the aggregate ten 25 thousand dollars or more of corporate treasury funds on 26 political activities must comply with the requirements of this 27 section. 28 (2) Any proxy or consent or authorization for an annual 29 meeting of the shareholders of a corporation, or a special 30 meeting in lieu of such meeting, where proxies are solicited 31 in respect of any security occurring on or after six months 32 following the date on which rules are made effective under 33 paragraph “e” shall provide for a separate resolution subject 34 to shareholder vote to approve any spending of ten thousand 35 -4- LSB 5213XC (5) 84 jr/sc 4/ 11

S.F. _____ dollars or more by the corporation for any political activity. 1 (3) Notwithstanding the requirement for an annual 2 shareholder vote to authorize any spending of ten thousand 3 dollars or more by the corporation for any political 4 activity, a corporation may request authorization for spending 5 on political activities on a more frequent basis. Any 6 authorization request by the corporation that is not made 7 during an annual authorization shall be deemed a special 8 authorization and must be authorized by a majority of the 9 shareholders voting on the question of authorization. 10 (4) If a corporation spends less than an aggregate of 11 ten thousand dollars in a twelve-month period for political 12 activities, the corporation is not required to seek shareholder 13 authorization for such spending. 14 b. Shareholder approval. 15 (1) When seeking shareholder authorization for expenditures 16 for political activities, the corporation shall request 17 authorization to spend a maximum dollar amount in the twelve 18 months following authorization. 19 (2) If known at the time of the authorization vote, the 20 company shall articulate whether the corporate treasury funds 21 so authorized are intended to benefit or defeat specific 22 candidates, ballot measures, or issue advocacy campaigns or 23 whether it will be paid to specific nonprofit entities or trade 24 associations for political activities. 25 (3) To be effective, the authorization vote must garner 26 support from a majority of shareholders voting on the 27 authorization. A vote by the shareholders to approve or 28 disapprove any spending of ten thousand dollars or more by a 29 corporation for a political activity shall be binding on the 30 corporation. 31 (4) Notwithstanding the requirement for an annual 32 shareholder vote to authorize any spending of ten thousand 33 dollars or more by the corporation for any political activity, 34 a corporation may request a special authorization for 35 -5- LSB 5213XC (5) 84 jr/sc 5/ 11

S.F. _____ additional spending on political activities, provided that 1 all spending on political activities of ten thousand dollars 2 or more must be authorized by a majority of the shareholders 3 voting, and for any special authorization, the corporation 4 shall articulate whether the corporate treasury funds so 5 authorized are intended to benefit or defeat candidates, 6 ballot measures, or issue advocacy campaigns or will be paid 7 to specific nonprofits or trade associations for political 8 activities at the time the special authorization is requested. 9 c. Director liability. If a corporation makes an 10 unauthorized contribution or expenditure for a political 11 activity, the directors at the time that the unauthorized 12 contribution or expenditure was incurred are jointly and 13 severally liable to repay to the corporation the amount of the 14 unauthorized contribution or expenditure, with interest at an 15 annual rate of eight per cent. 16 d. Sole proprietorships excluded. Notwithstanding any other 17 provision of this section, nothing in this section shall apply 18 a new duty to the owner of a sole proprietorship. 19 e. Rules. The board shall adopt rules to implement this 20 section. 21 2. Notification to shareholders —— report. 22 a. At least quarterly during each fiscal year, a corporation 23 that makes contributions or expenditures for political 24 activities must notify its shareholders in writing of the 25 nature of all its political activities funded by either its 26 separate segregated fund or through its general corporate 27 treasury, including contributions or expenditures made directly 28 or indirectly. 29 b. A report made pursuant to this section shall accompany 30 the notification and shall include all of the following: 31 (1) The date of the contributions or expenditures. 32 (2) The amount of the contributions or expenditures. 33 (3) The identity of the candidate, political party, 34 committee, electioneering communication, ballot measure 35 -6- LSB 5213XC (5) 84 jr/sc 6/ 11

S.F. _____ campaign, or issue advocacy campaign. 1 (4) If the contributions or expenditures were made 2 for or against a candidate, including an electioneering 3 communication as defined under federal law, the office sought 4 by the candidate, and the political party affiliation of the 5 candidate. 6 (5) If the contributions or expenditures were made for 7 or against a ballot measure, the purpose of the measure and 8 whether the contributions or expenditures were made in support 9 or opposition to the ballot measure. 10 (6) If the contributions or expenditures were made for or 11 against an issue advocacy campaign, the nature of the political 12 issue and whether the contributions were made in support or 13 opposition to the political issue. 14 (7) All expenditures made by a separate segregated fund 15 affiliated with the corporation. 16 3. Public disclosure. 17 a. The quarterly reports of political activities by a 18 corporation to its shareholders are public records open for 19 public inspection. 20 b. A copy of the reports filed shall be posted for at least 21 one year on the corporation’s internet site, if any. 22 Sec. 4. NEW SECTION . 68A.804 Public disclosure of corporate 23 political activities by the board. 24 1. A corporation required to provide a notification and 25 report to its shareholders under section 68A.803 must provide a 26 copy of the notification and report to the board, subject to 27 the requirements and penalties provided in this chapter. 28 2. A notification and report required to be filed under this 29 section shall be filed in electronic format as prescribed by 30 the board. 31 3. a. The quarterly reports of political activities by 32 a corporation to its shareholders shall be made publicly 33 available by the board. 34 b. The board shall post the quarterly reports on the board’s 35 -7- LSB 5213XC (5) 84 jr/sc 7/ 11

S.F. _____ internet site in a format that permits the reports to be 1 searched, sorted, and downloaded. 2 Sec. 5. NEW SECTION . 68A.805 Reports by the board. 3 1. Annually the board shall audit the extent of compliance 4 or noncompliance with the requirements of this subchapter by 5 corporations, their management, and shareholders, as well as 6 the effectiveness of the board in monitoring and enforcing 7 compliance with the reporting and disclosure requirements of 8 this subchapter. 9 2. Not later than June 30 of each year, the board shall 10 submit to the governor and the general assembly a report on the 11 review required by subsection 1 for the preceding year. 12 Sec. 6. NEW SECTION . 68A.806 Approval for corporate and 13 association political expenditures. 14 Notwithstanding any provision of the law to the contrary, a 15 trade, business, or professional association or a corporation 16 that has received shareholder authorization under section 17 68A.803, subsection 1, may make any contribution or expenditure 18 only when specifically authorized to do so as follows: 19 1. By the vote of the board of directors of the corporation 20 or of the executive committee of the trade, business, or 21 professional association. 22 2. By the president, vice president, secretary, or 23 treasurer of a corporation if the board has specifically 24 empowered such officer to authorize such contributions or 25 expenditures. 26 3. For a corporation, by any other person designated by 27 resolution of the board of directors of a corporation to 28 authorize contributions or expenditures. 29 Sec. 7. NEW SECTION . 68A.807 Form of contribution or 30 expenditure. 31 All contributions or expenditures, other than in-kind 32 contributions, by a corporation or a trade, business, or 33 professional association shall be made by check. 34 Sec. 8. NEW SECTION . 68A.808 Applicability to foreign 35 -8- LSB 5213XC (5) 84 jr/sc 8/ 11

S.F. _____ corporations. 1 1. A foreign corporation, other than a foreign association 2 or foreign nonprofit corporation, but including a foreign 3 parent corporation even though it does not itself transact 4 intrastate business, is subject to the requirements of this 5 subchapter if both of the following apply: 6 a. The foreign corporation derives more than one-half of its 7 income from real, tangible, or intangible property located or 8 having a situs in Iowa. 9 b. More than one-half of its outstanding voting securities 10 are held of record by persons having addresses in this state 11 appearing on the books of the corporation on the record date 12 for the latest meeting of shareholders held during its latest 13 full income tax year or, if no meeting was held during that 14 year, on the last day of the latest full income tax year. 15 2. This section does not apply to any corporation: 16 a. With outstanding securities listed on the New York stock 17 exchange or the American stock exchange. 18 b. With outstanding securities designated as qualified 19 for trading on the NASDAQ national market of the NASDAQ stock 20 market, or its successor. 21 c. If all of its voting shares, other than directors’ 22 qualifying shares, are owned directly or indirectly by a 23 corporation or corporations not subject to this section. 24 Sec. 9. NEW SECTION . 68A.809 Assessment of court costs and 25 attorney fees. 26 Any party who obtains a decision by a court that the 27 corporation failed to provide to the party information 28 required to be provided by this subchapter or provided the 29 party information of the kind required to be provided by this 30 subchapter that is incorrect, the court, in its discretion, 31 shall have the power to include in its judgment recovery by the 32 party from the corporation of all court costs and reasonable 33 attorney fees incurred in that legal proceeding to the extent 34 they relate to obtaining that final determination. 35 -9- LSB 5213XC (5) 84 jr/sc 9/ 11

S.F. _____ EXPLANATION 1 This bill requires a shareholder vote and majority approval 2 of shareholders on certain corporate political activities. The 3 requirement applies to a corporation incorporated under the 4 laws of Iowa, or certain foreign corporations, that plan to 5 spend $10,000 or more of corporate general treasury funds or 6 funds from a segregated account on political activities. 7 If a corporation makes an unauthorized contribution or 8 expenditure, the directors are jointly and severally liable 9 to repay to the corporation the amount of the contribution or 10 expenditure and interest at the rate of 8 percent. 11 The bill requires a corporation to notify its shareholders 12 and the ethics and campaign disclosure board of all its 13 political activities at least quarterly during each fiscal 14 year. The report requires a variety of information, including 15 the date of the contributions or expenditures; the amount 16 of the contributions or expenditures; and the identity of 17 the candidate, political party, committee, electioneering 18 communication, ballot measure campaign, or issue advocacy 19 campaign. These reports are public information and must be 20 published by the board, and the corporation if applicable, on 21 its internet site. 22 The bill requires the board to annually audit the extent of 23 compliance or noncompliance with the requirements of the bill 24 by corporations, their management, and shareholders, as well 25 as the effectiveness of the board in monitoring and enforcing 26 compliance with the reporting and disclosure requirements. 27 The bill provides that a corporation authorized by its 28 shareholders or a trade, business, or professional association 29 may make a campaign contribution or expenditure only when 30 specifically authorized to do so by certain specified officials 31 of the corporation or association. 32 The bill requires that all contributions or expenditures by 33 a corporation or a trade, business, or professional association 34 be made by check, other than in-kind contributions. 35 -10- LSB 5213XC (5) 84 jr/sc 10/ 11

S.F. _____ The bill imposes these same restrictions on some foreign 1 corporations if the foreign corporation derives more than 2 one-half of its income from real, tangible, or intangible 3 property located or having a situs in Iowa and more than 4 one-half of its outstanding voting securities are held of 5 record by persons having addresses in Iowa. 6 The bill provides that a party who obtains a decision by 7 a court that the corporation failed to provide to the party 8 information required to be provided by the bill may be awarded 9 court costs and reasonable attorney fees. 10 As provided in Code section 68A.701, a willful violation of 11 any provision of the campaign finance Code chapter is a serious 12 misdemeanor punishable by confinement for up to one year and 13 a fine of at least $315 but not more than $1,875. A variety 14 of civil remedies are also available in Code section 68B.32D 15 for a violation of Code chapter 68A or rules of the ethics and 16 campaign disclosure board, ranging from a reprimand to a civil 17 penalty of not more than $2,000. 18 -11- LSB 5213XC (5) 84 jr/sc 11/ 11