The White House's new restrictions on registered lobbyists have led some to look at alternatives to registering. As usual in Washington, the fine print contains some loopholes - and one involves a choice that trade associations and corporations make around this time of year.
Corporations and trade associations can choose between two types of expense accounting methods when filing lobbying disclosure reports. The more common choice, called Method A, requires groups to report expenses using definitions in the Lobbying Disclosure Act. Another choice, Method C, allows groups to use definitions in the Internal Revenue Code.
OK, we admit it sounds boring. But the choice can have a huge impact on the amount organizations report as the sum total of their lobbying expenses - and whether some of their employees even count as lobbyists. Both options have their pros and cons. Groups must make their selection in April, when they file first-quarter lobbying disclosure reports for 2010, but as hard as it is to think about accounting over the holidays, lawyers who advise clients on complying with lobbying laws said they should be mulling it over.
"April can’t roll around and ...pick one method or another because they’re two different methodologies," warned Kenneth Gross, a partner at Skadden, Arps, Slate, Meagher & Flom. "You either need to commit yourself to the change or keep information under both methods for the quarter and keep our options open."
So why does it matter? The LDA method requires organizations to report all federal lobbying, a definition that includes more than 2,000 members of the executive branch. But it doesn't require reporting of grass-roots and state-level lobbying expenses, which can be considerable for companies that face state-level regulation, such as insurance companies. Allstate Insurance Co., for instance, uses the LDA method, which doesn't require it to include its state-level lobbying costs.
The IRC method has a far more limited definition of executive branch officials, including only the top two people at each agency. But it requires reporting of grass-roots and state-level expenses, something Gross said is the dealbreaker for many of his clients because those figures can greatly increase the publicly reported lobbying expenses listed on the reports. Companies that use this method tend to have few state-level expenses. One example: Defense giant Raytheon Co.
But with the White House limiting the access of registered lobbyists, their ability to get jobs in the executive branch, and their eligibility to serve on agency advisory boards, clients are looking at alternatives, Gross said. The limited definition of the executive branch used in the IRC method means that some government relations employees might be able to shed the Scarlet "L" under that definition.
"For some companies it’s a tough decision and you have to do the math" to see what the reported expenses would be under both methods, he said.