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Political Reform Act - Honoraria Ban

What Does the Honoraria Ban Prohibit?

The honoraria ban prohibits most public officials and all candidates for public office from accepting any honoraria. Honoraria are payments made to an official, from other than the official’s public employer, for making speeches, publishing articles, or attending public or private conferences, conventions, meetings, social events, meals, or like gatherings.

For members of state boards and commissions and employees who are designated in an agency’s conflict of interest code, the honoraria ban only applies to payments from any source of income or gifts that is required to be reported on the official’s Statement of Economic Interests.

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What Activities are Covered by the Ban?

The ban covers the acceptance of payments, either cash or in-kind, for giving a speech, attending a meeting or participating in a panel. It also covers writing or being identified as an author of, or doing more than secretarial work in connection with, a nonfiction published article. Being paid for writing books, plays or screenplays is not covered.

Remember These Points

Accepting payment for making a speech, writing an article or serving as a panelist is prohibited under the honoraria ban unless an exception applies.

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What are the Exceptions to the Ban?

There are three major exceptions to this broad prohibition.

  • The special rules for travel that exempt certain travel from the ban are the most notable.
  • The “earned income” exception concerns income received for speaking or writing as a part of one’s private employment provided the predominant activity is not making speeches.
  • Under certain circumstances, an honorarium may be returned, donated, or the source reimbursed.

Special Rules for Travel

You will recall that these special travel rules applied to the gift limit as well. State officials are sometimes offered free transportation and lodging in connection with an invitation to make a speech, conduct a seminar, or serve on a panel. Previously, gifts of intrastate transportation and necessary accommodations were exempt from the gift limits, reporting requirements, and disqualification. In most instances, this is no longer the case. So you should consult with legal counsel before you accept any gift of transportation or lodging from any entity other than your own government agency.

As a general rule, when an official makes a speech, conducts a seminar or serves on a panel held within the United States and the travel is reasonably related to a legislative or governmental purpose, or to an issue of state, national, or international public policy, payments or reimbursements for the transportation, and related lodging and subsistence on the day before, day of, and day after the speech, are not subject to the gift limit or honoraria ban, but are subject to reporting and disqualification.

There are additional limited exceptions for travel paid for by:

  • Campaign funds
  • Nonprofit organizations pursuant to section 501(c)(3) of the Internal Revenue Code
  • Federal, state, or local government agencies
  • Foreign governments
  • Other entities for which the official performs services

Remember This Point

Some travel benefits are exempt from the ban, but the rules are very technical.

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The Earned Income Exception

A payment received in return for rendering personal services customarily provided in connection with the practice of a bona fide business, trade, or profession is considered “earned income” and is not prohibited under the honoraria ban. However, earned income of $500 or more may be reportable as income and may result in disqualification from decisions affecting the source of the income.

For purposes of the “earned income” exception, a profession, trade or business means an enterprise or employment separate from one’s state employment. See a list of possible exemptions below.

  • teaching
  • practicing law
  • medicine
  • insurance
  • real estate
  • banking
  • building contracting
  • others

Earned Income Exception: What about a department director who is also a professor at a college or university?

  • A department director may be a professor at a college or university and receive earned income for that employment since it is considered a bona fide profession.
  • Because of the exception for earned income from a bona fide profession, payments the director receives for speaking in the form of teaching are exempt.

Exemptions to the Honoraria Ban

On the other hand, a business, trade or profession is not “bona fide” unless it is independent from an official’s public office.

Take a look at this case. A toxicologist from the State Department of Health Services is invited to make a speech on toxicology. After the speech, the sponsor gives the toxicologist an envelope containing an honorarium check. Is she allowed to accept an honorarium for the speech?

No. She cannot be paid to make speeches on toxicology unless she has an independent “bona fide business” that allows her to accept the earned income.

Even if an official has an independent business, the official may not make a speech in an “official” capacity and be paid for it.

The FPPC has established certain criteria that must be followed to demonstrate that an official is practicing a bona fide business, trade or profession.

The maintenance of business records, licensure as a member of a profession, and proof of employment as a teacher are examples of the types of records that will demonstrate that a business, trade or profession is bona fide.

If the sole or predominant activity (50% of gross income) of the business, trade, or profession is making speeches, the business, trade, or profession will not be considered “bona fide.” There is a specific exception for teaching. Therefore, a consulting business that receives most of its income from making speeches is unlikely to fit under the “earned income” exception.

Remember These Points

Your public office, even if you are considered the expert in your field, cannot be used to generate additional income from speaking or writing.

Unless you teach, a business set up to make speeches will not fit into the “earned income” exception.

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An Honorarium may be Returned, Donated or the Source Reimbursed

There is no violation if an honorarium is either returned unused to the donor or delivered to the State Controller within 30 days of receipt. If neither option is possible, and no cash payment is involved, the official may reimburse the source for the value or use of the honorarium within the 30-day period.

A payment made to a bona fide charitable, educational, civic, religious, or similar tax-exempt, nonprofit organization in lieu of an honorarium is not a prohibited honorarium, if certain conditions are met.

To qualify, the payment must be sent directly to the nonprofit organization without being first received by the official. Additionally, the official may not be identified in connection with the payment or otherwise benefit from it.

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Penalties for a Violation of the Honoraria Ban

Any person who makes or receives a prohibited honorarium is liable in a civil action brought by the FPPC.

Violations could result in a fine for an amount of up to three times the amount of the unlawful honorarium. Violators are also subject to administrative sanctions, which include fines of up to $5,000 per violation.

Remember These Points

Although return, reimbursement, or donation of an honorarium is possible, there are very specific conditions that must be met. Following is a list of other points to remember.

  • Once an official receives an honorarium, the ban cannot be avoided by donating it to a charity.
  • Any person who makes or receives a prohibited honorarium is subject to penalties.

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You have completed the "Honoraria Ban" module. The next module is Contractual Conflicts of Interest: All Contracts.

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