Editor’s Note: This is Part Two of a two-part series on North Carolina’s Gift Ban. Part One covers what counts as a gift, to whom the ban applies, the indirect gift problem, and the food and beverage exceptions that Social Welfare Organizations and event sponsors rely on most.
This article covers the remaining gift exceptions, reporting obligations, and the penalties for violations.
North Carolina Gift Ban Exceptions: Items Other Than Food and Beverages
The State Government Ethics Act includes additional exceptions beyond food and beverages in the Gift Ban. The following exceptions are available to event hosts:
- Informational materials related to a Covered Person’s or Legislative Employee’s official duties;
- Plaques or similar nonmonetary mementos recognizing individual service;
- Gifts accepted on behalf of, or for, the State;
- Items generally available to the public or to all State employees;
- Gifts from the official’s own family or household (the most commonly used exception overall);
- Gifts related to industry recruitment, international trade, or tourism promotion, subject to reporting and turnover requirements;
- Certain gifts valued under $100 received during overseas trade missions where the gift is customary protocol; and
- Gifts arising from a personal, business, or civic relationship that is unrelated to the official’s public role and not given to lobby.
The Educational Meeting and Related Exceptions
One exception deserves special attention because it can cover significant benefits, including travel and entertainment. The Gift Ban permits reasonable expenditures for food, beverages, registration, travel, lodging, incidental items, and entertainment in connection with any of the following:
- An educational meeting attended by a Legislator, Legislative Employee, or Public Servant that is related to their official duties;
- An event at which the official is a speaker or panel member;
- A Legislator or Legislative Employee’s attendance at meetings of certain nonpartisan legislative organizations; or
- A Public Servant’s attendance at meetings of certain nonpartisan organizations.
All of the following conditions must be met:
- Expenditures are paid by a lobbyist principal, not a lobbyist;
- The meeting is attended by 10 or more people, has a formal agenda, and is noticed at least 10 days in advance;
- Food, beverages, transportation, or entertainment is provided to all attendees or to a defined group of 10 or more;
- Any entertainment is incidental to the main agenda; and
- If the official is a speaker, they must be a genuine speaker or panel participant.
Because this exception can cover significant benefits, organizations should consult with the State Ethics Commission staff before relying upon it. Staff will review the agenda and program and issue an informal opinion. The educational meeting criteria are set out in State regulations under “Educational Meeting Criteria.”
Reporting Obligations for North Carolina’s Gift Ban
Lobbyists, lobbyist principals, and State government liaison personnel must report permissible gifts on their quarterly expense reports filed with the Secretary of State if the expense exceeds the $10 reporting threshold.
Other persons who are not lobbyists, lobbyist principals, or State government liaison personnel, and who make a permissible gift valued over $200 to a Legislator, Legislative Employee, or Public Servant, must also report it.
If the donor is in North Carolina, the report must be made electronically to the Secretary of State’s office within 15 days after the end of the calendar quarter.
If the donor is outside North Carolina, the recipient official must report the gift on a special report or their annual statement of economic interest filed with the State Ethics Commission.
Penalties for Violations of North Carolina’s Gift Ban
For Public Officials
A Covered Person who accepts a gift outside a Gift Ban exception faces disciplinary action but not criminal prosecution, unless the gift was made with corrupt intent. Willful violations by Legislators may also be referred to the Legislative Ethics Committee for sanctions. A Legislator who accepts a gift with corrupt intent may be prosecuted for bribery, a Class F felony.
For Lobbyists and Organizations
Lobbyists, lobbyist principals, and State government liaison personnel who violate the Gift Ban face civil fines of up to $5,000 per violation and, for willful violations, criminal prosecution as a Class 1 misdemeanor. The Ethics Commission and the Secretary of State may refer cases to the Wake County district attorney for prosecution. A convicted lobbyist is also barred from lobbying for two years. Anyone who offers a gift to a Legislator with corrupt intent faces bribery charges, a Class F felony.
Indirect violations carry the same consequences as direct ones. Routing prohibited gifts through a Social Welfare Organization does not insulate the original donors from liability.
Key Takeaways For Nonprofits Regarding North Carolina’s Gift Ban
Know who is in the room. The Gift Ban applies differently depending on whether your guests are Legislators, Legislative Employees, Public Servants, or Covered Persons. Check before you plan.
Watch your funding sources. Even if your organization is not a lobbyist or lobbyist principal, using funds from lobbyists or lobbyist principals to pay for events with State officials can trigger the Gift Ban indirectly.
Use the right exception. The invited-group exception is the most commonly used one for events that include Legislators. The Public Servants exception is simpler but narrower. Know which one applies to your event before you send invitations.
Document everything. Keep funds from restricted sources in separate accounts. Track contributions and expenditures. Note in your invitation which Gift Ban exception applies.
Ask when in doubt. The State Ethics Commission staff will provide informal guidance. For the educational meeting exception in particular, it is worth getting that opinion before the event.
For more on the Gift Ban basics, who it covers, and the food and beverage exceptions event sponsors rely on most, see Part One of this series.
Ward and Smith’s Nonprofits team works closely with our Government Relations attorneys on issues like these. If you have questions, please contact your counsel.
