Raleigh, N.C. — Months after state lawmakers agreed to apply a favorable tax rate to their e-cigarette products, Reynolds American Inc, the parent company of R.J. Reynolds Tobacco Co., gave $50,000 to a nonprofit group affiliated with state House Republicans.
Reynolds listed the contribution on a voluntary disclosure form that accounts for its giving to a variety of politically active nonprofits during the 2014 calendar year. The company is one of a number of a handful of large businesses that makes such disclosures.
The contribution came to N.C. House Legislative Partners, a 501(c)(4) group set up to boost the fortunes of Republicans in the state House. Legally, House lawmakers and the nonprofit cannot coordinate their activities, but the group does hold events that GOP lawmakers attend.
The contribution is not unusual, according to David Howard, a spokesman for Reynolds American.
"We will engage with elected officials and their staffs to be able to communicate the company's viewpoints and perspectives on a variety of issues," Howard said this week.
Reynolds is a well-known political player in the state, with contributions from its PAC and corporate executives showing up on campaign finance reports for elected officials with some regularity. According to the National Institute for Money in State Politics, the company's PAC contributed $76,250 directly to state legislative candidates in 2014.
What makes the contribution to House Legislative Partners noteworthy is that the nonprofit group typically does not have to report who gives it money. Such "social welfare groups" have created a new conduit for campaign spending that is exempt from the contribution limits and disclosure requirements that define the post-Watergate campaign disclosure requirements candidates must abide by.
Last May, House lawmakers were debating creating a new excise tax for e-cigarette products. Backers said that the state wasn't poised to collect anything but sales tax on e-cigarettes, which convert liquid into vapor.
Under the bill, e-cigarettes were to be taxed at 5 cents per milliliter of the nicotine-containing liquid used in the so-called vapor devices. Opponents of the measure noted that cigarettes are taxed at 45 cents per pack, so the state would lose money as smokers switch to e-cigarettes.
"Yeah, a nickel is great for industry, of course – that's low. But what about those revenues in North Carolina that we potentially will lose and this could bring in?" Rep. Becky Carney, R-Mecklenburg, asked at the time. "If you’re going to raise your hand on a tax, make it count."
But backers of the tax argued, in part, that the favorable tax treatment was necessary to help land a new e-cigarette manufacturing plant in the state.
"I believe within the next two days, three days you will hear of an announcement of a new industry, not a new industry, not new in name to us, but a new opening of a factory in North Carolina that will provide about close to 300 new jobs for us, and for the first time since I've been here, this industry is asking that we set the excise tax," Rep. Julia Howard, R-Davie, said during the debate.
Days after the House vote, R.J. Reynolds announced it would open a new manufacturing facility for its Vuse vapor product in Tobaccoville. The bill passed the state Senate and was signed by Gov. Pat McCrory the same month.
David Howard said Reynolds wrote its check to House Legislative Partners on Oct. 8, 2014. It's worth noting that the year before, the company made a similar contribution to a nonprofit created to boost the fortunes of McCrory.
Corporations like Reynolds are not able to give to political candidates, and $50,000 far exceeds the contribution limits that can go to an individual running for office. Even with a paper trail, such transactions do not prove a quid pro quo, and it's impossible to say who else might have contributed to the nonprofit.
But after Reynolds wrote its check to House Legislative Partners, the organization transferred $71,000 to a newly created nonprofit called the NCHLP Education Fund. That group produced an ad that aired on several cable channels in the Charlotte market on behalf of Rep. Rob Bryan, R-Mecklenburg. Bryan did vote for the tax bill but said last fall he didn't know about the NCHLP Education Fund ad until after it aired.