Legal Alert

Drumbeat Grows for Legislation Against PACs and Foreign Electoral Influence

by Kate A. Belinski and Clayton C. Keir
February 23, 2022

Summary

Legislators in the U.S. Congress, Arizona, and California have proposed legislation restricting U.S. subsidiaries of foreign corporations from making political contributions. Members of both the U.S. House and Senate have also introduced a bill prohibiting for-profit corporations from establishing or operating a PAC. While it remains to be seen whether any of these bills will pass in their current form, they demonstrate a rising tide of legislation seeking to curb the influence of PACs and foreign corporations in the American electoral system.

The Upshot

  • Legislators in Congress, California, and Arizona have each introduced bills restricting how U.S. subsidiaries of foreign corporations can donate to elections in the United States.
  • Capitol Hill lawmakers have introduced bills prohibiting for-profit corporations from establishing or operating a PAC.
  • The bills represent a growing trend in legislation intended to curtail the role of foreign influence and PACs in the American electoral system.

The Bottom Line

It is unlikely that the proposed legislation in Congress, California, or Arizona will pass anytime soon. The bills do, however, reflect a growing appetite for legislation restricting the impact of foreign entities and PACs in the American electoral system.

Legislators in the U.S. Congress, Arizona, and California have proposed legislation restricting U.S. subsidiaries of foreign corporations from making political contributions. Members of both the U.S. House and Senate have also introduced a bill prohibiting for-profit corporations from establishing or operating a PAC. While it remains to be seen whether any of these bills will pass in their current form, they demonstrate a rising tide of legislation seeking to curb the influence of PACs and foreign corporations in the American electoral system.

U.S. Congress

  • U.S. Rep. Jamie Raskin (D-Md.) reintroduced the Get Foreign Money Out of U.S. Elections Act (H. R. 6283) in December of 2021. The bill amends the Federal Election Campaign Act to extend the ban on contributions and expenditures by foreign nationals to also include U.S. subsidiaries of foreign-owned corporations. The bill would allow subsidiaries to continue to sponsor a Political Action Committee (PAC) so long as the company certifies on an annual basis that no foreign nationals were involved in the operations or decision-making of the PAC. Rep. Raskin introduced this same bill during the previous two congressional terms. The Democrats’ sweeping election reform bill, the For the People Act, which passed the House but failed in the Senate earlier in 2021, also attempted to crack down on foreign spending in U.S. elections.  
  • On January 20, 2022, Sen. Mark Kelly (D-Ariz.) introduced the Ban Corporate PACs Act, S. 3528, which is the Senate version of HR 6238. The express purpose of the bill is to limit the authority of corporations to establish and operate PAC for political purposes. Under the bill, corporations must terminate their PACs and disburse remaining funds within one year of enactment. More than 70 Democratic members of Congress already have voluntarily stopped accepting contributions from corporate-sponsored PACs, but this legislative effort to level the playing field will meet strong resistance from Republicans and many other Democrats.

California

In California, Assemblymember Alex Lee (D-Alameda) is seeking to curb the political influence of foreign entities by introducing AB 1819 into the General Assembly. The bill expands the Political Reform Act of 1974’s prohibitions on foreign entities making political contributions, expenditures, or independent expenditures in California’s elections or ballot measures to extend to “foreign-influenced” business entities.

The bill defines foreign-influenced business entities as any business where either a) a single foreign principal owns or has direct or indirect beneficial ownership of one percent or more of the company, b) two or more foreign principals own or have direct or indirect beneficial ownership of five percent of the company, or c) a foreign principal contributes to the decision-making process to make a contribution regarding a ballot measure or election.

Assemblymember Lee’s bill requires a business making a contribution, expenditure, or independent expenditure to file a statement of certification declaring that the entity is not a foreign-influenced business entity. The proposed legislation is similar to, but more expansive than, legislation that passed in Washington state in 2020. Whereas the Washington statute only requires that U.S. subsidiaries certify that their political contributions are made from U.S. “homegrown” funds and that no foreign nationals are involved in decision-making regarding political contributions, the California bill would entirely prohibit contributions from U.S. subsidiaries of foreign corporations.

Arizona

State Rep. Kelli Butler (D-Phoenix) proposed HB 2772 in February of 2022, which prohibits foreign nationals and business entities from contributing to PACs formed for the purpose of influencing a ballot measure or that make expenditures connected to a ballot measure.

What’s Next?

The California and Arizona legislative proposals are far more likely to gain traction than any of the federal proposals. Of particular interest is AB 1819, the California bill, in that it would completely ban political contributions from U.S. subsidiaries of foreign corporations, putting these companies at a distinct disadvantage from their U.S.-based counterparts and raising potential constitutional challenges.

Although it remains unclear whether any of these bills will pass, they reflect a rise in legislative interest for curbing the influence of foreign corporations and PACs in the American electoral system. We are monitoring developments in this area closely and will provide future updates as appropriate.

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