Political Law Notes

FEC Commissioners Focused on Foreign Money

Date: October 3, 2016

Federal campaign finance laws prohibit foreign nationals from making contributions and expenditures in connection with any election in the United States – federal, state or local. Two FEC Commissioners believe that this restriction is in need of some fortification.

FEC Commissioner Ann Ravel recently circulated a proposal to rescind a 2006 advisory opinion that permits domestic subsidiaries of foreign corporations to make contributions through their PACs or directly where permitted by state or local law. She is concerned that in a post-Citizens United world, foreign funds can find their way into U.S. elections through sham domestic corporations and U.S. subsidiaries. This proposal follows on a forum sponsored by FEC Commissioner Ellen Weintraub in June that focused on foreign money in the U.S. elections. Commissioner Weintraub has proposed requiring sponsors of campaign messages to certify that they are not using foreign money.

On the other hand, Republican Commissioner Matthew Petersen has proposed a more modest change in policy regarding foreign contributions. He favors creating a “safe harbor” that would allow a Super PAC to lawfully accept funds from a corporate donor if the PAC receives a certification that (1) the company is organized under the laws of and is located in the U.S., (2) foreign nationals did not direct, control or participate in the contribution, and (3) only U.S.-generated net earnings were used to make the contribution.

The FEC has not been able to achieve consensus around any of these proposals. In late September, however, the Commission allowed a U.S. citizen living abroad to solicit contributions in a foreign country for candidates and political party committees. The FEC noted that in some circumstances the individual would have a duty to inquire about the potential contributors’ citizenship.

Foreign spending is sure to remain a hot button issue through the 2016 election and beyond. In this environment, U.S. subsidiaries of foreign corporations that contemplate forming PACs or contributing in states or localities where corporate contributions are permitted, would be well advised to adhere scrupulously to the FEC rulings governing their activities. Missteps could result in having to respond to an FEC investigation. And, while the FEC often deadlocks, the Department of Justice is quite willing to prosecute when it has evidence of impermissible foreign spending in U.S. elections.