BLOGS: Political GPS: Womble Carlyle Political Law

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Tuesday, April 28, 2015, 2:05 PM

Foreign National Political Contribution Laws Can Cause Confusion, Pain for Unwary



A business executive writes a small check to a neighbor who is running for a seat on the local school board. It sounds harmless, but the executive isn’t a U.S. citizen and by writing that check, she has broken federal campaign finance laws.

Womble Carlyle attorney and former Federal Election Commission Deputy General Counsel Jim Kahl regularly counsels multinational companies and their leaders about compliance with federal and state campaign finance laws. He said the rules surrounding campaign contributions can be tricky, and have caused problems even for well-meaning executives.

“The campaign contribution rules for foreign nationals differ significantly from those for U.S. citizens,” Kahl said. Only U.S. citizens or permanent legal residents (i.e., green card holders) may contribute to political campaigns. Foreign nationals – both individuals and corporations – are prohibited from making campaign contributions.

The number one misconception, Kahl said, is thinking that his prohibition only applies to federal elections. However, under federal law foreign nationals are prohibited from contributing in all U.S. elections—federal, state and local. So for a foreign national individual, donating to a city council candidate is just as illegal as giving money to a presidential campaign.

“These restrictions also apply to in-kind as well as monetary contributions,” Kahl said. “For example, a foreign national who hosts a fundraiser for a candidate at his home may find himself the subject of an FEC investigation. The gift of food, beverages and a venue is considered an illegal in-kind contribution.”

A second source of confusion stems from the fact that green card holders – non-citizens who reside permanently in the U.S. – are able to contribute, but other non-citizen residents, including those in the U.S. on a long-term work visa, are not. Kahl said, “Green card holders have a very specific status under the federal election law.”

What about contributions made by corporations or other business entities? A U.S. subsidiary of a foreign company may be able to make political contributions and it may be able to establish a political action committee (PAC), but special rules apply. As to corporate contributions, the funds used must come from domestic proceeds and foreign nationals may not participate in the decision-making regarding the contribution. Similarly, foreign nationals may not be involved in the management or oversight of the PAC, nor participate in decisions regarding its contributions.

With proper planning, including granting U.S. citizens (or green card holders) decision making authority, the corporation may be able to make contributions and sponsor a PAC. But the rules are complicated, and must be followed closely. “It’s very easy to trip unintentionally over the rules in this area,” Kahl said.

For example, the board of directors of a U.S. subsidiary with foreign national members may make the decision to start a PAC. But it cannot appoint the U.S. citizen (or green card holder) members of the PAC Board. The FEC views the latter as foreign nationals taking an active role in PAC management – and, thus, a violation of federal campaign finance law.

What happens if a company or individual violates federal campaign finance rules? Violations can result in civil monetary penalties following a Federal Election Commission investigation and criminal prosecution by the Department of Justice.

“It’s something that needs to be taken seriously. The foreign national individual or company may have to pay large fines. In addition, violations are usually newsworthy and can result in significant reputational damage to the corporate brand,” Kahl said.

Did You Know? Womble Carlyle’s Political Law practice guides clients through the complex and fast-changing law that governs political activity at the federal, state, and local levels.

Get to know us on Twitter at @WCSRTweet

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Thursday, April 16, 2015, 4:08 PM

New Government Contractor Political Contribution Disclosure Law Passed by Maryland General Assembly


On April 10, the Maryland General Assembly made significant changes to the state’s public contractor political contribution disclosure law. Many of the amendments were prompted by questions that had arisen regarding the most recent version of the law, which took effect just this past January.

The new amendments clarify that a contractor awarded a single contract with a state or local governmental entity valued at $200,000 or more is covered by the disclosure law, regardless of whether that contract was awarded before or after January 1, 2015.

An initial political contribution disclosure statement has to be filed when a contract is awarded, and covers contributions made in the 24-month period prior to award. In addition, a contractor that has submitted an initial statement or a contractor that was performing a covered contract as of December 31, 2014, must file semiannual disclosure statements. These reports are due by May 31, for the six months ending on April 30, and by November 30 for the six months ending on October 31. Previously, semiannual reports were due in February and August.

Since the new law does not go into effect until June 1, 2015, special reporting periods have been established for this year. The first report is due August 31, for the February 1 to July 31 period. The second report is due November 30, covering the three-month period of August 1 to October 31.

As a general rule, the reports must disclose:

  • The name and office sought of each candidate to whom one or more contributions in the cumulative amount of $500 or more were made during the reporting period;
  • The amount of aggregate contributions made to each such candidate;
  • The name of each unit of a governmental entity with which the contractor had a contract of $200,000 or more during the period;
  • The nature and amount of business done with each unit of a governmental entity; and
  • The name of the applicable person or entity, if the business was done or the contribution was made by a person, but attributed to the contractor.

Abbreviated reports can filed in two instances. If a covered contractor did not make any contribution in a cumulative amount of $500 or more to a candidate during the reporting period, the statement need only (i) provide a stipulation to that effect, and (ii) disclose the name of each unit of a governmental entity which with the contractor has a covered contract.

In addition, a contractor can seek a waiver from the State Board of Elections if it can show that it would be “unduly burdensome” for the contractor to identify each unit of government with which it has a contract exceeding $200,000. In that event, the contractor does not have to file an initial statement, and the semiannual statements can exclude the information concerning the units of government with which it contracts and the nature of its government business. Presumably, a contractor with a waiver that does not make any reportable contribution during a period would only need to submit a stipulation to that effect.

Such waivers have been difficult to obtain in the past. The State Board of Elections has indicated that it will develop guidelines on this and other provisions of the law once it has been enacted. Governor Hogan is expected to sign the legislation. 

Contact Information

If you have any questions please contact Jim Kahl at JKahl@wcsr.com or 202.857.4417 or any other members of the Womble Carlyle Political Law Team.
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