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.
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