A bill banning corporations with foreign influence from political spending in Pennsylvania is headed to the Senate.
The bill passed with bipartisan support in a 126-76 vote in the Democratic-controlled House.
The legislation prohibits “foreign-influenced corporations” from spending directly or indirectly on any political campaign, committee or party and from spending to support or denounce a question on the ballot.
The bill defines a foreign-influenced corporation as a business with at least 1% ownership by a single foreign investor or at least 5% ownership by multiple foreign investors.
Data from the Tax Policy Center says that about 40% of U.S. corporate equity was held by foreign investors in 2019, a number that has been slowly climbing over the past several decades.
Of 111 corporations studied within the Fortune 500, 98% met the bill’s definition of foreign-influenced corporations, according to the Center for American Progress.
Proponents of the bill worry about foreign influence in the approaching election, a reality other states have endured. A 2023 report by Massachusetts-based think tank American Promise says Uber spent more than $200 million on California elections in 2020.
Saudi Arabian Crown Prince Mohammed Bin Salman invested $3.5 billion in Uber in the company’s early days. Uber’s largest 2020 shareholder was Japanese multinational corporation SoftBank.
Seattle passed a law in 2020 to require corporations to certify they are not foreign-influenced to spend political dollars. San Jose, Ca., and St. Petersburg, Fla., have passed similar laws.
Minnesota’s 2023 law banning foreign-influenced corporations from political spending was blocked by a federal judge for infringing on corporate free speech.
Not-for-profit groups, such as unions, are not part of the proposed ban in Pennsylvania.
“The scenario is simple: there’s a loophole in our law, and we should fix it,” Rep. Joe Webster (D-Montgomery), the bill’s prime sponsor, said on the House floor in advance of the vote.
The loophole in question says foreign nationals cannot participate in American politics through voting or political spending, but multinational enterprises — or corporations operating outside the United States or controlled by more than one country — can contribute.
Under current campaign finance law, corporations cannot spend on candidates or their political action committees directly, but they can form PACs in Pennsylvania funded by their executives and corporate treasuries. The committees can then spend unlimited amounts on Pennsylvania politics.
Or corporations can spend their dollars on Super PACs, which obscure their donors from the public eye in a tradition known as “dark money.”
As ruled in the U.S. Supreme Court case Citizens United v. FEC, corporations can contribute to campaigns indirectly by spending on materials that expressly advocate for or against a candidate — such as political advertisements or mailers — without coordinating with the candidate. Indirect spending is done through independent expenditures.
Webster’s bill would continue to allow corporations to create corporate PACs. But foreign-influenced corporations could no longer spend dark money or make political purchases even when independent of a candidate or campaign.
What exactly the bill does to current law is confusing to some legislators.
“I mean, currently independent expenditures by corporations are allowed. If this passes, independent expenditures by corporations would still be allowed, regardless of whether there’s foreign ownership or not,” Rep. Brad Roae (R-Crawford/Erie) said before voting against the bill last month in the House State Government Committee.
Independent expenditures by any corporation are protected by Citizens United, but whether foreign-influenced corporations are included has been up for debate. The case ruled that the First Amendment protects corporations, or “associations of citizens,” from penalization for political activity regardless of wealth.
But whether a company with foreign-investor ownership counts as an association of citizens is unclear, particularly when foreign entities are barred from political activity. Webster’s bill would require corporations to certify that they were not foreign-influenced when they made their political expenditure.
“This is all designed to be understood by a small group of lawyers and politicians who want to keep this type of money in politics and corruption in the shadows and as un-understandable as possible to the general public,” said Rabbi Michael Pollack, executive director of March On Harrisburg.
The government reform group supports anti-corruption legislation and is pushing for this bill, which is now in the hands of the Republican-controlled state Senate.
Pollack said there are no guarantees the Republican-controlled Senate will move on this.
Senate Republican spokesperson Kate Flessner said the bill will be referred to the appropriate Senate standing committee for review.
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