January 8, 2020
TO:

Washington State Democratic Central Committee

FROM:

Kevin J. Hamilton
Brian G. Svoboda
Shanna M. Reulbach

RE:

The Seattle City Council’s Proposed Campaign Finance Ordinance

You have asked us to analyze a proposed ordinance, now being considered by the Seattle
City Council, that, in certain municipal elections, would place limits on contributions to
political committees which make independent expenditures or contribute to other
committees making independent expenditures, and ban “foreign-influenced corporations”
altogether from making independent expenditures or contributing to independent
expenditure committees. Because the proposed ordinance would burden core First
Amendment rights to make independent expenditures, it would almost certainly face
constitutional challenge, and such a challenge would have a strong likelihood of success
on the merits. We discuss these matters further below.
I.

The Proposed Ordinance

The proposed ordinance’s first main provision limits what a political committee may
receive if it finances independent expenditures. The proposed ordinance defines an
“independent expenditure committee” to include any political committee which either
makes independent expenditures, or contributes to other political committees making
independent expenditures, in amounts aggregating $1,000 or more in a city election.1 It
then places a general limit of $5,000 on contributions to independent expenditure
committees which convey, “implicitly or explicitly,” that the funds may be used in
elections for or against Mayor, City Council or City Attorney candidates.2 The lone
exception from the $5,000 limit is for contributions made by “limited contributor
committees”—i.e., political committees that have existed for at least nine months, receive
contributions from a number of people ranging from 150 to 600 (depending on the elections
in which they spend) and receive contributions only in amounts less than $500 or from
other limited contributor committees.3

1

Seattle City Council, Council Bill 119701, § 2.04.010 (intro. Nov. 5, 2019),
https://seattle.legistar.com/LegislationDetail.aspx?ID=4225595&GUID=B8D94167-D14C-4A40-BF302212C88E38D7&Options=ID%7CText%7C&Search=foreign&FullText=1.
2
Id. § 2.04.400.
3
Id. § 2.04.010.

 The proposed ordinance’s second main provision curtails contributions and expenditures
made by “foreign-influenced corporations.” The proposed ordinance states:
No foreign-influenced corporation shall make an independent expenditure
in elections for or against candidates for the offices of Mayor, City Council,
or City Attorney of the City of Seattle, or a contribution to an independent
expenditure committee that has conveyed, implicitly or explicitly, that
contributions to the committee may be used in elections for or against
candidates for the offices of Mayor, City Council, or City Attorney of [t]he
City of Seattle.4
The ordinance defines “corporation” broadly to include “a corporation, company, limited
liability company, limited partnership, business trust, business association, or other similar
entity.”5 A “corporation” is “foreign-influenced” if any one of the three conditions below
is met:
1.

A single foreign owner holds, owns, controls, or otherwise has direct or
indirect beneficial ownership of one percent or more of the total equity,
outstanding voting shares, membership units, or other applicable
ownership interests of the corporation; OR

2.

Two or more foreign owners, in aggregate, hold, own, control, or otherwise
have direct or indirect beneficial ownership of five percent or more of the
total equity, outstanding voting shares, membership units, or other
applicable ownership interests of the corporation; OR

3.

A foreign owner participates directly or indirectly in the corporation’s
decision-making process with respect to the corporation’s political
activities in the United States.6

A “foreign owner” is a “foreign investor” or “a corporation wherein a foreign investor
holds, owns, controls, or otherwise has directly or indirectly acquired beneficial ownership
of equity or voting shares in an amount that is equal to or greater than 50 percent of the
total equity or outstanding voting shares.”7 A “foreign investor” is a person or entity that
that “[h]olds, owns, controls, or otherwise has direct or indirect beneficial ownership of
equity, outstanding voting shares, membership units, or other applicable ownership
interests of a corporation” and is a foreign government, foreign political party, a
4

Id. § 2.04.400(B). Further, when a corporation makes an independent expenditure, it must file a statement
with the City Clerk certifying that it is not a foreign-influenced corporation. Id. § 2.04.270(D). It must also
provide a copy of that statement to any independent expenditure committee to which it makes a contribution,
and the independent expenditure committee must file the statement along with its campaign finance report.
Id. §§ 2.04.260(2)(d), 2.04.270(D).
5
Id. § 2.04.010.
6
Id.
7
Id.

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 combination of persons organized under the laws of another country or having its principal
place of business in a foreign country, or an individual who is not a U.S. citizen or greencard holder.8
Thus, if U.S. Company A owns 1% of U.S. Company B, and if a foreign individual has
50% of the voting shares of U.S. Company A, then U.S. Company B would be prohibited
from making independent expenditures in the specified elections, and from giving to
independent expenditure committees active in these same elections, regardless of whether
any foreign individual or entity actually participates in U.S. Company B’s electoral
decisions.
II.

First Amendment Scrutiny

The Supreme Court has held that First Amendment protections extend to corporations.9
Whenever a regulation burdens a speaker’s core political speech, including the ability to
make independent expenditures, the regulation is subject to strict scrutiny, which requires
the government to prove that the regulation furthers a compelling government interest and
is narrowly tailored to achieve that interest.10 The First Amendment likewise protects the
ability of persons and entities to contribute towards independent expenditures, subjecting
government restrictions on independent-expenditure financing to heightened scrutiny.11
A.

Contribution Limits

In Citizens United v. Federal Election Commission, the Supreme Court struck down the
federal prohibition on corporations making independent expenditures, reasoning that quid
pro quo corruption (or its appearance) is the only government interest capable of justifying
contribution and expenditure limits, and independent expenditures—which by definition
are made independent of candidates—cannot corrupt.12 Less than three months later, the
U.S. Court of Appeals for the District of Columbia Circuit, applying Citizens United, ruled
8

Id.
Citizens United v. Fed. Election Comm’n, 558 U.S. 310, 342 (2010); Austin v. Mich. Chamber of Commerce,
494 U.S. 652, 657 (1990), overruled on other grounds by Citizens United, 558 U.S. 310; Fed. Election
Comm’n v. Mass. Citizens for Life, Inc., 479 U.S. 238, 251-56 (1986); First Nat’l Bank of Boston v. Bellotti,
435 U.S. 765, 778 n.14, 784-85 (1978).
10
Citizens United, 558 U.S. at 340; see Austin, 494 U.S. at 657; Mass. Citizens for Life, 479 U.S. at 251-52;
Bellotti, 435 U.S. at 786; Buckley v. Valeo, 424 U.S. 1, 44-45 (1976).
11
See Citizens United, 558 U.S. at 340 (invalidating federal ban on corporate independent expenditures);
see also Long Beach Area Chamber of Com. v. City of Long Beach, 603 F.3d 684 (9th Cir. 2010);
(invalidating city ordinance placing contribution limits on entities making independent expenditures);
Thalheimer v. City of San Diego, 645 F.3d 1109 (9th Cir. 2011) (affirming injunction against limits on
financing independent expenditures); Farris v. Seabrook, 677 F.3d 858 (9th Cir. 2012) (enjoining
enforcement of contribution limits against recall committees, citing Long Beach Area Chamber of
Commerce); SpeechNow.org v. FEC, 599 F.3d 686 (D.C. Cir. 2010) (en banc) (invalidating federal limits
on contributions to political committees which solely make independent expenditures)
12
See generally Citizens United, 558 U.S. 310.
9

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 that it is unconstitutional to limit how much people can contribute to groups that only make
independent expenditures.13 The D.C. Court stated: “In light of the [Supreme] Court’s
holding as a matter of law that independent expenditures do not corrupt or create the
appearance of quid pro quo corruption, contributions to groups that make only independent
expenditures also cannot corrupt or create the appearance of corruption. . . . Given this
analysis from Citizens United, we must conclude that the government has no anticorruption interest in limiting contributions to an independent expenditure group.”14
The U.S. Court of Appeals for the Ninth Circuit, which has jurisdiction over the State of
Washington, has adopted the same reasoning. It struck down a City of Long Beach,
California ordinance, which prohibited groups that accepted contributions above certain
monetary thresholds from making independent expenditures.15 It also upheld an injunction
prohibiting the City of San Diego from enforcing an ordinance that operated to bar political
committees making only independent expenditures from accepting more than $1,000 a year
from any single source.16
Seattle’s proposed ordinance limiting how much money independent expenditure-only
political committees may accept from a single source each year is materially
indistinguishable from the invalidated San Diego and Long Beach ordinances. As in the
cases discussed above, because independent expenditures have been found to present an
insufficient risk of corruption as a matter of law, Seattle can point to no government interest
to justify a contribution limit to committees that make only independent expenditures. It
is almost certain that a court operating in Washington, applying Citizens United and Ninth
Circuit precedent, would hold this provision of the Seattle ordinance to be unconstitutional.
B.

Foreign-Influenced Corporations

The Supreme Court has not said “whether the government has a compelling government
interest in preventing foreign individuals or associations from influencing our Nation’s
political process.”17 In Citizens United, the Court explicitly avoided that issue, stating that
it was unnecessary to consider the question when the law at issue—the federal corporate
independent expenditure ban—was “not limited to corporations or associations that were
created in foreign countries or funded predominately by foreign shareholders.”18
While the Supreme Court has not spoken directly on the issue of foreign election financing,
it affirmed without opinion a federal three-judge panel decision in Bluman v. Federal
Election Commission.19 There, the lower court upheld the federal law prohibiting foreign
13

SpeechNow.org, 599 F.3d at 696.
Id. at 695.
15
Long Beach Area Chamber of Com., 603 F.3d at 687, 699.
16
Thalheimer, 645 F.3d at 1113, 1115, 1129.
17
Citizens United, 558 U.S. at 362.
18
Id. (emphasis added).
19
See Bluman v. Fed. Election Comm’n, 565 U.S. 1104 (2012).
14

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 nationals from making contributions and expenditures in connection with any federal, state,
or local election.20 The Bluman court said that, because “it is fundamental to the definition
of our national political community” that only citizens or lawful permanent residents be
able to participate in “activities of democratic self-governance,” the government has a
compelling interest in “limiting the participation of foreign citizens in activities of
American democratic self-governance, and in thereby preventing foreign influence over
the U.S. political process.”21 The federal government’s exclusion of foreign nationals from
political spending, the court concluded, “is therefore tailored to achieve that compelling
interest.”22
However, Bluman, a federal district court decision, does not clearly support an extension
of the current federal foreign national ban on the scale now contemplated by Seattle. The
federal statute at issue in Bluman restricted the political spending of foreign individuals
and business entities organized under the laws of another country or with a principal place
of business in another country; the statute did not prevent domestic corporations with
nominal foreign ownership or control from engaging in political speech, regardless of
whether a foreign person or entity is actually involved in the speech.23
Moreover, Bluman suggests that the tailoring of Seattle’s proposed ordinance is too broad
to withstand First Amendment scrutiny. The Bluman court concluded that the federal ban
on foreign-national spending was appropriately tailored to prevent foreign influence,
whereas Seattle’s ban is much broader and would prevent domestic corporations from
spending in connection with U.S. elections, ostensibly to prevent foreign influence. The
Citizens United Court’s brief statement about foreign-national spending would appear to
weigh against a regulation as broad as Seattle’s proposal—the Supreme Court hypothesized
only about foreign corporations or corporations “funded predominately by foreign
shareholders.”24 Regulating a domestic corporation in which a foreign owner (which may
itself not even be a foreign company) has as little as a 1% interest is a far cry from
regulating a predominately foreign-funded or -owned entity.
The State of Alaska, in an enacting a similar ban on foreign-influenced corporations
making contributions or expenditures in connection with elections, seemingly recognized
these concerns.25 To shield its ban from constitutional challenge, it included language
saying that the ban applies “only to the extent (1) federal law prohibits the foreignSee Bluman v. Fed. Election Comm’n, 800 F. Supp. 2d 281 (D.D.C. 2011).
Id. at 288.
22
Id. at 290.
23
See 52 U.S.C. § 30121.
24
See Citizens United, 558 U.S. at 362 (emphasis added).
25
See Letter, Jahna Lindemuth, Alaska Att’y Gen., to Bill Walker, Alaska Gov. at 4-5 (June 22, 2018)
(providing a legislative review of HB 44, which amended Alaska’s election laws to include the foreigninfluenced corporation prohibition) (“Alaska Letter”). The Alaska statute also has higher thresholds for
foreign ownership before a corporation is considered “foreign influenced.”
See Alaska Stat.
§ 15.13.068(c)(5).
20
21

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 influenced corporation . . . from making a contribution or expenditure in connection with
a state election; and (2) permitted by federal law.”26 Because federal law does not
categorically prohibit the full range of corporations covered by the Alaska law from
undertaking election spending, that law would allow such corporations to engage in some
political activity, and thus has a greater chance of satisfying the First Amendment’s
exacting standard.27
Thus, Seattle’s proposed ordinance barring foreign-influenced corporations from making
independent expenditures and contributions in furtherance of independent expenditures
will be subject to strict scrutiny because it burdens core First Amendment speech. The
City’s proposal is unlikely to survive such scrutiny, as federal courts have not recognized
a compelling interest in restricting the speech of “foreign-influenced” individuals or
entities, nor in regulating U.S. companies with a nominal amount of foreign ownership.
When those owners could just as easily be isolated from decisions concerning electoral
spending, the law is not narrowly tailored to serve the broader interest of keeping U.S.
elections free from foreign influence.
III.

Conclusion

Both major provisions of Seattle’s proposed campaign-finance ordinance have serious
constitutional flaws. And the passage of a law vulnerable to judicial challenge could have
unintended consequences for Seattle’s otherwise vibrant campaign finance limits.28
Citizens United provides an example. That case began as a challenge to a prohibition on
the use of corporate treasury funds to sponsor so-called “electioneering communications,”
or broadcast, cable or satellite communications that refer to federal candidates before their
voters during the thirty or sixty days before an election, from a professed media entity that
wanted to distribute a movie criticizing then-candidate Hillary Clinton through video on
26

Alaska Stat. § 15.13.068(b); see Alaska Letter at 4-5.
Another reason the Seattle ordinance may be unconstitutional is that Congress has preempted the City from
regulating foreign spending in elections. The Federal Election Campaign Act of 1971, as amended, prohibits
foreign nationals, directly or indirectly, from making contributions “in connection with a Federal, state, or
local election.” 52 U.S.C. § 30121(a)(1). Therefore, Congress has already regulated foreign spending in
connection with local elections. And where Congress has created a regulatory framework “so pervasive”
that it has left no room for other levels of government to regulate the subject matter, or where there is a
“federal interest . . . so dominant that the federal system will be assumed to preclude enforcement of state
laws on the same subject,” then Congress has preempted the entire field; no other jurisdiction may regulate
it, and any attempts will give way to federal law. Arizona v. United States, 567 U.S. 387, 399 (2012) (internal
quotation marks omitted). Particularly here, where Congress rather than any state or local government
typically oversees matters of citizenship, foreign relations, and national security, and Congress has already
enacted a law reaching state and local elections, there is a fair argument that the federal government has
evidenced an intent to occupy the field.
28
See, e.g., Seattle, Wash. Mun. Code § 2.04.730(B) (2019) (placing a mandatory limit of $500 on
contributions from any person to candidates for Mayor, City Council or City Attorney). After losing its
ability to make independent expenditures, a foreign-influenced corporation might well challenge both the
new foreign-influenced corporation restriction, and the existing monetary limit for direct contributions,
asserting that those laws together deprive it of any meaningful ability to engage in political speech.
27

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 demand.29 On a 5-4 decision, through a majority consisting of Justice Kennedy, Chief
Justice Roberts, Justice Scalia, Justice Alito and Justice Thomas, the Court not only struck
down the electioneering communications ban, but the Federal Election Campaign Act of
1971’s longstanding ban on corporate express advocacy expenditures.30 Thus, a plaintiff
which objected to the ordinance, and which otherwise opposed the campaign finance laws
now in place, might seek not simply to challenge the new ordinance, but to challenge other
aspects of current law also, and ultimately invite Supreme Court review of provisions that
might not otherwise come before a Court that is increasingly skeptical of campaign finance
regulation.
We are glad to provide further information on these matters at your convenience.

29
30

558 U.S. 310.
Id.

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