AO 2006-15: Domestic subsidiaries of foreign corporation may donate to state and local elections
Wholly-owned domestic subsidiaries of a foreign corporation may donate funds in connection with state and local elections, subject to state law, as long as no foreign national participates in decision-making and the funds do not come from a foreign national.
Background
Foreign nationals cannot directly or indirectly make a contribution or donation of money in connection with a federal, state or local election, nor can they direct, dictate, control or directly or indirectly participate in decisions concerning the making of any such contributions or donations. 2 U.S.C. 441e and 11 CFR 110.20.
The Act and Commission regulations define “foreign national” to include “foreign principals” and individuals who are neither U.S. citizens nor lawfully admitted permanent residents (i.e., green card holders). 2 U.S.C. 441e(b) and 11 CFR 110.20(a)(3). A foreign principal includes corporations organized under the laws of or having its principal place of business in a foreign country. 22 U.S.C. 611(b)(3).
TransCanada Corporation is a Canadian company that owns two U.S. corporations: Gas Transmission Northwest Corporation (GTN) and TransCanada Hydro Northeast Inc. (TC Hydro). Each wholly-owned subsidiary has a three member Board of Directors, and each Board has one member who is neither a U.S. citizen nor a green card holder. GTN and TC Hydro would like to donate and disburse corporate treasury funds in connection with state and local elections.
Analysis
Under the Act, TransCanada Corporation is a foreign national. However, because GTN and TC Hydro are each incorporated in the United States and each has its principal place of business in the United States, they are not foreign nationals for the purposes of 2 U.S.C. 441e.
Because one director on each of the subsidiaries’ boards is not a U.S. citizen or a permanent resident, those two individuals are considered foreign nationals. Because donations or disbursements may not be derived from the foreign national’s funds GTN and TC Hydro must use a reasonable accounting method to show that the subsidiary has sufficient funds in its accounts, other than funds given or loaned by its foreign national parent corporation. See AO 1992-16.
GTN and TC Hydro have proposed arrangements similar to those approved by the Commission in AO 2000-17 to ensure that no foreign national has any decisionmaking authority concerning the making of donations or disbursements. The subsidiaries’ Boards of Directors would establish a political donation budget on a “not to exceed” basis. The directors would enforce this budget cap and delegate political donation decision-making to a subset of board members composed entirely of U.S. citizens or permanent residents.
This approach ensures that only funds raised by the U.S. corporations are used and that only citizens or permanent residents have decision-making power for the state and local political donations and disbursements in question. As such, the plan is permissible under the Act and FEC regulations.
Length: 6 pages
Date: May 19, 2006