NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A2633
SPONSOR: Walker TITLE OF BILL:
An act to amend the election law, in relation to enacting the "democracy
preservation act"; and in relation to prohibiting contributions by
foreign-influenced business entities and requiring certification
PURPOSE OR GENERAL IDEA OF BILL:
To ban political spending by foreign-influenced business entities in New
York's state and local elections.
SUMMARY OF PROVISIONS: Section one is the title.
Section two outlines the legislative findings.
Section three of the bill amends the election law by adding section
14-116-a to prohibit contributions by foreign-influenced business enti-
ties.
Section four of the bill amends 14-100 of the election law by adding
subdivisions 18, 19, and 20 to define terms "foreign-influenced," "busi-
ness entity," and "foreign owner."
Section five of the bill amends 14-116 of the election law by adding
subdivision 4 to require that business entities that make political
expenditures or contributions file with the state board of elections
certifying that they are not a foreign-influenced business entity as per
the date such expenditure or contribution was made, and that copies of
the statement of certification are provided to any campaign or committee
to which they contribute upon request of the recipient to any other
person to whom they contribute.
Section six sets the effective date.
JUSTIFICATION:
New York state welcomes immigrants, visitors, and investors from around
the world. However, its elections should be decided by the people of New
York and not by foreign investors or the business entities over which
they exert influence.
Under current federal law, foreign governments, foreign corporations,
foreign political parties, and foreign nationals other than lawful
permanent residents are prohibited. from spending money in U.S.
elections. In 2012, the Supreme Court decision in Bluman v. Federal
Election Commission upheld this restriction. New York state law also
prohibits a foreign national, government, instrumentality or agent from
itself registering as an independent expenditure committee for the
purpose of making independent expenditures in any state or local
election.
However, neither federal nor state law adequately protects against the
influence of corporate political spending by U.S.-registered corpo-
rations with significant foreign ownership. In 2010, the Supreme Court
decision in Citizens United v. Federal Election Commission gave corpo-
rations free rein in campaign spending, which they have taken advantage
of in the days since the decision. Today, America's largest corporations
spend hundreds of millions of dollars directly from their corporate
treasuries to influence elections. But the Supreme Court's Citizens
United decision applies to corporations that are "associations of citi-
zens." Multinational corporations increasingly do not meet that defi-
nition. Foreign investors own increasing shares of U.S. corporate stock,
growing from only 5 percent in 1982 to approximately 35 percent in 2017.
Where part of the shareholders' equity is attributable to foreign inves-
tors, spending corporate treasury funds on New York elections means
spending the equity of foreign entities on New York elections. Further-
more, foreign investors can hold substantial influence even with only a
minority of shares. The U.S. Securities and Exchange Commission, major
capital investors, corporate managers, and corporate governance experts
broadly agree that ownership or control of one percent or more of shares
can confer substantial influence on corporate decision-making.
Political spending by foreign-influenced business entities can weaken,
interfere with, or disrupt New York's democratic self-government and the
faith that the electorate has in its elected officials. To protect the
integrity of New York's democratic self-government, it is necessary to
prevent foreign-influenced business entities from influencing New York
elections through political spending. Measures similar to this bill
have been enacted on a municipal level across the country. Seattle
passed an ordinance in January 2020 to ban foreign-influenced corpo-
rations from spending in their local elections. St. Petersburg, Florida,
has also enacted a similar law. Similar bills are pending in at least
six other states, and a local law is pending in New York City.
This bill will protect democratic self-government from the undue influ-
ence of foreign-influenced corporations by effectively prohibiting them
from spending in elections across New York State.
PRIOR LEGISLATIVE HISTORY:
2021-2022: Referred to Election law
FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS: None.
EFFECTIVE DATE:
180 days after it becomes a law. Effective immediately, the addition,
amendment and/or repeal of any rule or regulation necessary for the
implementation of this act on its effective date are authorized to be
made on or before such effective date.
STATE OF NEW YORK
________________________________________________________________________
2633
2023-2024 Regular Sessions
IN ASSEMBLY
January 26, 2023
___________
Introduced by M. of A. WALKER, SIMON, RAMOS, BICHOTTE HERMELYN, THIELE,
DICKENS -- read once and referred to the Committee on Election Law
AN ACT to amend the election law, in relation to enacting the "democracy
preservation act"; and in relation to prohibiting contributions by
foreign-influenced business entities and requiring certification
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. This act shall be known and may be cited as the "democracy
2 preservation act".
3 § 2. Legislative Findings. The legislature hereby finds and declares
4 that New York state welcomes immigrants, visitors, and investors from
5 around the world. However, its elections should be decided by the people
6 of New York and not by foreign investors or the business entities over
7 which they exert influence. Corporations with partial foreign ownership
8 have been spending money to influence state and local elections in New
9 York and around the country. The public has a compelling interest in
10 limiting the participation of foreign entities in activities of American
11 democratic self-government, which include spending money to influence
12 voters and finance campaigns, in the interest of preventing foreign
13 influence over the United States political process.
14 Investors are the ultimate beneficiaries of corporate interests. Where
15 part of the shareholders' equity is attributable to foreign investors,
16 spending corporate treasury funds on New York elections means spending
17 the equity of foreign entities on New York elections.
18 Business corporations and similar entities have a fiduciary duty to
19 their shareholders, including investors around the world, and generally
20 prioritize the interests of such shareholders, which may diverge
21 substantially from the interests of the people of New York and of citi-
22 zens of the United States. In addition, both formal procedures of corpo-
23 rate democracy and informal mechanisms of influence can provide foreign
24 investors with substantial influence even with only a minority of
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD02553-01-3
A. 2633 2
1 shares. The United States Securities and Exchange Commission, major
2 capital investors, corporate managers, and corporate governance experts
3 broadly agree that ownership or control of one percent or more of shares
4 can confer substantial influence on corporate decision-making.
5 Political spending by foreign-influenced business entities can weaken,
6 interfere with, or disrupt New York's democratic self-government and the
7 faith that the electorate has in its elected officials. To protect the
8 integrity of New York's democratic self-government, it is necessary to
9 prevent foreign-influenced business entities from influencing New York
10 elections through political spending.
11 § 3. The election law is amended by adding a new section 14-116-a to
12 read as follows:
13 § 14-116-a. Prohibited contributions by foreign-influenced business
14 entities. 1. Notwithstanding any provision of law to the contrary, it
15 shall be unlawful for a foreign-influenced business entity, directly or
16 indirectly, to make a contribution or donation of money or other thing
17 of value, or to make an express or implied promise to make a contrib-
18 ution or donation, in connection with a state or local election.
19 2. It shall be unlawful for a business entity prohibited under subdi-
20 vision one of this section, directly or indirectly, to make a contrib-
21 ution or donation to a constituted committee, independent expenditure
22 committee, political committee, or party committee.
23 3. It shall be unlawful for a business entity prohibited under subdi-
24 vision one of this section, directly or indirectly, to make an expendi-
25 ture, independent expenditure, or disbursement for a political communi-
26 cation.
27 4. It shall be unlawful for a person to knowingly solicit, accept, or
28 receive a contribution or donation described in subdivision one, two or
29 three of this section from a foreign-influenced business entity.
30 5. Except as provided in subdivision six of this section, it shall be
31 unlawful for a person who receives a contribution or donation from a
32 business entity to use that contribution or donation, directly or indi-
33 rectly, for any of the purposes described in subdivision one, two, or
34 three of this section, or to contribute, donate, transfer, or convey
35 funds from such a contribution or donation to another person for use for
36 any of the purposes described in subdivision one, two, or three of this
37 section. However, a person may use funds that do not comply with the
38 requirements of this section for other lawful purposes.
39 6. A person who receives a contribution or donation from a business
40 entity, and also receives from the business entity a copy of the state-
41 ment of certification described in subdivision four of section 14-116 of
42 this title, may use such funds for the purposes described in subdivision
43 one, two, or three of this section only if the person separately desig-
44 nates, records, and accounts for such funds, and ensures that disburse-
45 ments for the purposes described in subdivision one, two, or three of
46 this section are only made from funds that comply with the requirements
47 of this section. A person may rely in good faith on a statement of
48 certification that meets the requirements of subdivision four of section
49 14-116 of this title.
50 7. Any person found in violation of this section shall be guilty of a
51 class E felony and shall be subject to a civil penalty equal to the
52 contribution or donation amount plus a fine of up to ten thousand
53 dollars, to be recoverable in a special proceeding or civil action to be
54 brought by the state board of elections chief enforcement counsel.
55 § 4. Section 14-100 of the election law is amended by adding three new
56 subdivisions 18, 19 and 20 to read as follows:
A. 2633 3
1 18. "foreign-influenced" shall mean a business entity for which at
2 least one of the following conditions is met:
3 i. a single foreign owner holds, owns, controls, or otherwise has
4 direct or indirect beneficial ownership of one percent or more of the
5 total equity, outstanding voting shares, membership units, or other
6 applicable ownership interests of the business entity; or
7 ii. two or more foreign owners, in aggregate, hold, own, control, or
8 otherwise have direct or indirect beneficial ownership of five percent
9 or more of the total equity, outstanding voting shares, membership
10 units, or other applicable ownership interests of the business entity;
11 or
12 iii. a foreign owner participates directly or indirectly in the busi-
13 ness entity's decision-making process with respect to the business enti-
14 ty's political activities in the United States.
15 19. "business entity" shall mean a for-profit entity doing business
16 for profit in the state or elsewhere, including a for-profit corpo-
17 ration, company, limited liability company, limited partnership, busi-
18 ness trust, business association, joint-stock association or other simi-
19 lar entity.
20 20. "foreign owner" shall mean:
21 i. a foreign national; or
22 ii. a business entity wherein a foreign national holds, owns,
23 controls, or otherwise has directly or indirectly acquired beneficial
24 ownership of equity or voting shares in an amount that is equal to or
25 greater than fifty percent of the total equity or outstanding voting
26 shares.
27 § 5. Section 14-116 of the election law is amended by adding a new
28 subdivision 4 to read as follows:
29 4. Every business entity that makes an expenditure, or contribution,
30 for political purposes for a state or local election shall file with the
31 state board of elections, within seven business days after making such
32 expenditure or contribution, on the form prescribed by the state board
33 of elections, a statement of certification signed by the chief executive
34 officer, president or owner under penalty of perjury, avowing that after
35 due inquiry, such business entity was not a foreign-influenced business
36 entity on the date such expenditure or contribution was made. Business
37 entities shall provide a copy of the statement of certification required
38 by this subdivision to any campaign or committee to which they contrib-
39 ute, and, upon request of the recipient, to any other person to whom
40 they contribute.
41 § 6. This act shall take effect on the one hundred eightieth day after
42 it shall have become a law. Effective immediately, the addition, amend-
43 ment and/or repeal of any rule or regulation necessary for the implemen-
44 tation of this act on its effective date are authorized to be made on or
45 before such effective date.
