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L. Paige Whitaker Legislative Attorney - page 13 / 31





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Legislative Options After Citizens United v. FEC: Constitutional and Legal Issues

form to its shareholders.65 For example, federal statutes currently classify some U.S. corporations as “foreign” because they have a certain percentage of foreign ownership. 66

There is no constitutional provision that expressly permits Congress to enact such statutes, which generally regulate foreign investment in the United States.67 However, these statutes are commonly justified by other federal powers mentioned in the Constitution, including federal powers over immigration and naturalization;68 federal power to regulate interstate and foreign commerce;69 and the power to provide for the national defense.70 These provisions, or similar ones limiting the involvement of foreigners in the federal government,71 could also be cited in support of legislation restricting the political speech of foreign-owned or -controlled corporations. In fact, there are already two instances within election law where parent corporations and their subsidiaries are treated as a single entity. 72


conspiring with each other for purposes of the Sherman Act); David Aronofsky, Piercing the Transnational Corporate Veil: Trends, Developments, and the Need for Widespread Adoption of Enterprise Analysis, 10 N.C. J. INTL L. & COMM. REG. 31, 38-41 (1985) (“[The] notion [is] that the principal purpose of a multicorporate business entity is to achieve the economic welfare of the group as a whole through the integrated and coordinated activities of the individual members.”).

65 Particularly where the courts are concerned, a court will look beyond a corporate form if a subsidiary acts as an agent of the parent. The fact that a subsidiary is wholly owned is generally not enough. See, e.g., Delagi v. Volkswagenwerk, 278 N.E.2d 895, 897 (N.Y. 1972) (“[T]he [parent’s] control over the subsidiary’s activities … must be so complete that the subsidiary is, in fact, merely a department of the parent.”); Frummer v. Hilton Hotels Int’l, Inc., 227 N.E.2d 851 (N.Y. 1967) (finding that the subsidiary acted as the agent of its parent). See also 29 U.S.C. § 623(g) (considering evidence regarding interrelations of operations, common management, centralized control of labor relations, and common ownership or financial control in determining whether a U.S. parent corporation’s control of a subsidiary incorporated in a foreign country is such as to make the standards of the Age Discrimination in Employment Act applicable to the foreign subsidiary).

66 See, e.g., 46 U.S.C. § 12102 (certain ships owned by U.S. corporations are eligible for documentation only if their chief executive officer and the chairman of their board of directors are U.S. citizens and no more of their directors are noncitizens than a minority of the number necessary to constitute a quorum); 49 U.S.C. § 40102 (prohibiting U.S. corporations from registering aircraft unless (1) their president and two-thirds or more of their board of directors and other managing officers are U.S. citizens; (2) the corporation is under the actual control of U.S. citizens; and (3) at least 75% of the voting interest is owned or controlled by U.S. citizens); 42 U.S.C. § 2133(d) (prohibiting corporations believed to be controlled by foreign citizens or governments from obtaining licenses for nuclear facilities). There are also provisions that define “U.S. citizens,” “U.S. exporters,” or “U.S. businesses” so as to include foreign corporations with certain percentages U.S. ownership. See 15 U.S.C. § 4721(j)(3); 15 U.S.C. § 4724(e)(1)(C).

67 For more on this topic, see generally CRS Report RL33103, Foreign Investment in the United States: Major Federal Statutory Restrictions, by Michael V. Seitzinger.


Art. I, § 8, cl. 4; Fiallo v. Bell, 430 U.S. 787 (1977).

69 Art. I, § 8, cl. 3; North Am. Co. v. Secs. & Exch. Comm’n, 327 U.S. 686 (1946); Elec. Bond Co. v. Secs. & Exch. Comm’n, 303 U.S. 419 (1938).


Art. 1, § 8, cl. 12.

71 Then-Justice Rehnquist’s dissent in Sugarman v. Dougall, for example, notes that there are “no less than 11 instances” that distinguish citizens from foreigners in the Constitution: “Representatives, U.S. CONST. art. I, § 2, cl. 2, and Senators, art. I, § 3, cl. 3, must be citizens. Congress has the authority ‘to establish an uniform Rule of Naturalization’ by which aliens can become citizen members of our society, art. I, § 8, cl. 4; the judicial authority of the federal courts extends to suits involving citizens of the United States ‘and foreign States, Citizens or Subjects,’ art. III, § 2, cl. 1, because somehow the parties are ‘different,’ a distinction further made by the Eleventh Amendment; the Fifteenth, Nineteenth, Twenty-Fourth, and Twenty-Sixth Amendments are relevant only to ‘citizens.’ The President must not only be a citizen but ‘a natural born Citizen,’ art. II, § 1, cl. 5.” 413 U.S. 634, 651-52 (1973).

72 2 U.S.C. § 441a(a)(5) (“For purposes of the limitations provided by paragraph (1) and paragraph (2), all contributions made by political committees established or financed or maintained or controlled by any corporation, labor organization, or any other person, including any parent, subsidiary, branch, division, department, or local unit of such (continued...)

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