FEC urges Congress to close foreign money loophole

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The Federal Election Commission is urging Congress to close a loophole in federal law that allows foreign corporations to finance ballot measures.

The Federal Election Campaign Act currently prohibits foreign nationals and corporations from making political donations and independent expenditures in connection to an election for federal, state or local office. But the ban does not apply to political spending on ballot measures, referenda or even recall elections where a candidate is not seeking office.

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This month, the FEC unanimously approved more than a dozen legislative recommendations to federal lawmakers, including proposals to close the loophole and make it illegal to help foreign nationals circumvent the restrictions.

For years, government watchdog groups have stressed the need to limit foreign meddling in state and local ballot questions, but federal campaign finance regulators say their hands are tied.

In 2021, the FEC dismissed a complaint alleging that the Australian mining company Sandfire Resources violated federal campaign finance law when it spent nearly $288,000 to defeat a Montana ballot measure that would have made it easier for regulators to deny mining permits. The commission concluded that foreign campaign contributions in connection to ballot questions fell “outside the purview” of federal law.

In a statement explaining the commission’s decision in the case, then-Chair Shana Broussard, a Democrat, wrote: “Until Congress expands the (Federal Election Campaign) Act’s foreign national prohibition to encompass state and local ballot activities, which I urge it to do, the Commission is bound by the law as it currently stands.”

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In the absence of federal restrictions, several states have enacted their own bans. Maine became the latest state to tackle the issue in November when voters there approved a state referendum prohibiting companies owned by foreign governments from spending money to influence ballot initiatives.

The move came after a U.S. subsidiary of Hydro-Québec — a utility company owned by the Canadian province — spent more than $22 million to fight a state referendum concerning the construction of a transmission line in 2020.

Congress is currently considering several bills addressing the FEC’s recommendations. Last month, the Committee on House Administration advanced bipartisan legislation sponsored by Reps. Brian Fitzpatrick (R-PA) and Jared Golden (D-ME) to prohibit foreign nationals from spending on state and local ballot initiatives, referenda and recall elections.

In the Senate, the Select Intelligence Committee over the summer approved an intelligence appropriations bill introduced by Sen. Mark Warner (D-VA) that includes similar provisions on foreign campaign contributions.

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Sen. Sheldon Whitehouse (D-RI) and former Rep. David Cicilline (D-RI) have also sponsored sweeping campaign finance reforms that include measures to restrict foreign money in ballot initiatives and prevent someone from establishing a shell company to conceal election contributions by foreign nationals.

But even if Congress acts on the recommendations, preventing the flow of foreign money into U.S. elections could present a problem without additional funding.

A November report by the agency’s inspector general found that identifying and regulating unlawful foreign campaign contributions “continues to pose a significant challenge to the FEC.” The report blamed dwindling resources and a mounting workload.

The number of transactions subject to FEC regulations has increased dramatically over the previous two decades. During the 2000 election cycle, the FEC oversaw nearly 2 million receipts and expenditures. That number exceeded 590 million during the 2022 midterm elections.

At the same time, the FEC is struggling to maintain staff. From 2010 to 2023, its total workforce shrank by 12% and its budget, when adjusted for inflation, declined by 11%.

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