Strangers in a Strange Land: Domestic Subsidiaries of Foreign Corporations and the Ban on Political Contributions from Foreign Sources

Abstract:     
Candidates for federal office raised and spent nearly $4 billion in the election cycle leading up to the year 2000 elections. In the wake of this record fundraising, combined with allegations of corruption of political candidates by corporate contributions, Congress enacted the Bipartisan Campaign Reform Act of 2002 (BCRA). In addition to fulfilling its main goal of prohibiting “soft” money, that is, money that was not spent in coordination with a particular candidate, BCRA also prohibited foreign corporations, including domestic subsidiaries of foreign corporations, from contributing anything of value in a federal election.

In so doing, BCRA drew a distinction between purely domestic corporations and domestic subsidiaries of foreign corporations. By placing heavier restrictions on domestic subsidiaries of foreign corporations, BCRA joined a long line of federal statutes and regulations that assume that a foreign corporation operating in the United States will act like an agent of its parent company’s country of origin rather than like a domestic corporation.

This article argues that BCRA’s differential treatment of domestic subsidiaries of foreign corporations and purely domestic corporations violates the equal protection component of the 5th Amendment Due Process Clause. First, this distinction fails equal protection review even under the rational basis test because there is no rational distinction between domestic subsidiaries of foreign corporations and purely domestic corporations. Furthermore, even if it were to survive rational basis scrutiny, BCRA’s disparate treatment of domestic subsidiaries of foreign corporations should be reviewed under intermediate scrutiny because classifications based on nationality raise concerns of invidious discrimination normally protected by heightened scrutiny. Review under an intermediate level of scrutiny would further suggest the conclusion that BCRA’s disparate treatment violates equal protection.

Number of Pages in PDF File: 53

Keywords: BCRA, Soft Money, Campaign Finance Reform, Equal Protection, Alienage, Suspect Classification

Accepted Paper Series