Hawaii Redefines Corporate Powers to Exclude Election Spending

Hawaii has enacted one of the most significant state-level laws concerning corporate election activity since the U.S. Supreme Court’s landmark decision in Citizens United v. Federal Election Commission. Senate Bill 2471, signed into law by Governor Josh Green, redefines the scope of corporate powers for entities organized or transacting business in Hawaii by explicitly excluding election-related spending. The law is set to take effect on July 1, 2027, though legal challenges are anticipated before that date.

Understanding what the law allows, which entities it covers, and what penalties apply is essential for any organization with a presence in the state.

What Hawaii’s SB 2471 Changes for Corporate Election Activity

At its core, SB 2471 removes election and ballot-issue activity from the scope of powers available to corporations and other artificial legal entities in Hawaii. This means that covered entities will be effectively prevented from paying, contributing, or expending money or anything of value, whether directly or indirectly, to support or oppose a candidate, political committee, or political party.

The law applies beyond candidate elections. Covered entities are also prevented from spending to support or oppose constitutional amendments, county charter amendments, or other ballot questions once those measures have been formally certified or submitted to voters. Additionally, the law removes the authority for covered entities to make donations of any kind, except  charitable donations.

There is an exception for bona fide news stories, commentaries, and editorials. However, even that exception does not apply if the broadcasting, print, online, or digital distribution facility is owned or controlled by a candidate, political committee, or political party.

Which Entities Are Covered Under the New Hawaii Election Spending Law

SB 2471 applies broadly across entity types. The law covers domestic and foreign corporations, professional corporations, credit unions, agricultural cooperative associations, consumer cooperative associations, limited-equity housing cooperatives, limited liability partnerships, limited partnerships, limited liability companies, nonprofit associations, and nonprofit corporations other than committees.

A critical provision of the bill conditions its applicability on ongoing enforcement against foreign entities transacting business in Hawaii. 

Candidate committees, noncandidate committees, and similar committees created under federal law are explicitly granted the power to engage in election and ballot-issue activity.  These carve-outs preserve the ability of political committees to operate within established campaign finance frameworks 

Penalties for Violations of  Hawaii’s Corporate Powers Limits

Any election or ballot-issue activity by a covered entity will be deemed void. Beyond that, the consequences for violations can include suspension of the entity’s authority to operate or transact business in Hawaii, ineligibility for state contracts, designation as a non-compliant entity, revocation of the entity’s operating instrument, involuntary dissolution, and revocation of tax-exempt status where applicable.

Enforcement authority is limited to two state officials: the attorney general and the director of commerce and consumer affairs. This centralized enforcement structure means that private parties and local officials cannot independently pursue violations, Hawaii’s Law in the Context of the Post-Citizens United Landscape

Hawaii is not acting in isolation. The state is one of several jurisdictions that have introduced measures this year addressing the role of corporate powers in elections. These efforts represent an ongoing legislative response to the 2010 Citizens United decision, which held that the federal government’s restriction on independent political expenditures by corporations, associations, and labor unions violated the First Amendment.

While the Citizens United ruling remains the law of the land at the federal level and as applied throughout the states,  Hawaii is approaching the issue in a novel way. SB 2471 received overwhelming bipartisan support in both chambers of the Hawaii legislature, signaling broad political backing for the measure. However, the law is expected to face legal challenges before its effective date of July 1, 2027.

Organizations operating in Hawaii or monitoring state-level campaign finance developments should track the progress of any litigation closely, as court rulings could shape the future  of similar measures in other states.

Steps for Businesses and Organizations to Prepare

Even though the law does not take effect until July 2027, companies and organizations with operations in Hawaii should begin evaluating their existing election and ballot-issue spending activity. Assess whether your entity type is covered under the law. Identify any planned contributions, expenditures, or ballot-measure spending that would need to be curtailed before the effective date.

For organizations operating across multiple states, Hawaii’s new law adds another layer to an already complex patchwork of state-level campaign finance and corporate governance requirements. State and Federal Communications provides compliance consulting services to help government affairs professionals and corporate counsel navigate these evolving obligations.

Gov. Josh Green signed Senate Bill 2471 concerning the powers of corporations and certain other artificial legal entities. Beginning July 1, 2027, the bill excludes election and ballot-issue activity from the powers of corporations and other non-committee artificial legal entities organized and transacting business in Hawaii. Election and ballot-issue activity by such entities will be deemed void and result in penalties, including forfeiture of state charter privileges. The prohibition is based on the premise that artificial persons such as corporations were never intended to be imbued with the power to influence elections. The bill is conditioned on its ongoing applicability to foreign entities transacting business in the state. Hawaii is one of a number of states with measures introduced this year (e.g., Arizona Senate Concurrent Resolution 1053, Kansas House Bill 2766, Oklahoma House Joint Resolution 1075) addressing the grant of corporate powers related to election influence in the continuing wake of the U.S. Supreme Court decision in Citizens United v. Federal Election Commission.

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On Election Day, Massachusetts voters passed Question 2, paving the way for campaign finance reform.

The ballot measure establishes a citizen commission tasked with producing a report on the state of political spending in the Massachusetts and promoting an amendment to the United States Constitution. The commission would also report on whether the state can legally limit corporate contributions.

Proponents of the ballot question hope it will help in overturning the 2010 decision in Citizens United, while those against it argued the measure was a protest vote and created a new governmental body solely for symbolic gesture.

The measure passed 71.3 percent to 28.69 percent, with 81.8 percent of precincts reporting.

Next month, Massachusetts voters will decide on a ballot measure seeking to cap corporate spending in elections.

Ballot Question 2, if passed, will create a commission made up of citizens tasked with producing a report on the state of political spending in Massachusetts and promoting an amendment to the United States Constitution. The commission would also report on whether the state can legally limit corporate contributions.

The ballot measure has been characterized as a way for the state to show their opposition to the Supreme Court’s 2010 Citizens United decision.

The group advocating for Ballot Question 2 envisions a 28th Amendment removing the ability of corporations, labor unions, super PACs and other wealthy interests from financially influencing political campaigns.

To pass, an amendment to the U.S. Constitution would require approval by two-thirds of the U.S. House and Senate and must also be ratified by 38 states.

Gov. Rick Snyder signed two campaign finance bills accounting for the U.S. Supreme Court ruling in Citizens United into law on September 20, 2017.

Senate Bill 335 excludes an independent expenditure from the definition of a contribution and defines independent expenditure committees.

Senate Bill 336 incorporate violations established in Senate Bill 335 into the Code of Criminal Procedure.

The bills are effective immediately.

The Michigan Legislature passed two campaign finance bills accounting for the U.S. Supreme Court ruling in Citizens United from 2010.

Senate Bill 355 excludes an independent expenditure from the definition of a contribution and defines independent expenditure committees.

Senate Bill 336 incorporates violations established in Senate Bill 335 into the Code of Criminal Procedure.

Opponents of the bills argue it would allow candidates to raise unlimited contributions for independent expenditure committees, often referred to as super PACs.

Gov. Rick Snyder has 14 days upon receipt of the enrolled bills to sign or veto them.

On November 8, California voters approved a proposition directing state elected officials overturn Citizens United.

Overturn of Citizens United Act Advisory Question (Proposition 59) asked voters to affirm state elected officials should use all constitutional authority, including, but not limited to, proposing and ratifying one or more amendments to the U.S. Constitution to overturn Citizens United and other applicable judicial precedents to allow the full regulation or limitation of campaign spending. The proposition also directs the officials to act to make clear corporations should not have the same constitutional rights as human beings.

As of 5:00 a.m., with over 90 percent of the precincts reporting, the proposition passed 52.4 percent to 47.6 percent, according to the California Secretary of State’s office.

St. Petersburg Councilwoman Darden Rice will introduce a proposed ordinance to abolish super PACs and ensure foreign money stays out of city elections.

The ordinance would establish limits for independent expenditure committees and would require corporations contributing money to local elections to certify they are not influenced by foreign entities.

Rice hopes the ordinance will act as a model for similar laws around the country, potentially leading to a legal challenge. This could give the U.S. Supreme Court an opportunity to reconsider Citizens United.

Here is our latest edition of the News You Can Use Video Digest. Have a great weekend!

 

NYCU Video Digest was produced by 2016 interns Brittany Anderson and Clémence Besnard for State and Federal Communications.

On July 16, presidential candidate Hillary Clinton announced she will “propose a constitutional amendment to overturn Citizens United” in her first 30 days in office if elected president.

The announcement, in a video created by Clinton, was played at Netroots Nation, a politically progressive conference held this past weekend in St. Louis, Missouri. In the video, Clinton says she will “appoint Supreme Court justices who understand that this decision was a disaster.”

Clinton has previously championed the establishment of a small-donor matching system for presidential and congressional elections.

A bipartisan majority of lawmakers is calling for an amendment to the U.S. Constitution overturning the Supreme Court’s 2010 decision in Citizens United v. Federal Election Commission.

In the Citizens United decision, the Court ruled corporations and unions should be considered individuals for purposes of political contributions; therefore, restricting their donations to candidates is a violation of their First Amendment right to free speech.

New York is now one of 16 states—and the first with a Republican-controlled chamber—supporting an amendment in response to the decision.

California’s Senate Bill 254 became law without the governor’s signature on June 9, 2016.

The measure will place a ballot question on the November 8, 2016 ballot asking voters whether California’s elected officials should use all of their constitutional authority, including proposing and ratifying one or more amendments to the United States Constitution, to overturn the Citizens United decision of the U.S. Supreme Court.

A previous version of this bill was approved by lawmakers in 2014, but was blocked by legal challenges until January 2016 when the Supreme Court of California upheld the Legislature’s power to use advisory ballot measures.

 

The New Hampshire Legislature begins the New Year addressing campaign finance issues stemming from the U.S. Supreme Court Citizens United decision. On Wednesday, January 6, the House will review Senate Bill 136, a bill first introduced in the 2015 legislative session. The bill, which passed the Senate last year, establishes a committee to review constitutional amendments pending in Congress regarding the Citizens United decision and related cases having been introduced in the United States Supreme Court.

Photo of the New Hampshire State House by AlexiusHoratius on Wikipedia.

Following a ruling by the California Supreme Court, the California Legislature is permitted to place an advisory measure related to campaign finance on the November 2016 ballot. The advisory measure asks voters their opinions on campaign finance and whether there should be a federal constitutional amendment to overturn Citizens United.

A conservative group challenged the constitutionality of the advisory measure, insisting the Legislature was prohibited from putting such measures before voters. The California Supreme Court ruled the advisory measure is permissible because state legislatures have a role in passing federal constitutional amendments, and therefore it met the required nexus between an advisory measure and a potential legislative action.

Proposition 49, the “Citizens United” measure, will appear on the general election ballot in November 2016.