SB1179 SD1

SECTION 1. The legislature finds that the State has a compelling interest in securing its democratic self-governance from foreign influence. The State welcomes immigrants, visitors, and investors from around the world. However, its elections should be decided by the people of Hawaii and not by foreign investors or the business entities over which they exert influence.

The legislature further finds that the United States Securities and Exchange Commission, major capital investors, corporate managers, and corporate governance experts broadly agree that ownership or control of one per cent or more of shares can confer substantial influence on corporate decision-making. For similar reasons, ownership or control of five per cent of shares by multiple foreign investors can affect corporate decision-making. Corporations with partial foreign ownership have been spending money to influence state and local elections around the country.

The legislature also finds that investors are the ultimate beneficiaries of corporate interests. As the Hawaii supreme court has explained, after "all other creditors have been satisfied," shareholders lay claim to a company's "shares and the residual estate." Ito v. Investors Equity Life Holding Co., 135 Hawaii 49, 346 P 3d 118 (2015). Where part of the shareholders' equity is attributable to foreign investors, spending corporate treasury funds on Hawaii elections means spending the equity of foreign entities on Hawaii elections.

Additionally, the legislature finds that corporations and similar entities have a fiduciary responsibility to their shareholders, including investors around the world, and generally prioritize the interests of such shareholders, which may diverge substantially from the interests of the people of Hawaii and the United States.

Also, the legislature finds that the United States government has concluded that Russia, China, Iran, and other foreign actors are engaged in ongoing campaigns to undermine democratic institutions, as set forth in the joint statement "Combating Foreign Influence in US Elections," issued by the Office of the Director of National Intelligence, United States Department of Justice, Federal Bureau of Investigation (FBI), and Department of Homeland Security on October 19, 2018. The FBI has concluded that foreign-influenced activities include "criminal efforts to suppress voting and provide illegal campaign financing," as set forth in FBI Director Christopher Wray's press briefing on election security on August 2, 2018.

The legislature further finds that, aside from active measures by hostile intelligence services, the explicit or implicit influence of major foreign investors subjects corporate decision-making to foreign influence as executives consider interests of foreign investors. Domestic corporate political spending by such corporations threatens democratic self-governance.

In addition, the legislature finds that the United States Congress and the United States Supreme Court recognize the need to protect American elections from foreign influence through the ban on contributions and expenditures by foreign nationals imposed by title 52 United States Code section 30121, upheld by the Supreme Court in Bluman v. Federal Election Commission, 800 F. Supp. 2d 281 (D.D.C. 2011), affirmed, 565 U.S. 1104 (2012).

The legislature further finds that existing law does not adequately protect against foreign interference through corporate political spending by United States corporations with significant foreign ownership, as explained by Federal Election Commissioner Ellen Weintraub in her May 22, 2019, written testimony to the United States House of Representatives Committee on Oversight and Reform's Subcommittee on National Security.

The legislature further finds that political spending by foreign-influenced business entities can weaken, interfere with, or disrupt Hawaii's democratic self-government and the trust that the electorate has in its elected representatives.

The legislature further finds that former President Barack Obama warned of foreign corporate spending in state elections and that Ellen Weintraub, commissioner of the Federal Election Commission, and Ann Ravel, former commissioner of the Federal Election Commission, specifically called on states to enact legislation to limit the influence of foreign-influenced corporate spending on American elections.

The legislature recognizes that Seattle, Washington has enacted legislation, and the U.S. Congress and several states and municipalities are considering enacting legislation, to limit foreign-influenced corporate political spending and to protect the integrity of their elections from foreign influence through corporate political spending. Therefore, to protect the integrity of Hawaii's democratic self-government, it is necessary to prevent foreign-influenced business entities from influencing Hawaii's elections through political spending.

The purpose of this Act is to protect the State's democratic self-governance by:

(1) Prohibiting foreign entities and foreign-influenced business entities from making independent expenditures, electioneering communications, or contributions to candidates or committees, or contributions or donations to other persons earmarked for those purposes;

(2) Requiring every business entity that contributes or expends funds in a state election to file a statement of certification regarding its status as a foreign-influenced business entity or foreign corporation; and

(3) Requiring noncandidate committees making only independent expenditures to obtain a statement of certification from each top contributor required to be listed in an advertisement.

SECTION 2. Section 11-302, Hawaii Revised Statutes, is amended by adding four new definitions to be appropriately inserted and to read as follows:

""Business entity" means a for-profit corporation, company, limited liability company, limited partnership, business trust, business association, or other similar for-profit business entity.

"Chief executive officer" means the highest-ranking officer or individual having authority to make decisions regarding a corporation's affairs.

"Foreign-influenced business entity" means a business entity that meets at least one of the following conditions:

(1) A single foreign investor holds, owns, controls, or otherwise has direct or indirect beneficial ownership of one per cent or more of the total equity, outstanding voting shares, membership units, or other applicable ownership interests of the business entity;

(2) Two or more foreign investors, in aggregate, hold, own, control, or otherwise have direct or indirect beneficial ownership of five per cent or more of the total equity, outstanding voting shares, membership units, or other applicable ownership interests of the business entity; or

(3) A foreign investor participates directly or indirectly in the corporation's decision-making process with respect to the business entity's political activities in the United States.

"Foreign investor" means a person or entity that:

(1) Holds, owns, controls, or otherwise has direct or indirect beneficial ownership of equity, outstanding voting shares, membership units, or other applicable ownership interests of a business entity; and

(2) Is:

(A) A government of a foreign country;

(B) A foreign political party;

(C) An individual outside the United States who is not a citizen of the United States or a national of the United States and who is not lawfully admitted for permanent residence; or

(D) A business entity that:

(i) Is organized under the laws of or having its principal place of business in a foreign country; or

(ii) In which a person or entity described in subparagraph (A), (B), or (C) holds, owns, controls, or otherwise has directly or indirectly acquired a beneficial ownership of equity or voting shares in an amount that is equal to or greater than fifty per cent of the total equity or outstanding voting shares."

SECTION 3. Section 11-356, Hawaii Revised Statutes, is amended to read as follows:

"[[]§11-356[]] Contributions and expenditures by a foreign national, foreign-influenced business entity, or foreign corporation; prohibited. (a) [~~Except as provided in subsection (b), no~~] No contributions or expenditures shall be made to or on behalf of a candidate, candidate committee, or noncandidate committee, by a foreign national, foreign-influenced business entity, or foreign corporation, including a domestic subsidiary of a foreign corporation, a domestic corporation that is owned by a foreign national, or a local subsidiary where administrative control is retained by the foreign corporation[~~, and in the same manner prohibited under 2 United States Code section 441e and 11 Code of Federal Regulations section 110.20, as amended.~~

~~(b) A foreign-owned domestic corporation may make contributions if:~~

~~(1)~~ Foreign national individuals do not participate in election-related activities, including decisions concerning contributions or the administration of a candidate committee or noncandidate committee; or

~~(2)~~ ~~The contributions are domestically-derived~~].

(b) No independent expenditures or electioneering communications shall be made by a foreign national, foreign-influenced business entity, or foreign corporation.

(c) No contribution or donation shall be made to any person by a foreign national, foreign-influenced business entity, or foreign corporation if the contribution or donation is earmarked for the recipient to make a contribution, independent expenditure, or electioneering communication.

(d) Every business entity that contributes to or makes an expenditure on behalf of a candidate, candidate committee, or noncandidate committee, including an independent expenditure or electioneering communication, shall, within seven business days after making the contribution or expenditure, file with the campaign spending commission a statement of certification signed by the business entity's chief executive officer avowing under penalty of perjury that, after due inquiry, the business entity was not a foreign-influenced business entity or foreign corporation on the date the expenditure, independent expenditure, contribution, or expenditure for an electioneering communication was made. For purposes of this certification, the business entity shall ascertain beneficial ownership in a manner consistent with the Hawaii Business Corporation Act or, if it is registered on a national securities exchange, as set forth in title 17 Code of Federal Regulations sections 240.13d-3 and 240.13d-5. The business entity shall provide a copy of the statement of certification to any candidate or committee to which it contributes, and upon request of the recipient, to any other person to which it contributes.

(e) For the purposes of this section:

"Earmarked" means a designation, instruction, whether direct or indirect, express or implied, oral or written, which results in all or any part of the contribution or donation being expended in a manner that would be prohibited by this section if made by the foreign-influenced business entity.

"Electioneering communication" has the same meaning as defined by section 11-341."

SECTION 4. Section 11-393, Hawaii Revised Statutes, is amended to read as follows:

"§11-393 Identification of certain top contributors to noncandidate committees making only independent expenditures. (a) An advertisement shall contain an additional notice in a prominent location immediately after or below the notices required by section 11-391, if the advertisement is broadcast, televised, circulated, or published, including by electronic means, and is paid for by a noncandidate committee that certifies to the commission that it makes only independent expenditures. This additional notice shall start with the words, "The three top contributors for this advertisement are", followed by the names of the three top contributors, as defined in subsection [~~(e),~~] (f), who made the highest aggregate contributions to the noncandidate committee for the purpose of funding the advertisement; provided that:

(1) If a noncandidate committee is only able to identify two top contributors who made contributions for the purpose of funding the advertisement, the additional notice shall start with the words, "The two top contributors for this advertisement are", followed by the names of the two top contributors;

(2) If a noncandidate committee is able to identify only one top contributor who made contributions for the purpose of funding the advertisement, the additional notice shall start with the words, "The top contributor for this advertisement is", followed by the name of the top contributor;

(3) If a noncandidate committee is unable to identify any top contributors who made contributions for the purpose of funding the advertisement, the additional notice shall start with the words, "The three top contributors for this noncandidate committee are", followed by the names of the three top contributors who made the highest aggregate contributions to the noncandidate committee; and

(4) If there are no top contributors to the noncandidate committee, the noncandidate committee shall not be subject to this section.

In no case shall a noncandidate committee be required to identify more than three top contributors pursuant to this section.

(b) If a noncandidate committee has more than three top contributors who contributed in equal amounts, the noncandidate committee may select which of the top contributors to identify in the advertisement; provided that the top contributors not identified in the advertisement did not make a higher aggregate contribution than those top contributors who are identified in the advertisement. The additional notice required for noncandidate committees described under this subsection shall start with the words "Three of the top contributors for this advertisement are" or "Three of the top contributors to this noncandidate committee are", as appropriate, followed by the names of the three top contributors.

(c) This section shall not apply to advertisements broadcast by radio or television of such short duration that including a list of top contributors in the advertisement would constitute a hardship to the noncandidate committee paying for the advertisement. A noncandidate committee shall be subject to all other requirements under this part regardless of whether a hardship exists pursuant to this subsection. The commission shall adopt rules pursuant to chapter 91 to establish criteria to determine when including a list of top contributors in an advertisement of short duration constitutes a hardship to a noncandidate committee under this subsection.

(d) A noncandidate committee shall obtain a statement of certification from each top contributor required to be listed in an advertisement pursuant to this section avowing under penalty of perjury that, after due inquiry, none of the funds contributed by the top contributor were derived from a foreign corporation or foreign-influenced business entity. If a noncandidate committee does not receive a statement of certification from a top contributor, the advertisement shall include the following statement: "Some of the funds used to pay for this message may have been provided by foreign or foreign-influenced businesses." A noncandidate committee shall be entitled to rely on a statement of certification provided by a top contributor unless the noncandidate committee has actual knowledge that the statement of certification is false.

[~~(d)~~] (e) Any noncandidate committee that violates this section shall be subject to a fine under section 11-410.

[~~(e)~~] (f) For purposes of this section, "top contributor" means a contributor who has contributed an aggregate amount of $10,000 or more to a noncandidate committee within a twelve-month period before the purchase of an advertisement."

SECTION 5. Nothing in this Act shall be construed to diminish or infringe upon any right protected under the First Amendment of the Constitution of the United States or conflict with any federal statute or regulation.

SECTION 6. If any provision of this Act, or the application thereof to any person or circumstance, is held invalid, the invalidity does not affect other provisions or applications of the Act that can be given effect without the invalid provision or application, and to this end the provisions of this Act are severable.

SECTION 7. This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun before its effective date.

SECTION 8. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 9. This Act shall take effect on January 1, 2026.

THE SENATE	S.B. NO.	1179
THIRTY-SECOND LEGISLATURE, 2023		S.D. 1
STATE OF HAWAII