Our Right to Speak
by Tom Yamachika, President, Tax Foundation Hawaii
Act 11, passed by the last legislature and set to go into effect in July 2027, was billed as a workaround of Citizens United v. Federal Election Commission, 558 U.S. 310 (2010), that would essentially prohibit corporations, LLCs, and other “artificial entities” from spending money or doing anything else, directly or indirectly, to support or oppose any political candidate or ballot measure. One government agency summed it up:
To apparently work around what is plain in the case, this bill relies on an untested legal theory using an unprecedentedly dangerous mechanism—the full revocation of all corporate powers in the state—in defense of a theory that collapses in upon itself upon further examination.
The operative theory behind this bill is that states have the ability to define corporate powers and can strip certain powers to speak based upon the content of that speech that are otherwise protected by the First Amendment and Citizens United. This approach alone will likely be subject to strict scrutiny as a form of content-based speech restriction under the First Amendment, as this bill removes only speech related to elections and ballot initiatives from a corporation's powers, while permitting a corporation to retain its ability to speak in other contexts.
These comments weren’t from just any old government agency. They were from the Hawaii Department of Attorney General, the folks who defend it in court if it gets challenged. And it did get challenged.
The Act supplies a solution that is much more far-reaching than the problem, which we understand to be copious amounts of money expended in favor of or against political candidates. The solution in the Act is to make all artificial entities within the state powerless to engage in election activity or ballot-issue activity.
Yes, the law provides definitions and exceptions. But using a phrase like “directly or indirectly,” as one of the definitions does, is open to quite a bit of interpretation.
Last week, for example, you saw in this space some views on Proposition 2 relating to RISE Bonds. That is ballot-issue activity unless the Foundation’s action was within the exception for “any bona fide news story, commentary, or editorial distributed through the facilities of a broadcasting station or of any print, online, or digital newspaper, magazine, blog, or other periodical publication.” If we published that article when Act 11 was in effect, depending on the enforcing agency’s mood, we could be facing a tax exemption revocation, involuntary corporate dissolution (the Tax Foundation of Hawaii is a corporation), or other draconian sanctions.
Here in the United States, we are supposed to have freedom of speech. That means ordinary citizens like us can talk about important issues, and even criticize the government, without being subjected to threats of punishment as we see in some autocratic or totalitarian countries. When citizens get together and form associations or other entities, like corporations, the rules should be similar. Should be. And that is one thing that the Citizens United decision says.
Earlier in the era of Trump 2.0, I watched in horror as several big law firms were targeted for punishment because of what they said, who they hired, or which clients they represented. I was heartened when the courts started torching the executive orders and vindicating the law firms’ positions. Even then, however, there were a few big firms that made substantial concessions to make the threats go away (at least for a while).
Hopefully, the courts will do the right thing here and give Act 11 the thrashing that it deserves.