Meet the (likely) freshman class of the 116th Congress

Dentons’ public policy team probes the polls to give you a first look at the newest (anticipated) members of Congress in this special report.

New federal court ruling shakes up disclosure norms in the federal independent expenditure space

In a decision likely to throw further uncertainty into the world of campaign finance disclosure rules, an Obama-appointed judge on the United States District Court for the District of Columbia recently invalidated the Federal Election Commission’s (“FEC”) regulation regarding the disclosure of donors by organizations making federal independent expenditure communications.  In light of the ruling, organizations, including 501(c)(4) social welfare entities, seeking to spend money on independent expenditures involving federal candidates between now and the November midterms should be mindful of the shifting legal ground beneath them and the likelihood of increased scrutiny into their FEC disclosure filings moving forward.

The existing FEC regulation at issue – 11 C.F.R. § 109.10(e)(1)(vi) – requires organizations that make independent expenditures in excess of $250 in a calendar year to disclose the identity of donors who gave over $200 for the purpose of furthering the reported independent expenditures.  Independent expenditures are communications that expressly advocate the election or defeat of a clearly identified federal candidate.  According to Judge Beryl Howell’s decision, the current iteration of the 11 C.F.R. § 109.10(e)(1)(vi) “blatantly undercuts” the overall congressional goal of disclosure due to the fact that it only requires organizations to report donors who gave for the particular independent expenditure being reported.  Thus, if donors gave contributions for general independent expenditures, or even if donors gave contributions earmarked for a specific independent expenditure plan but not a particular expenditure, such donors would not need to be disclosed on the independent expenditure reports.

In light of Judge Howell’s ruling, the FEC now has 45 days to issue regulations that more closely align with her understanding of the purpose of the Federal Election Campaign Act of 1971 – greater transparency.  The existing regulation will remain in effect for the 45 days, so organizations spending money on independent expenditures for the next 45 will be subject to those rules.  In the interim period, there is no need to amend past disclosure reports.

Given the significance of this ruling and the mixed reception it has received among lawyers concerned about First Amendment and administrative deference concerns, there will likely be an appeal from Crossroads GPS, an intervenor in the case and one of the most active 501(c)(4) social welfare organizations in the political arena.  It also remains to be seen how the FEC will respond to the court’s order and how it choose to enforce a new regulation that might jeopardize the anonymity of good faith donors to politically-active nonprofits. The Dentons Political Law Team will continue to monitor the legal issues and developments surrounding non-profit disclosure rules, but in the meantime please consult legal counsel should your organization be considering playing in the independent expenditure space.

Primaries in Conn., Minn., Wisc.: what to watch for and expect as polls close

Primaries in three states on Tuesday will set the contours of some of fall’s highest profile gubernatorial  and US House contests, as both parties eye possible and long-pursued upsets in Connecticut, Minnesota, and Wisconsin.

Connecticut

CT-Gov (D & R): Democratic Gov. Dan Malloy decided not to seek a third term in the face of an ongoing economic crisis that’s made him incredibly unpopular, and Republicans have a real chance to score a pickup in the fall.

Five Republicans are competing here, and there’s no obvious frontrunner. The state party endorsed Danbury Mayor Mark Boughton, who has led the few polls we’ve seen. Boughton, along with businessman Steve Obsitnik and former Trumbull First Selectman Tim Herbst, are participating in the state’s public financing program, which gives them each $1.35 million for the primary but caps their spending at $1.6 million.

Two businessmen, David Stemerman and Bob Stefanowski, are mostly self-funding their bids and are therefore not limited in how much they can spend. Stemerman has spent a hefty $6.2 million during his campaign, while Stefanowski has spent $2.9 million. Both Stefanowski and Stemerman have also aired commercials attacking one another while largely laying off their rivals. A survey earlier this month from the Democratic firm Tremont Public Advisors had Boughton leading Stefanowski 32-22, with Stemerman at 17.

Things are much more lopsided for the Democrats. The state party establishment, as well as a number of prominent unions, are supporting wealthy businessman Ned Lamont, who notably defeated Sen. Joe Lieberman in the 2006 primary before losing the general election to Lieberman’s independent campaign; Lamont also lost the 2010 primary to Malloy. The only other Democrat in the race is Bridgeport Mayor Joe Ganim, who spent several years in prison for corruption but regained his old office in 2015. Lamont has outspent Ganim $2.6 million to $600,000 during the campaign.

CT-05 (D & R) (50-46 Clinton, 54-45 Obama): Democratic Rep. Elizabeth Esty announced she would retire in the spring after news broke that she’d inadequately handled an abusive staffer.

Former Simsbury First Selectwoman Mary Glassman narrowly won the endorsement of the Democratic Party endorsement over former high school teacher Jahana Hayes, the 2016 National Teacher of the Year. Glassman has the backing of several of Connecticut’s House members, but several unions and Sen. Chris Murphy are supporting Hayes, who would be the first black woman to represent the state in Congress. Glassman outspent Hayes $220,000 to $59,000 from July 1 to July 25 (which the FEC calls the “pre-primary period”), but Hayes had more money in the bank for the final weeks of the race.

This western Connecticut seat has been competitive territory in the past, and Republicans hope that retiring Gov. Dan Malloy’s unpopularity will give them an opening. However, none of the three Republican candidates have raised much money. The top fundraiser is retired psychology professor Ruby O’Neill, who outspent businessman Rich DuPont $57,000 to $33,000 in the pre-primary period. Former Meriden Mayor Manny Santos spent only $6,000 during this time, but he has the state party endorsement.

Minnesota

MN-Gov (D & R): Democratic Gov. Mark Dayton is retiring after two terms, and both parties will fight hard to win this contest in the fall. The Democratic primary is a three-way race between Attorney General Lori Swanson, Rep. Tim Walz, and state Rep. Erin Murphy.

Swanson only entered the race in early June, but she brought plenty of name recognition with her. However, her campaign has faced some tough stories in the two months since. News broke in July that Rep. Rick Nolan, who is Swanson’s running mate, had hired a former employee for his 2016 re-election campaign even though the aide had previously left Nolan’s legislative staff after multiple women accused him of sexual harassment. In the final week of the contest, former staffers at the attorney general’s office charged that Swanson had pressured government employees into doing political work for her. Two polls taken in July, before the Nolan story broke, showed Swanson leading the primary, but we have no new data since then.

Walz, who represents a competitive congressional seat in the southern part of the state, looked like the frontrunner throughout most of the race, and he and his allies have outspent the rest of the field. However, Murphy, who has been trying to run to the left of the pack, has Dayton’s support as well as the official endorsement of the state Democratic Party.

On the GOP side, former Gov. Tim Pawlenty is seeking to regain his old seat eight years after leaving office and embarking on an unsuccessful presidential bid. He faces Hennepin County Commissioner Jeff Johnson, who lost the 2014 general election to Dayton 50-44. Pawlenty has considerably more money and name recognition, and the few polls we’ve seen have shown him far ahead. Johnson, however, has the state GOP’s backing, and he’s tried to position himself to Pawlenty’s right. The former governor went up with a negative TV ad last month, so he’s at least taking Johnson seriously as a threat.

MN-01 (R) (53-39 Trump, 50-48 Obama): Democratic Rep. Tim Walz is leaving this competitive southern Minnesota seat behind to run for governor, and Republicans are hoping its sharp swing towards Trump will give them a big opening in the fall. The GOP candidates are state Sen. Carla Nelson and businessman Jim Hagedorn, who narrowly lost to Walz in 2016 in a race that had looked safe for Team Blue until election night.

Nelson outspent Hagedorn $126,000 to $93,000 during the pre-primary period, though he had more money left for the final weeks of the contest. Nelson does have the NRA in her corner, while Hagedorn has the party endorsement. Still, some Republicans are anxious about nominating Hagedorn, who has a long history of misogynist comments, birther ramblings, and comments about “ungrateful” and “dead Indians.” Whoever emerges will take on former Defense Department official Dan Feehan, who faces little opposition in the Democratic primary.

MN-05 (D) (73-18 Clinton, 74-24 Obama): Rep. Keith Ellison announced on the final day of candidate filing that he was leaving this safely blue Minneapolis seat to run for attorney general to succeed Lori Swanson, who herself had just announced a last-minute bid for governor. Several Democrats quickly entered the race for Ellison’s seat, and the main candidates look like former Minnesota House Speaker Margaret Anderson Kelliher, state Rep. Ilhan Omar, and state Sen. Patricia Torres Ray.

Kelliher narrowly lost the 2010 primary for governor to Mark Dayton. Omar, who would be the nation’s first Somali-American member of Congress, has endorsements from Dayton, Minneapolis Mayor Jacob Frey, and the state party. Torres Ray would also make history as Minnesota’s first Hispanic member of Congress, but she’s raised considerably less money than her two main opponents.

MN-08 (D) (54-39 Trump, 52-46 Obama): Democratic Rep. Rick Nolan is retiring from a seat in the Iron Range in the northeast corner of the state. This area is ancestrally Democratic but shifted hard towards Trump, and Republicans are excited about St. Louis County Commissioner Pete Stauber, who faces no serious primary opposition.

There are three main Democratic candidates. State Rep. Jason Metsa and former state Rep. Joe Radinovich, who was Nolan’s campaign manager during his tight 2016 re-election campaign, have the most money and support from party elites. Radinovich, who has had the airwaves to himself, outspent Metsa $124,000 to $82,000 during the pre-primary period, and they both had a similar amount of cash left for the final weeks of the race. However, while retired Duluth news anchor Michelle Lee has raised and spent very little money or attracted much support from Democratic power players, she does have name recognition from her decades on TV.

Mining is one of the key issues in this contest. Mesta is the Democrat closest to mining interests and he has the backing of the United Steelworkers. Lee in particular has emphasized her opposition to local copper-nickel mining and its effects on the environment. Radinovich has tried to position himself in the middle on this issue while focusing more on healthcare.

Vermont

VT Gov (R): Gov. Phil Scott, a centrist Republican stock-car driver, was once one of the most popular governors in the country — beloved by Republicans, Democrats and independents. But then, in April, he signed three historic gun-control laws, drawing fierce protests from residents of this traditionally pro-gun state. In a Morning Consult poll conducted after the signing, Scott’s popularity among Republicans dropped by 26 percentage points, and he now has a -15 net approval rating with voters of his own party. That could be a problem on Tuesday, given that shopkeeper Keith Stern is challenging Scott from the right, specifically criticizing Scott for signing the gun bills. The Republican Governors Association is acting like this is a competitive race: It has invested more than $1 million in a PAC supporting Scott’s re-election.

If Scott does lose the primary, then Stern, a more mainstream conservative, would instantly become a heavy underdog in this dark-blue state. (Going by our new and improved partisan lean metric,1 Vermont is 24 points more Democratic-leaning than the country as a whole.) Although none of the Democratic candidates has lit the world on fire financially, the favorite in the Democratic primary is probably former Vermont Electric Cooperative CEO Christine Hallquist, who, if elected, would be the nation’s first transgender governor.

Wisconsin

WI-Gov (D): Democrats have a crowded contest to take on GOP Gov. Scott Walker. State Superintendent of Public Instruction Tony Evers, the only statewide official running, has had decisive leads in the few polls we’ve seen, while his rivals have all been far behind.

However, former state Rep. Kelda Helen Roys, who would be the first woman to serve as governor, spent considerably more money than the rest of the field during July, which could help her get her name out late in the race. Professional Fire Fighters of Wisconsin president Mahlon Mitchell, who would be Wisconsin’s first black governor, has also spent a credible amount of money, and he’s backed by several unions. Attorney Matt Flynn, campaign finance reform activist Mike McCabe, Madison Mayor Paul Soglin, and state Sen. Kathleen Vinehout are also in.

WI-Sen (R): Republicans have hosted an extremely expensive contest to take on Democratic Sen. Tammy Baldwin. In one corner is businessman and Marine veteran Kevin Nicholson, who has benefited from over $10 million in spending from groups supported by conservative megadonor Richard Uihlein. In the other is state Sen. Leah Vukmir, who has received $2.5 million in air support from groups funded by Diane Hendricks, another conservative megadonor, and the Metropolitan Milwaukee Association of Commerce.

Nicholson has pitched himself as a conservative outsider, while Vukmir is much closer to the state GOP establishment and touts endorsements from both the state party and most of the state’s House delegation (including retiring Speaker Paul Ryan). Vukmir and her allies have taken aim at Nicholson’s tenure as president of the College Democrats of America, including his 2000 speech at the Democratic National Convention in support of Al Gore. Nicholson and his supporters have hit back against Vukmir for expressing past doubts about Donald Trump. A few polls in July showed Nicholson ahead, but we haven’t seen any fresh numbers in weeks.

WI-01 (D) (53-42 Trump, 52-47 Romney): Speaker Paul Ryan is retiring from this southern Wisconsin seat, and the GOP quickly closed ranks behind attorney Bryan Steil. Democrats are hoping to make a play for this district, and they have a battle between ironworker Randy Bryce and Janesville School Board member Cathy Myers.

Bryce entered the race last year with a strong announcement video promoting him as a blue-collar American who will stand up to the GOP, which helped him raise gobs of money. He also has the support of the DCCC, Bernie Sanders, and several unions. However, Bryce has attracted some bad headlines over the last year. Most notably, he only paid off some old debts, including $1,300 in child support and a $2,000 loan from almost two decades ago, well after he kicked off his campaign. Myers has raised considerably less money and generated much less attention, either good or bad.

An August midterm cheatsheet: 2018 by the numbers

Election prognosticators argue that the “holy trinity” of POTUS approval, Right Track/Wrong Track and Generic Ballot preference foretell the outcome in November.

Looking back over the last 9 midterms, we see that presidents with a sub-50 percent approval rating lose an average of 40 seats in the House and 6 seats in the Senate. We also note that the summer Right Track/Wrong Track number seems to align better than the generic ballot as an early indicator of seat loss.

By the numbers:

  • Democrats in 56 House districts surpassed Republican incumbents in second-quarter fundraising, according to the latest Federal Election Commission filings. Sixteen of those House Republicans finished the quarter with less cash in their campaign accounts than Democratic opponents, while no Democratic members lag their Republican challengers in cash.
  • There are 23 House seats held by a Republican incumbent that Hillary Clinton won in 2016: AZ-O2, CA-10, CA-21, CA-25, CA-39, CA-45, CA-48, CA-49, CO-06, FL-26, FL-27, IL-06, KS-03, MN-03, NJ-07, NY-24, PA-06, PA-07, TX-07, TX-32, VA-10, and WA-08.
  • There are 12 House seats held by a Democratic incumbent that Donald Trump won in 2016: AZ-01, IA-02, IL-17, MN-01, MN-07, MN-08, NH-01, NJ-05, NV-03, NY-18, PA-17, and WI-03.
  • So far in 2018, Democratic House primaries featuring at least one woman, one man and no incumbent, woman have woman in 70 of 106 cases (66 percent). One the GOP side, just 11 of 29 won (38 percent). Democrats have nominated women in 85 of 179 (47 percent) of 2018 House races, excluding incumbents. On the GOP side, just 24 of 139 (17 percent).
  • The House GOP has 42 open or vacant seats, the most since the Gatsby Era: 19 Solid R, 4 Likely R, 7 Lean R, 4 Toss up, 5 Lean D, 3 Likely D.

Download the full report (PDF) here.

As midterms approach, campaigns must contend with evolving nature of social media rules

In recent weeks there has been a flurry of activity regarding the role of social media in both federal and state elections, spurred in large part by concerns about foreign interference in American elections as well as President Trump’s undying love for the medium.

Twitter, a favorite engagement tool of many elected officials, consultants and media observers, has been at the center of much of this activity.

Late last month, after coming under intense scrutiny from policymakers on both sides of the political aisle for lax screening of account holders, Twitter announced that it would be adopting amendments to its internal political ad rules ahead of the 2018 midterm elections.

The new policies–designed to stem the influence of foreign nationals in US elections (an illegal practice) and to increase overall transparency in political engagement–obligate political candidates and committees purchasing ads on the platform to become certified as political advertisers before communicating with users.  For federal candidates and political committees, this means providing Twitter with your Federal Election Commission identification number for certification purposes.  For non-FEC registered organizations, this means submitting a notarized identification form to Twitter establishing account status as a certified advertiser.  The revised policies also implement new restrictions regarding profile bios, profile photos, linked websites, and header photos that seek to ensure transparency in political communication and guard against improper use of Twitter by foreign actors.

Almost in unison with the launch of these new Twitter political engagement policies, a federal judge in the Southern District of New York issued a controversial ruling in a lawsuit involving President Trump’s use of the social media platform.  The President, as political observers know well, has made a practice of tweeting with great regularity and was known for blocking followers who were critical of Administration actions.  The later practice, which angered certain groups of his political opponents, was challenged in federal court as an unconstitutional restraint on the First Amendment rights of the blocked Twitter users.

In what many have described as a curious and constitutionally questionable decision, U.S. District Judge and Obama-appointee Naomi Reice Buchwald found for the plaintiffs, characterizing the President’s personal Twitter account as a public forum or “digital town hall” from which he could not exclude individuals.  Twitter muting by the President was somehow adjudged permissible, but not the full blocking of followers.  The President is appealing the decision to the Second Circuit Court of Appeals, but in the meantime public officials across the nation are left to ponder whether they also must leave open their personal Twitter accounts to all comers as public forums, or whether they can legally shut down their accounts without violating the “constitutional rights” of their followers.

With Twitter and other social media platforms at the center of so many political and legal battles at present, it’s entirely predictable that state governments would begin to seek out new ways to regulate online electioneering activity by political candidates and their campaigns.  Maryland is a prime example of one such jurisdiction that has taken recent action in this area.  Earlier this month, Governor Larry Hogan – who has come under scrutiny from transparency groups for allegedly “censoring” comments on government Facebook pages – permitted the Online Electioneering Transparency and Accountability Act to become law without his signature.

This new law aims to strengthen Maryland’s current campaign finance framework, and requires online platforms that have more than 100,000 monthly visitors to maintain a public file of advertisers who spend a certain amount of money on their system.  Advertisers who use those vehicles must report a wide range of information, including the identities of the individuals controlling the ads, the amount paid for the ads, and the name of a contact person that the State Board of Elections may contact if an inquiry is appropriate.  Such information would need to be made public within 48 hours of launch by the entity that was paid for the ad.

No matter the context, the message is clear – government entities are beginning to wake up to the role that social media and online platforms are playing in American politics and elections.  There are sure to be more regulations implemented, at both the state and federal level, and most assuredly more lawsuits tackling the thorny constitutional, statutory and regulatory issues surrounding forms of virtual political engagement.

A midterms deep dive: a Dentons elections report

We are less than 150 days from November’s general elections. Roughly half of the state primary election contests, as well as a few special elections, are behind us, and the contours of the campaign battlefield for the November general election are taking shape.

So it’s an excellent opportunity for an update on the battle for control of the US House and Senate, and a look at the key races for governor and attorney general, as well as seats in state legislatures around the country.

  • The GOP currently enjoys a two-seat majority in the US Senate and a 23-seat majority in the US House of Representatives. In the Senate, Democrats are defending 26 seats to the GOP’s nine. As mandated by the Constitution, all 435 House seats are on the ballot in November.
  • In the states, the GOP currently holds 33 governorships, the Democrats have 16, and there is one Independent. As a result of retirements, the GOP will be defending 26 governors’ seats while the Democrats will be defending only 10. Elections for state legislators will be held in 46 states. In addition, 35 of 50 attorney general seats will be contested this election cycle. In 43 states, the attorney general is directly elected and 30 of states states will hold elections for the position this November. Moreover, 4 of the 5 states where the attorney general is appointed by the governor will hold elections for governor. Main, the sole state where the attorney general is appointed by the state legislature, is also holding legislative elections this November. Of the 99 total state legislative chambers in the US, the GOP currently controls 67 of them.

A few truisms about midterm elections:

  • While President Donald Trump won’t be on the ballot this November, his presence will be felt and will surely influence many House, Senate and even state races, for better and for worse.
  • Additionally, the party out of power–that is, the party not in the White House–always has the edge on voter intensity and enthusiasm. Midterms are often very unkind to the party in the White House.
  • Finally, history has shown that the generic ballot question, which simply asks voters which party they would prefer to control Congress, is fairly reliable metric of how many House seats turn over to the other party in the general election. (The most recent Real Clear Politics polling average has the generic ballot ballot at D+7.6.)

The answers to the following questions will help inform the path forward:

  • Just how large a shadow will President Trump cast on the federal races, or will those races turn primarily on local issues not involving the president?
  • Will a relatively strong national economy cause voters to “vote their pocketbooks” and overlook both their concerns about the president’s tweets and their unhappiness with congressional gridlock in Washington?
  • How much of a role will the #metoo movement, and women generally, play in the outcome of the elections?
  • With Democratic turnout this fall expected to be close to historic levels for a midterm election, what, if anything, can the GOP do to fire up its base and get them to voting booths this fall?

What else do we know at the movement? We know that there are more women candidates running for office, from both parties, than at any time in our history. We know that Democrats are leading the fundraising race at the candidate level but are still struggling at the national committee level. We know that retirements at the federal level, especially for the GOP, are reaching historic proportions and that those open seats are particularly vulnerable to national political sentiment.

Above all else, we know that events–nationally, locally, and on the world stage–that are presently unforeseeable have the potential to upstage all that we think we know today.

For a deep dive into the map, polling, historical data, and anecdotal evidence for virtually every election this fall, download Dentons’ latest election report here.

Chinese tech in Washington’s cross hairs

On May 29, the Trump Administration announced that the United States (US) will: (i) “impose a 25 percent tariff on $50 billion of goods imported from China containing industrially significant technology, including those related to the ‘Made in China 2025′ program,” and (ii) “implement specific investment restrictions and enhanced export controls for Chinese persons and entities related to the acquisition of industrially significant technology.”

Meanwhile, both the House and Senate versions of the National Defense Authorization Act for Fiscal Year 2019 (NDAA), Congress’ over $700 billion annual defense policy bill, include provisions targeting Chinese technology companies.

$50 billion in tariffs on Chinese technology sector /  Investment restrictions and enhanced export controls targeting Chinese acquisition of US technology

The White House’s announcement of these measures to “defend America’s intellectual property and proprietary technology from theft and other threats” comes less than a week before a US delegation led by Secretary of Commerce Wilbur Ross is scheduled to return to China for another round of trade talks from June 2-4.  The final list of covered Chinese imports containing advanced technologies that will be subject to the tariffs will be announced by June 15, and the list of investment restrictions and enhanced export controls will be announced by June 30.  However, there is no guarantee that the US will implement these measures.  Today’s announcement may be viewed as an attempt to create negotiating leverage in advance of the upcoming US-China trade talks.  It may also be a response to bipartisan pressure from Capitol Hill arising from President Trump’s announcement on May 25 about a deal that would lift severe sanctions imposed on Chinese telecom company ZTE in exchange for a $1.3 billion fine, oversight by American compliance officers, and the replacement of certain members of ZTE’s executive/management team.

Of course, President Trump has established a consistent track record of following through on proposed trade and related actions.  Therefore, companies that would be impacted by the imposition of the 25 percent tariffs on $50 billion worth of Chinese goods containing advanced technologies, and the imposition of new investment restrictions and enhanced export controls related to the acquisition of US technology, should monitor all forthcoming developments related to today’s announcement closely and prepare for the Administration’s corresponding follow-up announcements on or before June 15 and June 30, respectively.

House and Senate versions of NDAA include provisions prohibiting US Government procurement of certain Chinese technologies

Capitol Hill has become an increasingly hostile environment for Chinese technology companies.  The wave of opposition in Congress against Chinese technology companies is not limited to members of one party or a select few in both parties.  Widespread, bipartisan concern exists about the real and potential threats to US national security resulting from the use by federal employees and appointees, and in particular — military and intelligence community personnel — of Chinese technology / devices.

The US House of Representatives passed its version of the NDAA by a vote of 351-66 on May 24.  The Senate’s version of the annual defense policy bill was approved by the Senate Armed Services Committee (SASC) on May 23 and could be considered on the Senate floor as early as during the week of June 4.  The House-passed version of the NDAA “directs a whole-of-government strategy to confront the People’s Republic of China” and prohibits all US Government agencies from acquiring or using technology developed by Huawei or ZTE.  The House bill also includes a provision that would prohibit federal agencies from acquiring or using certain Chinese-made surveillance equipment.

Although the SASC-approved version of the NDAA that is on its way to the Senate floor has not been released by the Committee, it contains provisions that adhere to a core tenet of the US Department of Defense’s (DOD’s) National Defense Strategy, which classifies China as a “revisionist power” and “strategic competitor” that “seek[s] to shape the world toward [its] authoritarian model through destabilizing activities that threaten the security of the United States and its allies.”  The current Senate version of the NDAA contains a provision that would prohibit DOD from acquiring or using technology developed by Huawei or ZTE (as compared to the House version of the bill that prohibits all US Government agencies from such acquisition or use).  The Senate bill also includes a provision that would require all companies doing business with DOD to disclose whether they allow foreign government access to sensitive company information, including their software source code.  This provision is said to be a direct response to Russian and Chinese government contracting processes that at times require companies pursuing government business to submit to source code reviews.  Additionally, Committee on Foreign Investment in the United States (CFIUS) reform legislation — the Foreign Investment Risk Review Modernization Act (FIRRMA or S. 2098) — which would impose heightened restrictions on Chinese investment in the US, is included in the Senate version of the NDAA.  An effort to add FIRRMA to the House NDAA via amendment failed.  The unsuccessful action in the House and successful action in the Senate are a direct acknowledgment of Secretary of Defense Jim Mattis’ requests in separate letters on May 4 to House Armed Services Committee (HASC) and SASC leadership to include FIRRMA in this year’s NDAA.

Once the Senate has passed its version of the bill, the NDAA will be conferenced, during which time HASC and SASC staff will work to resolve the minor disparities between the two versions of the bill, HASC and SASC members and staff will resolve some of the more challenging disparities, and the Big Four (the Chairmen and Ranking Members of the two committees) will resolve the most contentious disparities.

Congress has passed the NDAA for 57 straight years.  It is one of but a few remaining must-pass annual bills on Capitol Hill.  Companies that could be impacted by these provisions in the two versions of the NDAA moving through Congress should monitor the NDAA consideration process closely in anticipation of the bill’s enactment later this year.