Voters in Michigan and Montana approved two campaign finance measures last week that could fundamentally reshape how money flows into state elections.
These ballot initiatives represent a bold attempt by state citizens to bypass long-standing federal precedents regarding corporate political spending. While Michigan’s new rules focus on expanding transparency and restricting “pay-to-play” influence, Montana has adopted a legal strategy that targets the very definition of corporate personhood.
Inside Political Law reported that these measures, though distinct in their mechanics, both show a growing movement to tighten the reins on political expenditures at the state level.
The stakes for businesses, contractors, and political organizations are high. In Michigan, the new laws could drastically expand the scope of what constitutes regulated political activity, while in Montana, corporations face the potential loss of their legal charters if they attempt to engage in political spending.
Michigan restricts political contributions from state contractors
Michigan voters approved Proposal 2, a measure that introduces a strict “pay-to-play” regime alongside broader disclosure requirements for political communications. The law targets specific entities that hold or seek large state or local contracts, as well as certain regulated utilities.
Under the new rules, these entities—along with their subcontractors, officers, directors, and owners of at least 5% of the entity—are prohibited from making political contributions while seeking a contract, during its term, and for 18 months after it ends.
This restriction extends beyond the companies themselves to include “principals,” which encompasses agents, lobbyists, and even the families of some key decision-makers. Any entity established or controlled by these contractors is also covered. The Proposal 2 document outlines these requirements, which change how the state regulates these activities following a previous lack of a statewide prohibition of this scale.
The law also moves to capture “electioneering communications.” These are messages that identify candidates or ballot questions but do not explicitly tell voters how to vote.
By expanding the definition of an "expenditure" to include any communication that "promote, supports, attacks, or opposes" a candidate or measure, Michigan is broadening the net of regulated activity. The law now requires payer disclosure for internet political advertising, closing a gap that previously left digital spending less transparent.
The new requirements are already facing a legal challenge, with a lawsuit alleging the law is unconstitutional. Current and potential Michigan contractors and regulated utilities are being advised to prepare for these changes as the litigation moves forward.
Montana tests corporate power theories
In Montana, voters passed Initiative 194, a measure known as the “Montana Plan,” which utilizes a novel legal theory to restrict corporate political spending. Rather than attempting to ban political speech—a move that would likely run afoul of Citizens United v. FEC—the measure redefines what a corporation is permitted to do.
The Montana Plan relies on the principle that corporations are “artificial persons” created by state law. Because the state grants these entities their powers and privileges, Montana argues it has the authority to decide that political spending is simply not one of those powers. According to the official Initiative 194 text, political spending is not among the powers Montana extends to covered entities, including corporations, nonprofits, trusts, and trade associations.
The consequences for non-compliance are severe. If a covered entity engages in prohibited spending to support or oppose a candidate or ballot measure, the spending is void. The entity automatically forfeits its Montana-conferred charter privileges, including limited liability and its right to perpetual duration.
This approach is designed to sidestep Supreme Court precedents that protect independent political spending by corporations. By framing the restriction as a limitation on corporate “powers” rather than a restriction on “speech,” Montana is attempting to move the debate into a different legal arena. However, the success of this distinction remains uncertain.
Critics of this strategy argue that states cannot circumvent the First Amendment simply by recharacterizing speech as a corporate power. This exact argument was central to challenges against a similar law in Hawaii, known as Act 11. In that case, the U.S. Chamber of Commerce argued that the state’s framing was an attempt to bypass constitutional protections.
The legal battle over Montana’s approach is expected to be intense. Initiative 194 is scheduled to take effect on January 1, 2027, providing a window for legal challenges to reach the courts before the law goes live.
The tension between state-level democratic reforms and federal constitutional protections has reached a new flashpoint as these laws prepare for implementation.
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