Previously, I have discussed the potential for U.S. states to adopt state divestment and selective procurement laws of their own that would target companies doing business in or with Iran. This past September, for instance, reports indicated that up to 25 states would have ballot measures in the upcoming November elections involving such state sanctions on Iran. As I suggested, unless such state divestment and selective procurement laws are narrowly tailored to the language of Section 202 of the Comprehensive Iran Sanctions Accountability and Divestment Act (“CISADA”), such laws are at serious risk of being preempted at the federal level.

Now, Wisconsin legislators are first to throw down the gauntlet, as two Republican lawmakers – one a State Senator, the other a State Representative – have introduced legislation that would force the State of Wisconsin’s Investment Board to divest from any company that conducts business with Iran. The State of Wisconsin’s Investment Board maintains a portfolio in which it controls $130 billion in total assets.

According to State Rep. Dale Kooyenga, one of the bill’s two sponsors, the proposed state legislation would “offer[] [Wisconsin] the opportunity to limit the proliferation of Iran’s weapons program and reassert our state’s rights on the treaty that constitutionally should have been approved by the U.S. Senate.”

I have not seen the actual text of the bill, but based on the press release accompanying its release and other reporting on the proposed legislation, I am skeptical that the legislation would survive the hurdle erected by the doctrine of federal preemption. As I’ve written elsewhere, the passage of Section 202 of CISADA both makes it easier for states to adopt state divestment and selective procurement laws that are immune from federal preemption and harder at the same time. The reason is clear: by expressly authorizing U.S. states to enact certain state divestment and selective procurement laws, Congress immunized from federal preemption certain state-level activities, while implicitly subjecting to federal preemption all other activities that exceeded the bounds of that initial authorization. Tailoring proposed state divestment and selective procurement laws to the authorization in CISADA, then, is thus mandatory for state legislators, if they wish to avoid having their sanctions laws preempted at the federal level.

In my view, the Wisconsin bill would exceed the scope of the authorization located at Section 202 of CISADA. Recall that CISADA Section 202 authorized a state or local government:

“…to adopt and enforce measures that meet [certain] requirements…to divest the assets of the state or local government from, or prohibit investment of the assets of the state or local government in, any person that the state or local government determines, using credible information available to the public, engages in [certain] investment activities in Iran.”

Such investment activities are limited to instances in which a person “has an investment of $20 million or more in the energy sector of Iran…” State or local laws tailored to these instances “[are] not preempted by any federal law or regulation.”

The proposed legislation, however, would divest the assets of the State of Wisconsin’s Investment Board from all companies that conducted business in or with Iran.   In other words, the Wisconsin bill clearly ignores the implied limits (investments of $20 million or more in Iran’s energy sector) that Congress put on state or local divestment activities. As such, passage of the legislation would be likely to violate the Supremacy Clause of the U.S. Constitution, which prioritizes federal law over contrary state or local laws.

Fortunately, it looks like this bill is something of a showpiece anyway, so it won’t be left to such ignominious defeat. According to reports, Wisconsin’s legislative session ended Monday, and the bill will be unlikely to make it to the floor in time for a vote.

Nonetheless, interested readers should recognize that just because state legislation is being offered to sanction companies engaged in business dealings in or with Iran, that does not mean that such legislation will survive federal scrutiny. As the newest proposed bill makes clear, most often it will not.