Whether the Creation of Natcast Violates the Government Corporation Control Act
Background
- The CHIPS Act directed the Secretary of Commerce to establish a National Semiconductor Technology Center (NSTC) to conduct R&D, capitalize an investment fund, and grow the semiconductor workforce, but it did not expressly authorize creation of a private corporate operator.
- In 2023 the Department of Commerce published a Federal Register notice creating a Selection Committee to identify board members who would form an independent nonprofit to operate the NSTC.
- The Department provided a Department-funded 249-page Guidebook (including specimen incorporation documents, bylaws, policies, and outside- counsel legal advice) to accelerate formation; the selected trustees substantially adopted those materials.
- The trustees incorporated as “SemiUS” (now Natcast) in Delaware (Oct. 19, 2023) and shortly thereafter entered interim and long-term funding agreements under which the Department made up to $7.4 billion of appropriated CHIPS Act funds available to Natcast.
- The Office of Legal Counsel was asked whether the Department’s extensive involvement in Natcast’s creation violated the Government Corporation Control Act (GCCA); OLC concluded the Department had “established” Natcast, Natcast acts as an agency, and the CHIPS Act did not specifically authorize creation of such a corporation, so the creation violated the GCCA.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the CHIPS Act specifically authorized creation of a private corporate operator for the NSTC | The Department: CHIPS Act language (15 U.S.C. §4656’s public-private reference and §4659 “other transactions” authority) permits formation of a private operator | OLC: Those provisions are general and not the type of specific statutory authorization GCCA requires | Held: CHIPS Act did not specifically authorize creation of Natcast |
| Whether the Department “established or acquired” Natcast under the GCCA | The Department: Natcast was formed by private trustees and thus not established by the agency | OLC: The Department selected the committee and trustees, funded and drafted the Guidebook/specimen documents and legal advice, and otherwise directed formation | Held: The Department “established” Natcast within meaning of the GCCA |
| Whether Natcast “acts as an agency” under the GCCA (i.e., is an instrumentality) | The Department: Natcast is an independent nonprofit operator and does not perform general government functions | OLC: Natcast was created to perform statutory functions, is funded (exclusively at inception) with appropriated CHIPS funds, and performs the NSTC role delegated by the Department | Held: Natcast acts as an agency/instrumentality for GCCA purposes |
| Whether using private proxies avoids the GCCA and whether prior informal OLC advice controls | The Department relied on past informal OLC guidance and analogies (e.g., Canadian Lumber) to justify the approach | OLC: An agency cannot evade the GCCA by deputizing private incorporators; prior informal dicta were erroneous and are withdrawn | Held: Enlisting private proxies does not avoid the GCCA; prior informal advice/dicta withdrawn |
Key Cases Cited
- Fed. Crop Ins. Corp. v. Merrill, 332 U.S. 380 (1947) (authority on legal consequences of federal actions and contracts)
- Encino Motorcars, LLC v. Navarro, 138 S. Ct. 1134 (2018) (statutory text interpretation principles)
- Biden v. Nebraska, 143 S. Ct. 2355 (2023) (limits of broad statutory language as specific authorization)
- Ala. Ass’n of Realtors v. HHS, 141 S. Ct. 2485 (2021) (agency lacked specific congressional authorization despite broad statutory language)
- DHS v. MacLean, 574 U.S. 383 (2015) (inferences from Congress’s selective language use)
- Dep’t of Transp. v. Ass’n of Am. R.Rs., 575 U.S. 43 (2015) (functional reality of government status over disclaimers)
- Lebron v. Nat’l R.R. Passenger Corp., 513 U.S. 374 (1995) (practical reality test for government instrumentality)