NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A6975C REVISED MEMO 06/17/2016
SPONSOR: Kavanagh (MS) TITLE OF BILL: An act to amend the election law, in relation to poli-
tical contributions
PURPOSE:
This bill would add Limited Liability Companies (LLCs) to section 14-116
of the election law, so that LLCs are made subject to the existing
contribution limits for corporations. This bill would also increase
transparency by requiring disclosure of the identity of individuals with
membership interests in LLCs and attribute contributions to members of
LLCs.
SUMMARY OF SPECIFIC PROVISIONS:
Section 1 of the bill adds LLCs to Election Law § 14-116 to provide that
LLCs are subject to the aggregate contribution limit of $5000 that
applies to corporations. Section 1 also requires disclosure of the iden-
tity of all direct and indirect owners of the membership interests in
the LLC and the proportion of each direct and indirect member's owner-
ship interest in the LLC.
Section 2 amends § 14-120 of the Election Law by requiring all contrib-
utions made to a campaign or political committee by a LLC be attributed
to each member of the LLC in proportion to the member's ownership inter-
est. In addition, the State Board of Elections shall enact regulations
that prevent the avoidance of the established rules.
Section 3 of the bill establishes the effective date.
JUSTIFICATION:
Current law, as interpreted by the State Board of Elections (SBOE),
allows a single individual to make multiple contributions to the same
candidate or committee through separate LLCs. Often it is difficult to
know who is ultimately directing the contributions.
The election law does not explicitly address contributions by LLCs.
Instead, pursuant to a 1996 SBOE decision, each LLC is treated as a
separate contributor even if many of them are controlled by the same
person. As a result, LLC contributions are governed in a way that is
inconsistent with all other types of campaign contributions. The
contribution limits that apply to corporations do not apply; the assign-
ment of contributions to members required of partnerships does not
exist; and the transparency and protection against an individual
contributing above the legal limits is absent.
In April, 2015, in the face of public outcry and despite the support of
two of the four SBOE members, the board declined to revisit its 1996
decision, leaving it up to the legislature to act. Thereafter, the Daily
News reported that the LLC loophole was used to contribute $25 million
to state politicians over the past decade and that LLCs linked to one
individual have used it to contribute $13.2 million since 2000 (Bill
Hammond, NY Daily News, April 28, 2015,
wvvw.nydailynews.com/opinion/bill-hammond-bending-cash-article-1.2202
628).
Contrary to the current approach, the Federal Election Commission treats
LLCs as corporations or partnerships rather than individuals for
campaign finance purposes. This bill would apply to LLCs the provisions
that already apply to corporations under New York law. It would also
increase transparency by requiring disclosure of the identity of indi-
viduals with membership interests in LLCs. Finally it would ensure that
the loophole is fully closed by attributing LLC contributions to each
LLC member in a manner similar to that provided for under current law
for partnerships.
These changes would clarify the election law with respect to LLCs,
provide uniformity, and close an egregious loophole that has allowed
certain individuals to evade limits that other contributors adhere to.
PRIOR LEGISLATIVE HISTORY:
2016: A6975C - Passed Assembly
2015: A6975B - Passed Assembly
2014: A5067 - On the floor
2013: A5067 - On the floor
2012: A2493 - Codes
2011: A2493 - Rules
2010: A11355A - Rules
Similar legislation:
2016: A2614 - Election Law
2015: A2614 - Election Law
2014: A112 - Election Law
2013: A112 - Election Law
2012: A5912 - Election Law
2011: A5912 - Election Law
2010: A7069 - Election Law
2009: A7069 - Election Law
EFFECTIVE DATE:
This act shall take effect immediately.
