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.
STATE OF NEW YORK
________________________________________________________________________
6975--C
Cal. No. 261
2015-2016 Regular Sessions
IN ASSEMBLY
April 15, 2015
___________
Introduced by M. of A. KAVANAGH, SIMON, ZEBROWSKI, CAHILL, MILLER, GOTT-
FRIED, LAVINE, JAFFEE, GALEF, ABINANTI, WOERNER, BUCHWALD, COLTON,
KAMINSKY, MAGNARELLI, MAYER, MOSLEY, SANTABARBARA, SKOUFIS, COOK,
BRONSON, ROSENTHAL, RYAN, BARRETT, FAHY, RUSSELL, STECK, ROZIC, SIMO-
TAS, ORTIZ, BLAKE, QUART, DINOWITZ, PEOPLES-STOKES, LIFTON, SCHIMEL,
CUSICK, TITONE, HUNTER, STIRPE, CERETTO -- Multi-Sponsored by -- M. of
A. BRENNAN, ENGLEBRIGHT, FARRELL, GLICK, LUPARDO, MAGEE, MARKEY, McDO-
NALD, ROBINSON, SCHIMMINGER, SEAWRIGHT, THIELE -- read once and
referred to the Committee on Election Law -- committee discharged,
bill amended, ordered reprinted as amended and recommitted to said
committee -- reported and referred to the Committee on Codes --
committee discharged, bill amended, ordered reprinted as amended and
recommitted to said committee -- advanced to a third reading, amended
and ordered reprinted, retaining its place on the order of third read-
ing
AN ACT to amend the election law, in relation to political contributions
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. Section 14-116 of the election law, subdivision 1 as redes-
2 ignated by chapter 9 of the laws of 1978 and subdivision 2 as amended by
3 chapter 260 of the laws of 1981, is amended to read as follows:
4 § 14-116. Political contributions by certain organizations. 1. No
5 corporation [or], limited liability company, joint-stock association or
6 other corporate entity doing business in this state, except a corpo-
7 ration or association organized or maintained for political purposes
8 only, shall directly or indirectly pay or use or offer, consent or agree
9 to pay or use any money or property for or in aid of any political
10 party, committee or organization, or for, or in aid of, any corporation,
11 limited liability company, joint-stock [or], other association, or other
12 corporate entity organized or maintained for political purposes, or for,
13 or in aid of, any candidate for political office or for nomination for
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD00169-11-6
A. 6975--C 2
1 such office, or for any political purpose whatever, or for the
2 reimbursement or indemnification of any person for moneys or property so
3 used. Any officer, director, stock-holder, member, owner, attorney or
4 agent of any corporation [or], limited liability company, joint-stock
5 association or other corporate entity which violates any of the
6 provisions of this section, who participates in, aids, abets or advises
7 or consents to any such violations, and any person who solicits or know-
8 ingly receives any money or property in violation of this section, shall
9 be guilty of a misdemeanor.
10 2. Notwithstanding the provisions of subdivision one of this section,
11 any corporation or an organization financially supported in whole or in
12 part, by such corporation, any limited liability company or other corpo-
13 rate entity may make expenditures, including contributions, not other-
14 wise prohibited by law, for political purposes, in an amount not to
15 exceed five thousand dollars in the aggregate in any calendar year;
16 provided that no public utility shall use revenues received from the
17 rendition of public service within the state for contributions for poli-
18 tical purposes unless such cost is charged to the shareholders of such a
19 public service corporation.
20 3. Each limited liability company that makes an expenditure for poli-
21 tical purposes shall file with the state board of elections, by December
22 thirty-first of the year in which the expenditure is made, on the form
23 prescribed by the state board of elections, the identity of all direct
24 and indirect owners of the membership interests in the limited liability
25 company and the proportion of each direct or indirect member's ownership
26 interest in the limited liability company.
27 § 2. Section 14-120 of the election law is amended by adding a new
28 subdivision 3 to read as follows:
29 3. (a) Notwithstanding any law to the contrary, all contributions made
30 to a campaign or political committee by a limited liability company
31 shall be attributed to each member of the limited liability company in
32 proportion to the member's ownership interest in the limited liability
33 company.
34 (b) If, by application of paragraph (a) of this subdivision, a
35 campaign contribution is attributed to a limited liability company, the
36 contributions shall be further attributed to each member of the limited
37 liability company in proportion to the member's ownership interest in
38 the limited liability company.
39 (c) The state board of elections shall enact regulations that prevent
40 the avoidance of the rules set forth in paragraphs (a) and (b) of this
41 subdivision.
42 § 3. This act shall take effect immediately.
