Gov. Andrew M. Cuomo announced in May that he is advancing legislation to close what he called “the LLC loophole” in New York state.
The governor has introduced eight bills – one for all political offices and one for each of the state’s elected offices, requiring that limited liability corporations be treated as traditional corporations, capping contributions at $5,000. The bills would prevent LLCs from circumventing disclosure requirements and ensure that businesses do not wield an outsized influence in politics and elections across the state, Cuomo said.
“The people of New York are demanding change and it’s time we took action to restore the public trust by closing the LLC loophole and bringing fairness to our campaign finance system,” Cuomo said. “For years, I have proposed closing the LLC loophole–one of the most egregious flaws in our campaign finance system–and every year the bill has stalled. This year, I am introducing eight different bills to close the LLC loophole – one for each elected office in the state. Pass all of them, or as many as you’d like, but at a minimum, pass the one impacting anyone running for the office of the governor.”
He said the LLC loophole is widely open to abuse – with companies regularly taking advantage of the gap in state law to set up numerous LLCs to donate millions of dollars to political campaigns, candidates for public office and elected officials in New York.
These eight bills are designed to close the LLC loophole, all of which apply to candidates for governor:
1. Everyone (all candidates for state political office).
2. Candidates for governor and the State Legislature.
3. Candidates for governor and State Senate.
4. Candidates for governor and State Assembly.
5. Candidates for governor, the attorney general and the comptroller.
6. Candidates for governor and the attorney general.
7. Candidates for governor and the comptroller.
8. Candidates for governor.
The Federal Election Campaign Act of 1971 is the primary law governing political campaign spending and fundraising in the United States. In 1974, the State Legislature overturned a ban which previously outlawed corporations from donating to political campaigns, and replaced it with a $5,000 contribution limit.
Until 1996, New York’s election law aligned with FECA and capped donations by businesses and corporations to political campaigns, while mandating full disclosure. In 1996, the state Board of Elections broke from federal law and ruled that LLCs may be treated as separate and distinct individuals for the purpose of campaign contributions.
The ruling allowed LLCs to contribute up to $60,800 per candidate in a statewide race or a maximum of $150,000. The law also permitted these companies to donate with increased anonymity and at far greater levels than other corporate, partnership and business entities across the state.
In April 2015, the state Board of Elections took up a vote to close the LLC loophole and issue a new ruling with regards to LLC contributions. The board deadlocked, voting 2-2 on the issue and ultimately failing to overturn the 1996 decision.