Applause for Brennan Center Lawsuit Challenging LLC Loophole

July 14, 2015

The Brennan Center for Justice has just sued the New York State Board of Elections, asking a state court to rule that the Board must close the “LLC Loophole,” which allows huge amounts of untraceable political donations to be funneled through LLCs. The Board of Elections opened the loophole in 1996 when it ruled that LLCs are not corporations, and are therefore not subject to the $5,000 limit on political contributions like corporations are. The Brennan Center sent a public request in April to the Board of Elections to rescind its opinion about LLCs:

Under that Opinion, LLCs (limited liability companies) are treated as individuals rather than “corporations” or “partnerships” under the Election Law, entitling LLCs to a contribution limit that is more than eight times the corporate limit in statewide races, far higher than what the Legislature intended for artificial business entities. Moreover, the Board has permitted individuals who control multiple LLCs to use them to evade contribution limits entirely.

In one of the starkest examples, one wealthy contributor used 27 LLCs to contribute at least $4.3 million to political committees in the state over the past two years.3 The prevalence of such conduct is impossible to fully ascertain, because LLCs need not disclose the identities of their members or officers in their corporate filings.

We applaud the Brennan Center’s lawsuit, and hope to see the LLC Loophole closed as soon as possible.