April 15, 2015

Commissioner Douglas A. Kellner Commissioner Gregory P. Peterson Commissioner Andrew J. Spano Commissioner James A. Walsh NYS Board of Elections 40 North Pearl Street, Suite 5 Albany, NY 12207-2729

Dear Commissioners Kellner, Peterson, Spano and Walsh:

We join a broad coalition of good government groups to urge you to close the LLC loophole, which governs the way that limited liability companies participate in the political process. We are encouraged that this issue will be on the agenda at your upcoming meeting on Thursday, and hope that you use this opportunity to fix a gaping loophole in our states elections. We were pleased that the Governor included a provision to close the LLC loophole in his Executive budget proposal. We were disappointed it was not included in the final enacted budget. In addition, we sponsor bills that would make this fix legislatively, and we will continue to push this legislation forward. But you have the power to solve this problem yourselves, by issuing a new opinion to reverse the way our state treats LLCs. The Board of Elections (BOE) governs LLC contributions in a way that is inconsistent with all other types of campaign contributions. The contribution limits that apply to corporations do not apply; the assignment 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:

Each individual and each LLC has the same contribution limit -- $60,800 to a statewide candidate per election cycle. But LLCs are not prohibited from making multiple contributions over the limit from a single source, and are not required to disclose information that meaningfully identifies the source of their contributions. This means individuals controlling multiple LLCs may give effectively unlimited contributions to each candidate.

Partnership contributions above $2,500 must be attributed to each partner whose contribution exceeds $99. LLCs are not required to attribute contributions to members or disclose their membership publicly, for purposes of contributions or otherwise.

Corporations may contribute an aggregate of up to $5,000 in a calendar year to candidates and committees. LLCs may contribute an aggregate of up to $150,000 in a calendar year to candidates and committees.

The impact of the BOEs 1996 decision to treat LLCs as individuals is dramatic. The coalition of civic organizations referenced above wrote a letter to the Governor on April 13, which detailed the impact of the BOEs 1996 decision to treat LLCs as individuals: As the Moreland Commission discovered in 2013, one entity utilized 25 separate LLCs and subsidiary entities to make 147 separate political contributions totaling more than $3.1 million since 2008. In cases where the Moreland Commission has not weighed in, it can be impossible to track the source of LLC contributions, since the only identifying information available online is the name of the LLC, the date of filing, the county where filed, a mailing address, and a registering agent's address. Thats why papers across the state, including the Albany Times Union, New York Daily News, Syracuse Post-Standard, Rochester Democrat and Chronicle, Buffalo News, Glens Falls PostStar, Plattsburgh Press-Republican, and Middletown Times Herald-Record have supported closing the loophole. In addition, the BOE policy is out of step with how LLCs are classified by the Federal Election Commission. Originally the FEC treated LLCs similarly to the way New York State now does. This error was corrected sixteen years ago, when the FEC ruled that LLCs would be treated as corporations or partnerships for Federal election law and contribution purposes. A number of other jurisdictions have also closed, or never opened, the LLC loophole. In New Jersey, LLCs are not allowed to make contributions as an entity. In Colorado, contributions from LLCs are prohibited if the IRS treats them as corporations. And Maryland and Washington D.C. have passed legislation closing their LLC loopholes. We note that in addition to the push by the coalition of good government groups, the Brennan Center for Justice at NYU School of Law and Emery Celli Brinckerhoff & Abady LLP wrote you a letter on April 9 urging action on this matter. We join their request that you rescind the Boards 1996 opinion to treat LLCs as individuals and we support their proposal that you provide that LLCs will be treated either as corporations or partnerships depending on their tax status; and clarify that no person may use multiple LLCs to circumvent contribution limits and disclosure requirements." We urge a robust debate at Thursdays meeting, and action to fix this deeply damaging policy. There's no reform more important to restoring faith in our state government. Thank you for your attention to this. Sincerely,

Daniel Squadron Brian Kavanagh New York State Senator New York State Assemblymember 26th District 74th District