Bill To Close LLC Loophole Approved By State Sentate

A loophole within state law could be closed to address large and unchecked campaign contributions by limited liability corporations.

Recently, state Assembly members voted in favor of legislation to eliminate a provision within current law that allows LLCs to make campaign contributions as individuals. If the State Senate passes the bill, the large flow of money to campaigns by multiple LLCs, which can be under the ownership of a person or corporation, could end.

Per a state Board of Elections decision in 1996, a LLC is treated as a separate contributor even if many of them are controlled by the same person. According to the bill memo, the state board hasn’t revisited the subject and has left the decision to state legislators.

The Federal Election Commission treats LLCs as corporations or partnerships rather than individuals, and new state legislation would do the same for state races.

Under the bill sponsored by Assemblyman Brian Kavanagh, D-Manhattan, LLC contributions would be restricted to the $5,000 aggregate limit, per race per year, that current law holds for corporations. Current law allows LLCs to contribute as much as $150,000 a year to a state race — 30 times more than what corporations are able to contribute.

Legislation would also demand an LLC that makes a contribution to disclose the identity of all direct and indirect LLC owners, including the percentage of their ownership interest.

Twelve Republican state legislators voted against the bill while 132 lawmakers said ‘yes.’ Assemblymen Andy Goodell, R-Jamestown, and Joseph Giglio, R-Gowanda, voted in the affirmative.

Goodell said bringing LLCs in line with what corporations can contribution is a positive. However, he said restrictions should be expanded to include prohibitions on contributions from unions and lobbyists who have business pending in front of the legislature or corporations seeking no-bid contracts.

“The public employees unions typically contribute a lot of money to New York City Democrats who in turn reward those public sector unions by voting to provide them with substantial taxpayer funds from the public purse,” he said. “Some of my New York City colleagues like, appreciate and benefit from that conflict of interest. As it was pointed out on the floor, and I’ve noted in the past on this bill, it’s not the comprehensive finance reform that we had hoped for.”

The Assembly has passed the bill every year since 2015, but the Senate has failed to act. Three days remain before session ends for the year.

“It’s long past time for the Senate Majority to join us in shutting it down,” Kavanagh said.

In a statement Friday to The Post-Journal, state Sen. Cathy Young, R-Olean, said she opposes the matter because of constitutionally protected freedom of speech.

“Treating an LLC as a corporation does not close any alleged loophole,” she said.

State lawmakers have made some progress over the last year to address ethics and transparency issues with a rash of corruption and scandal in Albany dating back to the 2000s. In February, the Assembly and Senate approved a constitutional amendment that would revoke pensions of public officials who are convicted of a felony related to their official duties. The final decision will occur in November when voters will have the opportunity to say ‘yes’ or ‘no’ to the proposed amendment.

The push for pension stripping came after Sheldon Silver, former Assembly speaker, and Dean Skelos, former Senate Republican leader, were convicted for using their influence in office to generate personal gains.

Legislators also came to a consensus on new requirements for members who earn additional income from outside employment. Any member of the legislature earning more than $5,000 through outside employment must submit a written request for an advisory opinion to the Legislative Ethics Commission to ensure the employment is consistent with Public Officers Law.

With progress on some fronts also comes action waiting in other areas like term limits on leadership positions. In addition, New York State Comptroller Thomas DiNapoli said in December that he wants more oversight of contracts pertaining to economic development projects. DiNapoli’s recommendations included restoring the office’s oversight of the State University of New York and City University of New York contracts.

Reforms recommended by DiNapoli come amid a bid-rigging scheme involving former aides to Gov. Andrew Cuomo, the head of SUNY Polytech and LPCiminelli. DiNapoli’s proposed legislation hasn’t come before the Assembly or Senate. Goodell said it could come up this week.

“It’s a step in the right direction,” Goodell said regarding DiNapoli’s legislation. “It’s more effective having an independent person review contracting rather than another handpicked staff member.”