Appeals Court Rejects Efforts to Close ‘LLC loophole’
Earlier today, a mid-level state appellate court rejected two efforts by the Brennan Center for Justice to close New York’s “LLC loophole.”
Back in 1996, the New York State Board of Elections (SBOE) issued an advisory opinion which found that limited liability companies (LLCs) should be treated as individuals rather than corporations, meaning that they have very high contribution limits. In contrast, corporations are subject to a $5,000 annual aggregate contribution limits.
The Brennan Center, concerned about the use of the LLC loophole by special interests groups “to funnel tens of millions of dollars into political campaigns, sometimes in secret, circumventing both contribution limits and disclosure requirements,” sought to close the loophole.
In the first case, the Brennan Center (with the support of other good government groups) filed a lawsuit in State Supreme Court in Albany against the state Board of Elections that sought to overturn the Board’s 1996 advisory opinion relating to political donations by limited liability companies (LLCs). (Read my July 2015 blog post on that lawsuit here.)
In a unanimous decision, the Appellate Division, 3rd Department upheld a lower court ruling that dismissed their lawsuit because the plaintiffs lacked standing.
In the second case, the Brennan Center filed a combined CPLR Article 78 proceeding and action for a declaratory judgment against the SBOE seeking a judgment rescinding their 1996 opinion and ordering them “to issue a new opinion or regulation consistent with the text and purpose of the Election and [Limited Liability Company] Laws.”
In a four-to-one decision, the court declined to do so, upholding the lower court’s decision that the plaintiffs lacked standing and that the matter presented a nonjusticiable political question.
Read news coverage of this story from the Capitol Confidential blog, Courthouse News and Politico NY.