Court Rejects Effort to Close ‘LLC Loophole’

A state judge has dismissed a lawsuit challenging the way that the state Board of Elections (SBOE) treats limited liability companies (LLCs).

Under a 1996 opinion, the SBOE determined that LLCs should be treated as individuals under state law, rather than as corporations or partnerships. As a result, LLCs can make much larger donations than if they were treated as corporations.

The lawsuit asked the court to “order the Board [of elections] to issue a new opinion or regulation consistent with the text and spirit of the Election and LLC Laws.” (Read my July 2015 blog post on the lawsuit here.)

State Supreme Court Justice Lisa Fisher dismissed the case, finding that the statute of limitations for challenging the SBOE’s 1996 action has passed. She also characterized the issue as a “political question best suited foe resolution through legislative action.”

Gov. Cuomo has proposed closing the LLC loophole as part of this “Good Government and Ethics Reform” legislation (A.9011/S.6411). The Assembly has approved a bill that, among other ethics, lobbying and election law changes, would close the LLC loophole (A.9535). The Senate has not approved the change, saying that any “reforms” must address labor-union donations as well as business donations.

Read news coverage from the Times Union, Politico NY and the AP.