Assemblyman Skoufis: Close the LLC loophole to reduce the influence of big money in campaigns

The public deserves a fair electoral process, with candidates who are truly looking out for their best interests. To accomplish this, we need to reduce undue, big-money influence in state government campaigns and, likewise, voters deserve to know who’s really behind the campaign messages they see on their television sets and in their mailboxes. By closing loopholes that allow deep-pocketed special interests to skirt campaign finance laws and influence campaigns, we can level the playing field and ensure fairer elections. An opportune place to start would be to close the so-called limited liability corporation (LLC) loophole, the most egregious evasion of campaign finance law that exists in New York State.

This past spring, I co-sponsored key legislation that the New York State Assembly passed with strong bipartisan support that would close the LLC loophole (A.6975-B). The bill, which awaits action in the Senate, would regulate the ability of individuals to make campaign contributions over the legal limit through the use of LLCs.

The LLC loophole came about from a 1996 ruling by the state Board of Elections that allowed LLCs to give $150,000 annually to New York campaigns because it recognized them as individuals rather than corporations.[1] Since then, certain donors have taken advantage of this loophole to set up numerous LLCs in order to make virtually unlimited campaign contributions. The federal Supreme Court’s 2014 ruling in McCutcheon v. FEC further exacerbated the situation by removing aggregate limits on individual donations – in other words, the court ruled that caps could not be placed on individuals vis-à-vis the total amount of money given across-the-board to all candidates in a calendar year. While the law currently treats each LLC as an individual donor, one person can control more than one LLC. Thus, the LLC loophole is a clear violation of the intent of campaign finance law, which is to provide transparency and to limit big money’s unseemly influence on campaigns.

Lawmakers like myself, along with a coalition of good-government groups and grassroots activists, have renewed our efforts to close this loophole. The ability of LLCs to circumvent campaign contribution limits promotes a “pay-to-play” atmosphere in state government, giving some individuals undue influence. The LLC loophole legislation sets out to correct this problem by establishing LLCs as corporations – not individuals – under campaign finance law and capping contributions at an aggregate of $5,000.

The passage of this bill will be a significant step towards restoring integrity to New York State’s electoral process, something I will continue to fight for in the Assembly.

James Skoufis is a New York State Assemblyman representing the 99th District which includes the Town of Stony Point.

[1] https://www.brennancenter.org/ closing-new-york-llc-loophole