CCP Legal Director Allen Dickerson submitted comments to the Federal Election Commission’s (FEC) Notice of Proposed Rulemaking 12-80: Limited Liability Partnerships (LLPs). Currently, if an LLP makes a contribution, that contribution counts against the individual limits of the LLP’s partners. The FEC’s proposed rule would treat LLPs as corporations for purposes of campaign finance law if the LLP elects corporate tax treatment. In short, the proposed rule would completely prohibit all LLP contributions, simply based on which box an LLP checks on its tax form.
As CCP points out in its comment, the FEC’s proposed LLP rule appears to be based on a similar rule governing LLCs. However, the LLC rule was justified by “the ability of LLCs to accumulate wealth…[which] was repudiated in Citizens United. Consequently, the Commission’s regulations can only be justified by the governmental interests in preventing corruption or the appearance thereof, or to stop circumvention of the campaign finance laws. Corporate LLPs do not pose a threat to either of these interests sufficient to justify a contribution ban.”
CCP notes that Congress has already addressed the “threat of corruption” with its partnership contribution limit. Additionally, because the FEC already attributes LLP contributions to individual partners, there is no threat of circumventing the contribution limits; state and federal law impose several penalties for setting up “sham” organizations to circumvent the limits. The comment also notes that the Commission’s assumption that “additional benefits conferred by corporate tax status necessarily makes a ‘corporate LLP’ more dangerous” is simply not supported by evidence. CCP thus recommends that the FEC not make a new rule for LLPs. But, in the event that the FEC does, it should treat LLPs like LLCs and allow LLPs to solicit funds for their PACs from a broad “restricted class.”