CCEG STATEMENT TO HOUSE STATE AFFAIRS COMMITTEE IN SUPPORT OF BILL TO CLOSE LLC LOOPHOLE Although Colorado law bans contributions from corporations to candidates, it treats limited liability companies and partnerships (collectively LLCs) like individuals and allows them to give candidates up to $1000 for statewide races and $400 for state legislative races. As a result, during the 2006 election cycle many donors used LLCs to skirt contribution limits by funneling excess donations through the LLCs they own or operate. The LLC loophole directly undermines Article 28’s purpose of limiting individual contributions and allows donors who use LLCs to hide their identities because LLCs are not required to disclose the names of their individual members. Even a review of corporation reports does not always reveal the people behind any particular LLC. To give a flagrant example of how the LLC loophole was exploited this last election, former Congressman Bob Beauprez’s (R-CO) gubernatorial campaign committee reported receiving 32 separate $500 contributions on the same day from 16 similarly named LLCs. State records revealed that the LLCs operated from the same address and suite number. At least 12 of the 16 LLCs are subsidiaries of Southwestern Investment Group and are owned or operated by a single individual, Mark Campbell. In addition to the multiple LLC contributions, Mr. Campbell personally gave $1,000, for a grand total of $17,000. Rep. Beauprez also accepted 18 different $500 contributions on the same day from 9 different LLCs owned or operated by Eric Bush, president of Bush Development. Mr. Bush also individually contributed $1,000 to the campaign, for a grand total of $10,000. The Federal Election Commission (FEC) long ago recognized the severity of the LLC loophole. It has stated that treating an LLC as a person with contribution limits independent of its members leads to, “…proliferation problems, since a person who [is] a member of numerous LLCs could contribute up to the statutory limits through each of them.” For that reason, the FEC adopted a rule mandating apportionment of contributions from an LLC to its individual members. HB 1323 does the same thing. Under this bill, an LLC that makes any contribution to a candidate committee or political party must, at the time it makes the contribution, provide the following information: affirmation of eligibility to make the donation, names and addresses of the LLC’s members, and information as to how the contribution is to be attributed among its members. No committee or party is authorized to deposit the contribution unless and until that information is provided. It is important to note that HB 1323 does not in any way infringe on an individuals right to contribute the maximum donation allowed by law. Nor does this bill require that contributions made by an LLC be attributed to every member, but only to designated consenting members. HB 1323 closes the LLC loophole and increases transparency in campaign finance disclosures. For those reasons, CCEG urge the committee to support HB 1323.
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