Cuomo’s bill would help close New York’s infamous ‘LLC loophole’

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New York Gov. Andrew Cuomo. (Photo credit: Diana Robinson/Flickr)

New York Gov. Andrew Cuomo wants limited liability companies (LLCs) in his state to be treated as traditional corporations — at least in terms of campaign contributions. In a May 24 press release, the governor outlined eight different bills that would potentially eliminate the loopholes allowing LLCs to donate millions to campaigns in an effort to circumvent traditional disclosure requirements.

“Pass all of them, or as many as you’d like, but at a minimum, pass the one impacting anyone running for the office of the governor,” said Cuomo in the statement. “I will go first – pass it and I will sign it into law today.”

New York state Senate Majority Leader John Flanagan, a Republican, called the bill a “red herring,” arguing that the campaign finance conundrum requires a more comprehensive approach that includes attention to enforcement issues.

We’ve written before about how transparency for LLCs varies substantially from state to state. In the case of New York, OpenCorporates’ report card on corporate data openness notes that the state fails to publish any information about directors or shareholders for companies registered in the state.

Transparency advocates have tried to close New York’s LLC loophole through the courts – unfortunately, to no avail.

Meanwhile, both Maryland and the District of Columbia have successfully worked toward closing the LLC loophole in campaign finance that allows anonymous donors to set up a company for the purpose of contributing to super PACs.

As we’ve explored in our study of Delaware LLC registration law, these insufficiently identified vehicles — or “shell-LCs,” as we think of them here — are particularly dangerous for their lack of transparency in campaign donations. These bills would help shine a light on who’s really behind the money trying to influence elections in the Empire State.