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Interpretative Opinion 02-05(a): Contribution Limitations

May 13, 2002

The Honorable Jim Graham
Councilmember, Ward One
Council of the District of Columbia
441-4th Street, NW, Suite 718
Washington, DC 20001

Re: Contribution Limitations for Limited Liability Corporations

Dear Councilmember Graham:

This responds to your request for an expedited opinion concerning the extent to which limited liability corporations (LLCs) may make contributions. Specifically, you ask whether LLCs are viewed as independent entities, similar to non-LLC corporations, thus permitted to contribute the maximum amount allowable to citizen-service funds and political campaigns.

DC Official Code § 1-1101.01(8) defines the term, “person”, as “an individual, partnership, committee, corporation, labor organization, and any other organization” (emphasis added).

DC Official Code § 1-1131.01(a)(1) provides, “[n]o person shall make any contribution which, and no person shall receive any contribution which, when aggregated with all other contributions received from that person, relating to a campaign for nomination as a candidate or election to public office, . . ., exceeds: in the case of a contribution in support of a candidate for Mayor . . . , $2000 . . . “.

DC Official Code § 1-1104.03(a) states in pertinent part, “[n]o person shall make any contribution which, and neither the Mayor, the Chairman of the Council, nor any member of the Council shall receive any contribution from any person which, when aggregated with all other contributions received from such person, exceed $400 per calendar year . . . “.

DC Official Code § 1-1104.03 ( c) provides, “[c]ontributions of personal property from persons to the Mayor or to any members of the Council or contributions of the use of personal property shall be valued, for purposes of this section, at the fair market value of such property not to exceed $1,000 per calendar year at the time of the contribution.”

3 DCMR § 3011.9 states, “[c]ontributions to a candidate or political committee shall be attributed to the person actually making the contribution” (emphasis added).

3 DCMR § 3011.12 states, “[c]orporations may make contributions in the District of Columbia.”

The District of Columbia campaign finance statute broadly defines the term, “person”, to include an individual, a corporation and other organized groups of individuals. Generally, a corporation, including an LLC, may contribute to campaigns for elective office in the District of Columbia as well as to citizen-service programs, and the corporate structure, for purposes of the contribution limitations, will not be disregarded (emphasis added). This means that a contribution by a corporation to a candidate, political committee or citizen-service program will be recognized as separate from its [individual] incorporators unless and until sufficient reason to the contrary appears. However, when the notion of corporateness is invoked and employed for improper purposes (e.g., to perpetuate fraud, to evade the law, or to escape obligations), the corporate structure will be disregarded when corporate ownership, management and control cannot be separated (emphasis added). Such determinations will be made on a case-by-case basis.

It is a well-settled principle of corporate law that ownership of all or a majority of the shares of a corporation by one individual, or a few individuals, does not afford sufficient grounds for disregarding corporateness. Notwithstanding, the rule that corporateness will be sustained only for legitimate purposes has particular significance when applied to one-person, family or other closely held corporations. Such is the case due to the concentration of control and superior knowledge in the principal shareholder or shareholders, thereby lending itself to illegitimate use. Consequently, courts have conditioned recognition of corporateness on compliance with two (2) requirements: (1) the business must be conducted on a corporate and not a personal basis; and (2) the enterprise must be established on an adequate financial basis.

It is therefore the opinion of the Office of Campaign Finance that a corporation, regardless of its size, purpose and/or structure may contribute in support of, or opposition to, election campaigns and citizen-service programs in the District of Columbia, to the maximum amount allowable by law. The test concerning corporateness is whether or not recognition of the corporate structure would produce unjust or undesirable consequences inconsistent with the concept. Therefore, where a determination is made that the corporate structure has been used to circumvent the District’s campaign finance laws, a single contribution limit will apply to the corporation and its individual incorporator(s).