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Interpretative Opinion 01-12: Contribution Limitations

January 8, 2002

Evan D. Harms, Law Clerk
Grossberg, Yochelson, Fox & Beyda, LLP
2000 L Street, NW
Suite 675
Washington, DC 20036-4907

Re: Contribution Limitations

Dear Mr. Harms:

This responds to your request for an opinion concerning whether a person, as defined in the District of Columbia Official Code § 1-1101.01(8) (2001 Edition), may make a contribution in the maximum amount allowable to a mayoral candidate, in his or her individual capacity, as well as through a limited liability company, Subchapter S corporation, professional corporation, or other business entity.

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

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 . . ., $2,000”.

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 may contribute to a campaign for elective office in the District of Columbia, and the corporate structure, for purposes of the contribution limitations, will not be disregarded. This means that a contribution by a corporation to a candidate or political committee 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. 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 in opposition to, elections in the District of Columbia. 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).