As an executive, there is a strong likelihood that at some point in your career, you will be asked to make a campaign contribution—especially if you work in an area with a close affiliation with government. The rules are complex, and there is wide variation among federal and state rules. In addition, those differing rules are constantly in flux. For instance, the Maryland General Assembly has made several changes to Maryland campaign finance law that took effect on January 1, 2015, the start of the State’s new four-year election cycle.
First, the Maryland legislature raised the individual contribution limit from $4,000 to $6,000. (The legislature also raised the so-called “aggregate limit” on all contributions from $10,000 to $24,000. But as a result of the Supreme Court’s intervening decision in McCutcheon v. FEC, Maryland’s aggregate contribution limit was unconstitutional and therefore unenforceable even before the change took effect.)
Second, the legislature addressed a peculiar aspect of pre-2015 Maryland campaign finance law. Under Maryland law, unlike federal law, corporations may make campaign contributions. But if a corporation is a wholly-owned subsidiary of another corporation, contributions from these entities are considered to be made by a single contributor. Likewise, if multiple corporations are owned by the same stockholder, they are deemed to be a single contributor. We’ll call this the corporate attribution rule.
Limited liability companies, limited partnerships, and other business entities also are permitted to make campaign contributions in Maryland. Yet the corporate attribution rule did not apply to these noncorporate business entities before now. So under pre-2015 Maryland law, a conversation like this could occur:
Campaign Representative: Hi Bob, I’m calling to see if you would like to contribute to Friends of Jim. Jim is running for State office here in Maryland.
Bob: Well, okay. I’ll make a contribution.
Campaign Representative: Great, our opponent has raised millions, so we are in need of millions.
Bob: I see. In that case, I’ll make the maximum contribution: $4,000.
Campaign Representative: That’s great news. But I have even better news. Since you happen to control several layers of single purpose noncorporate entities in connection with your firm’s investments, and because those entities are LLCs, each one of those LLCs can also make the maximum contribution. I’ve done the math for you and it turns out you can contribute $200,000 to Friends of Jim.
Bob: Oh. Is that right? I had no idea. . . .
Campaign Representative: Right, I’ll be looking for your checks. Thanks.
No longer. The General Assembly’s new attribution rule applies broadly to “business entities,” rather than narrowly to corporations as it had previously. The rule treats multiple business entities as a single contributor if one is wholly owned by another, or if the business entities “are owned or controlled by at least 80% of the same individuals or business entities.” Maryland Code, § 13–226(e)(2)(ii) of the Election Law Article.
This is a significant change to Maryland campaign finance law. And if you are a member in a limited liability company that intends to make a Maryland campaign contribution, it’s critical that you be mindful of this new attribution rule.