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Court refuses to strike campaign financing loophole

ALBANY — A state court on Wednesday refused to strike down the so-called LLC loophole that has allowed corporations to surpass corporate limits in campaign finance law to contribute millions of dollars to candidates and political parties.

Good-government advocates in state Supreme Court in Albany sought to strike the loophole after the state Board of Elections, voting along party lines in April, failed to vote to end the practice.

But Justice Lisa Fisher ruled the argument, based on the law passed in 1996, was brought too late for the courts to intervene in a legislative matter and that the Board of Elections’ action, in April 2015 was proper.

Fisher found the election board’s decision “was not without any sound basis in reason. The Court cannot substitute its own judgment.”

In April, the Brennan Center for Justice of the New York University School of Law accused the Board of Elections of acting arbitrarily and capriciously in deadlocking on a vote to provide new legal guidance that would end use of the loophole. The loophole was part of a 1996 state law that was later interpreted as treating LLCs as individuals.

In New York, individuals can give up to $150,000 to political campaigns each election cycle, while companies are limited to $5,000. And because companies can create unlimited LLCs, critics say companies face virtually no contribution limits.

“We’re looking at it carefully and strongly considering our options, and our inclination is to file an appeal,” said Lawrence Norden of the Brennan Center. He said the center hopes to focus any further court review on the merits of the argument, rather the propriety of the elections board’s vote.

“The legislature never intended to create this loophole,” Norden said. He noted the federal government made it clear LLCs couldn’t be used to exceed corporate limits.

But the decision may not be the final word on what the court referred to as the “infamously dubbed LLC Loophole.” An appeal may be possible, although the Brennan Center didn’t immediately respond to a request for comment Wednesday.

In addition, Gov. Andrew M. Cuomo, who has benefitted from the LLC loophole more than any other candidate, is again proposing that new law end its use. That proposal is part of state budget negotiations with legislative leaders now underway.

A budget is due by April 1. But proposals to end the LLC loophole have failed to gain legislative approval in the past.

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