Maryland Campaign Donation Loophole Targeted
Maryland officials say they are drawing closer to closing a campaign-finance loophole that has allowed owners of limited liability companies to give millions in extra donations to state political candidates.
The state’s Commission to Study Campaign Finance Law met for two days this week to discuss possible legislation to tighten the state’s relatively loose campaign-finance laws, and members acknowledged the loophole is one of the most pressing matters before them.
Under Maryland law, individuals and corporations can give no more than $4,000 to a political candidate and $10,000 total during an election cycle.
Corporations are prohibited from making additional contributions through their wholly owned subsidiaries, but owners of multiple LLCs may make maximum donations on each one's behalf - allowing a single person to funnel tens of thousands of dollars to a single candidate.
"In terms of perception, this is a major, major issue," said Delegate Jon S. Cardin, Baltimore County Democrat. "We should treat everybody equally."
LLCs are business entities established so their owners can minimize their liability in the event of a lawsuit, making them responsible only for their personal investment in a company rather than additional assets. People can establish several; real estate owners often establish them for each of their owned properties.
State officials say the "LLC loophole" has become increasingly urgent as the number of state-registered LLCs in the state has grown from 61,000 in 2004 to 109,000 in 2010, according to data from legislative analysts.
Both Democrats and Republicans have shown interest in changing the law, but there are several different approaches from which the commission can choose.
Twenty-one states have avoided such loopholes by prohibiting corporate donations entirely, while four states - including Virginia - take the opposite approach and allow individuals and corporations to contribute unlimited funds.
"There ought to be some sort of balancing act," Mr. Cardin said, adding that he’d rather not place extra restrictions on corporations that heed the $4,000 limit. "We just want to make sure that we don’t put any onerous burden on business entities if we do in fact close those loopholes."
The commission could propose adding language to state laws that would make owners of LLCs and those with similar arrangements subject to the same contribution limits as corporations, but some officials say that could be difficult to enforce.
State Deputy Prosecutor Mike McDonough told the commission that owners don’t even have to provide their names when registering an LLC with the state’s Department of Assessments and Taxation, which could make future campaign violations highly difficult to prove.
"That’s an area that creates all sorts of issues for our office," Mr. McDonough said. “The resources that would have to go into every investigation would far exceed the return."
Commission members said they are nonetheless hopeful that they can craft a solution in time for next year’s assembly.
The panel also listened to testimony this week on other reforms that it is considering, such as tightening reporting requirements on independent expenditures, and increasing the state’s $4,000 and $10,000 contribution caps, which went into effect in 1991.
"I think we have got a tremendous amount of very valuable information," said commission Chairman Bruce L. Marcus. "Hearing both sides of every issue will help us come to some good conclusions."
The Commission to Study Campaign Finance Law was formed in 2011 to explore updating the state’s regulations after Attorney General Douglas F. Gansler, a Democrat, proposed dozens of changes and several proposals died during that year’s General Assembly.