A check arrives from a limited liability company. The name is unfamiliar, the amount is well within the individual limit, and the deposit deadline is tomorrow. Can your committee accept it?

In the experience of Thomas Datwyler, who has processed contributions for more than 400 federal committees, LLC political contributions are one of the few areas where the answer genuinely cannot be given from the face of the check. Federal campaign finance law does not treat an LLC as a single category of donor. It classifies each LLC according to how that company is treated for tax purposes, and the classification determines whether the contribution is permitted at all, whose limits it counts against, and what your committee must document before it is reported.

Why LLC Political Contributions Are Different

Most donor questions resolve at the entity level. Corporations cannot contribute to candidate committees or hard-money PACs. Individuals can, subject to limits. Partnerships can, subject to their own rules.

This is where committees most often go wrong, Thomas Datwyler notes, because the entity-level instinct that resolves most donor questions produces the wrong answer for LLC political contributions.

An LLC does not sit cleanly in any of those buckets, because an LLC is a state-law form rather than a tax classification. The same three letters can describe a company treated as a corporation, a company treated as a partnership, or a single owner’s pass-through entity. Federal rules follow the tax treatment, not the name.

How the FEC Classifies LLC Political Contributions

For purposes of contribution limits and prohibitions, an LLC is treated as either a corporation or a partnership, and that single determination governs how LLC political contributions are handled from intake through reporting.

When an LLC is treated as a corporation

An LLC is considered a corporation if it has chosen to file as a corporation under IRS rules, if it has publicly traded shares, or if it has made no choice under IRS rules as to whether it is a corporation or a partnership.

A corporate LLC is generally prohibited from contributing to political committees. It may establish a separate segregated fund, and it may give to independent expenditure-only committees. For a candidate committee or a traditional PAC, though, the check cannot be deposited.

When an LLC is treated as a partnership

An LLC treated as a partnership may contribute, but the contribution is governed by the rules that apply to partnerships — there is no separate, more generous LLC allowance.

A partnership contribution is a type of joint contribution. It must be attributed to the partnership and to each partner, either in direct proportion to each partner’s share of the profits or by agreement among the partners.

Single-member LLCs

A single-member LLC that has not elected corporate treatment — a disregarded entity for tax purposes — may contribute, but the contribution must be attributed to the single member rather than to the company. A disregarded entity that does not have a single natural-person member is treated as a partnership contribution instead.

Because the classification rules interact in ways that are not obvious from the outside, the standing guidance Thomas Datwyler gives committees reviewing LLC political contributions is always the same: get the LLC’s tax treatment in writing rather than inferring it.

The Notification Requirement for LLC Political Contributions

The obligation to explain the contribution sits with the contributor, not only with your committee. When contributing, the LLC is required to notify the recipient committee that it is eligible to make the contribution and to indicate how the contribution should be attributed.

For partnership contributions, this means written notice listing the names of the contributing partners and the amount attributed to each. Unlike other joint contributions, the signature of each partner is not required — but the written attribution is.

If that notice does not arrive with the check, your committee should request it before depositing. Documented requests matter, as the enforcement discussion below explains.

Attribution: Why One Check Hits Two Limits

This is the point that catches campaigns most often, and it is where LLC political contributions most frequently turn into excessive ones. A partnership contribution counts against the partnership’s limit and against the limits of each participating partner.

The practical consequence: a partner who has already given the maximum in that election cannot have any further amount attributed to them. If a $10,000 contribution from a four-partner LLC would attribute $2,500 to a partner who has already contributed the individual maximum, that portion is excessive, regardless of the fact that the LLC itself had given nothing previously.

Who Cannot Be Attributed

Two prohibitions carry straight through the attribution analysis for LLC political contributions:

• Because corporate contributions are prohibited, a partnership or LLC with corporate partners or members may not attribute any portion of a contribution to those corporate partners or members. An LLC composed solely of corporate members may not contribute at all.
• Because contributions from foreign nationals are prohibited, no portion of a contribution may be attributed to a partner who is a foreign national.

Both restrictions can reduce the amount your committee may lawfully keep, even where the total is within the headline limit.

What Enforcement Looks Like for LLC Political Contributions

The Commission has made clear that attribution requirements apply to contributions received by all committees, including independent expenditure-only committees, and that it may pursue civil penalties in appropriate cases.

More useful for treasurers is the framework the Commission has described for how it approaches these matters. In broad terms: it may proceed against an LLC that failed to provide correct attribution information; excuse a contributor that supplied correct information within a short window; dismiss where a recipient committee demonstrates best efforts to obtain the attribution information; and pursue a committee that neither exercised best efforts nor reported the contribution accurately.

How Thomas Datwyler and 9Seven Consulting Handle LLC Political Contributions

Donor vetting and contribution limit review are part of every engagement Thomas Datwyler oversees at 9Seven Consulting. We identify the problem before the deposit rather than after the filing, which is the difference between a routine question to a donor and an amended report.

Founded in 2013 by Thomas Datwyler, former controller of a $52 million presidential campaign, the firm has served more than 400 political committees, filed more than 4,000 FEC reports and reconciled more than 7,500 bank statements. If your committee is receiving LLC political contributions and no one is checking the attribution chain, that is a gap worth closing before the next reporting period.

Frequently Asked Questions

Can a campaign accept LLC political contributions?

It depends on the LLC’s tax treatment. An LLC treated as a corporation is generally prohibited from contributing to candidate committees and traditional PACs. An LLC treated as a partnership may contribute subject to partnership rules, and a single-member LLC that has not elected corporate treatment may contribute with the amount attributed to its member.

What information must an LLC provide with its contribution?

The LLC must notify the recipient committee that it is eligible to contribute and indicate how the contribution should be attributed. For partnership contributions, that means a written notice naming the contributing partners and the amount attributed to each.

Does an LLC contribution count against the individual partners’ limits?

Yes. A partnership contribution counts against the partnership’s limit and against each participating partner’s individual limit for that election.

What happens if the LLC never sends attribution information?

The committee should request it and document the request. The Commission has indicated that it considers whether a recipient committee made best efforts to obtain attribution information when deciding how to proceed.

Who should a committee ask about an unfamiliar LLC contribution?

A compliance professional who reviews the attribution chain rather than the entity name. Thomas Datwyler and the team at 9Seven Consulting review LLC political contributions and other entity contributions for campaigns, PACs, party committees and nonprofits before the funds are deposited.

Can an LLC with corporate members contribute?

No portion of a contribution may be attributed to corporate members, and an LLC composed solely of corporate members may not make contributions to candidate committees.

This article is general information about federal campaign finance reporting. It is not legal advice.