Partnership and LLC contributions
Partnerships and limited liability companies (LLCs) that are treated as partnerships for tax purposes may make contributions to influence federal elections, subject to limits. A partnership contribution always counts against the limits of the participating partners, as well as the partnership's limit.
A partnership or partner who is not otherwise prohibited from making contributions may contribute up to the individual limits in the contribution limit chart.
|Candidate committee||PAC† (SSF and nonconnected)||Party committee: state/district/local||Party committee: national||Additional national party committee accounts‡|
|Donor||Individual||$2,900* per election||$5,000 per year||$10,000 per year (combined)||$36,500* per year||$109,500* per account, per year|
|Candidate committee||$2,000 per election||$5,000 per year||Unlimited transfers||Unlimited transfers|
|PAC: multicandidate||$5,000 per election||$5,000 per year||$5,000 per year (combined)||$15,000 per year||$45,000 per account, per year|
|PAC: nonmulticandidate||$2,900* per election||$5,000 per year||$10,000 per year (combined)||$36,500* per year||$109,500* per account, per year|
|Party committee: state/district/local||$5,000 per election (combined)||$5,000 per year (combined)||Unlimited transfers||Unlimited transfers|
|Party committee: national||$5,000 per election**||$5,000 per year||Unlimited transfers||Unlimited transfers|
*Indexed for inflation in odd-numbered years.
†“PAC” here refers to a committee that makes contributions to other federal political committees. Independent-expenditure-only political committees (sometimes called “Super PACs”) may accept unlimited contributions, including from corporations and labor organizations.
‡The limits in this column apply to a national party committee’s accounts for: (i) the presidential nominating convention; (ii) election recounts and contests and other legal proceedings; and (iii) national party headquarters buildings. A party’s national committee, Senate campaign committee and House campaign committee are each considered separate national party committees with separate limits. Only a national party committee, not the parties’ national congressional campaign committees, may have an account for the presidential nominating convention.
**Additionally, a national party committee and its Senatorial campaign committee may contribute up to $51,200 combined per campaign to each Senate candidate.
Attribution among partners
A portion of the partnership contribution must be attributed to each contributing partner. If all partners within the organization are contributing, the partnership may attribute the contribution in direct proportion to each partner’s share of the partnership’s profits.
However, if the partnership attributes a contribution on another basis agreed to by the partners, or if it attributes contributions only to certain partners, then the following rules must be observed:
- The contributing partners' profits must be reduced (or their losses increased) in proportion to the contribution attributed to them; and
- The profits (or losses) of only the contributing partners must be affected.
A portion of a contribution drawn on a partnership account may not be attributed to the spouse of a partner unless the spouse is also a member of the partnership.
Whatever the attribution, the portion attributed to each partner must not, when aggregated with other contributions from that person, exceed his or her contribution limit to the political committee.
Example: Attribution and the contribution limits
A firm has four partners who split the partnership profits as follows:
- Partner A takes 30 percent;
- Partner B takes 20 percent;
- Partner C takes 25 percent; and
- Partner D takes 25 percent.
The partnership makes a $1,000 contribution to a candidate for the primary election. The full amount counts against the partnership's limit for that candidate for the primary. If the partnership attributes the contribution to every partner in proportion to his or her percentage share of the firm's profits, the contribution counts as a contribution from each partner as follows:
- Partner A, $300 contribution;
- Partner B, $200 contribution; and
- Partners C & D, $250 contribution each.
Each partner may make additional contributions to the candidate up to the individual per election limit.
Notice to recipient committee
Because a contribution from a partnership is a type of joint contribution, the partnership must provide to the recipient committee, along with the contribution, a written notice listing the names of the contributing partners and the amount to be attributed to each (unless the contribution is attributed equally among the partners). However, unlike other joint contributions, the signature of each contributing partner is not required.
Contributions from a partnership need not be accompanied by the signature of each contributing partner.
Contributions from limited liability companies (LLCs)
For purposes of contribution limitations and prohibitions, a limited liability company (LLC) is treated either as a corporation or a partnership. An LLC is considered a corporation if:
- It has chosen to file, under Internal Revenue Service (IRS) rules, as a corporation; or
- It has publicly traded shares.
An LLC is considered a partnership if:
- It has chosen to file, under IRS rules, as a partnership; or
- It has made no choice, under IRS rules, as to whether it is a corporation or partnership.
If an LLC is considered a corporation, it is generally prohibited from making contributions to political committees, although it is permitted to establish a separate segregated fund (SSF). If an LLC is considered a partnership, it is permitted to make contributions to political committees, but it is subject to the rules for partnerships.
Single member LLC
If a single member LLC does not elect corporate tax treatment, it may make contributions; the contributions will be attributed to the single member, not the LLC.
Notice to recipient committee
At the time it makes a contribution, an LLC that has elected to be treated as a partnership must notify the recipient committee:
- That it is eligible to make the contribution; and
- How the contribution should be attributed among members.
Notification will prevent the recipient committee from inadvertently accepting an illegal contribution.
Attribution of contributions from an LLC
The method for attributing contributions from a partnership would also apply to an LLC (and its members) that has chosen to be treated for tax purposes as a partnership, or that has not chosen how it should be treated by the IRS. Note, however, that an LLC that chooses to be treated for tax purposes as a corporation is generally prohibited from making contributions to political committees.
Prohibited partnership/LLC contributions
LLC that chooses tax treatment as corporation
An LLC that elects to be treated as a corporation for tax purposes is treated as a corporation under the Federal Election Campaign Act (the Act) and thus is generally prohibited from making contributions in connection with federal elections. Pursuant to SpeechNow.org v. FEC and Carey v. FEC, a corporation may make contributions to nonconnected political committees that make only independent expenditures (Super PACs), or to separate accounts maintained by nonconnected political committees for making only independent expenditures (Hybrid PACs).
Partnerships or LLCs with corporate partners/members
Because contributions from corporations are prohibited, a partnership or an LLC with corporate members (but treated as a partnership for tax purposes) may neither use the profits of nor attribute any portion of a contribution to the corporate partners. A partnership or LLC composed solely of corporate partners may not make any contributions (except to Super PACs and the non-contribution accounts of Hybrid PACs).
However, a joint venture partnership wholly owned by corporate partners and affiliated with at least one of the partners may pay the establishment, solicitation and administrative costs of its SSF without making a contribution.
Although law firms, doctors' practices and similar groups are often organized as partnerships, some of these groups may instead be professional corporations. (Generally, the Commission relies on state law to distinguish a partnership from a corporation.)
Unlike a partnership, a professional corporation is prohibited from making any contributions (except to Super PACs and the non-contribution accounts of Hybrid PACs) because contributions from corporations are unlawful. A professional corporation follows the rules applicable to any other corporation. However, an individual member of a professional corporation may contribute to an SSF using a check drawn on his or her non-repayable corporate drawing account because the check represents a contribution from the individual rather than from the corporation.
Note, membership organizations and trade associations whose members include partnerships or LLCs that are treated as partnerships for tax purposes may solicit those entities at any time as part of the restricted class.
Partnerships or LLCs with foreign national partners/members
Similarly, because contributions from foreign nationals are prohibited, a partnership or LLC may not attribute any portion of a contribution to a partner or member who is a foreign national, nor may any partner who is a foreign national participate directly or indirectly in decisions regarding the making of contributions or donations in connection with any federal, state, or local election in the United States.
Partnerships or LLCs with federal government contracts
A partnership or LLC which is negotiating a contract with the federal government or which has not completed performance of such a contract is prohibited from making contributions. However, an individual partner in such a firm may make contributions from personal funds (rather than from funds drawn on the partnership’s accounts). Also, an individual who is in his or her own right, or as a sole proprietor, a federal government contractor may not make contributions using any funds (business or personal) under his or her control. However, the individual’s spouse is not prohibited from making a personal contribution.
Political action committees sponsored by partnerships
In addition to making direct contributions, a partnership may participate in federal elections by sponsoring a nonconnected political action committee (PAC).
A partnership composed entirely of corporations cannot establish or support a political committee unless the partnership is affiliated with one of the corporate partners.
PAC sponsorship affords a partnership two advantages. First, contributions made by the PAC are generally not attributed to the partnership or the individual partners. Second, once it has qualified as a multicandidate committee, the PAC has a higher contribution limit than the partnership.
A PAC must keep records and file regular FEC reports of receipts and disbursements. Also, partnership support in the form of administrative costs and other contributions counts against contribution limits. Moreover, a partnership or LLC that is a federal contractor is prohibited from providing such support.
The law requires all political committees to register with the FEC. Because a partnership or LLC taxed as a partnership is not considered to be a corporation, the type of political committee formed by such an organization is called a "nonconnected committee." A nonconnected PAC becomes a "political committee" and must register with the FEC once it raises or spends more than $1,000 in a calendar year to influence federal elections.
The PAC treasurer is legally responsible for authorizing expenditures, monitoring contributions, depositing receipts in the PAC's designated bank account, keeping records of receipts and disbursements, and filing complete, accurate and timely reports of activity with the FEC.
Partnership support of PAC
A partnership is limited in the amount of unreimbursed support it may give to its nonconnected PAC (for example, office space and phones) because such support is considered a contribution subject to limits and prohibitions. Partnership contributions to the PAC are limited to $5,000 per calendar year. (Contributions from each partner's personal funds to the PAC are also limited to $5,000 per calendar year.) Contributions—including loans and in-kind contributions—made by partnerships to their nonconnected PACs are attributable among participating partners. No part of a partnership's contributions to its PAC, however, may be attributed to a partner who is prohibited by the Act from making contributions.
Partnership contribution plans
A partnership, without establishing a PAC or triggering any reporting responsibility, may set up an internal plan to facilitate voluntary contributions from individual partners, or from the partnership as a whole, to candidates and political committees. In several advisory opinions (AOs), the Commission has said that the incidental expenses incurred to administer such plans and to keep records on contributions are not considered contributions or expenditures. Therefore, such incidental expenses do not count toward contribution limits and do not cause the firm to become a political committee under the Act. None of the plans involve the partnership's soliciting contributions on behalf of specific candidates. See AOs 1984-18, 1981-50 and 1980-72.
Note, by contrast, that when the partnership incurs expenses to facilitate contributions to its nonconnected PAC, the expenses are considered contributions to the nonconnected PAC and must be attributed among the partners eligible to make contributions. See AO 1982-63.
Legal and accounting services
A partnership may offer free legal and accounting services to its nonconnected PAC, to candidate committees and to other political committees provided that:
- The services to candidate committees and other nonparty committees are provided only for the purpose of helping them comply with the federal campaign finance law;
- The services provided to political party committees do not directly further the election of any specific candidate for federal office; and
- The individual who performs the service is a regular employee of the partnership.
The recipient committee must report the value of the donated services as a memo entry on Schedule A if the aggregate value exceeds $200 per calendar year. To facilitate reporting, the partnership should provide the committee with the necessary information.
Partner activity on behalf of candidates
In several advisory opinions, the Commission addressed the issue of partners engaging in political activity during working hours. This situation is different from the limited exemption for legal and accounting services. That exemption is not for campaign activity, but rather for work which helps a committee comply with the federal campaign finance law.
Compensation for partner/volunteer
In AOs 1980-107 and 1979-58, two senior partners of law firms wished to provide volunteer services during working hours to the campaigns of federal candidates. In these cases, the partners' compensation was based not on the number of hours worked, but rather on their proprietary interest in their firms. Moreover, the partners had complete discretion over the use of their time. The Commission concluded that the firms could pay full compensation to the partners without making contributions to the campaigns receiving their services.
Compensation for partner/candidate
As a general rule, compensation paid by a partnership to a partner who is simultaneously running as a candidate is not considered a contribution from the partnership if the compensation:
- Results from bona fide employment genuinely independent of the candidacy;
- Is exclusively in consideration of services provided; and
- Does not exceed the amount that would be paid to a similarly qualified person for the same work.
Compensation to a partner for time spent campaigning is a contribution from the partnership, unless the compensation is reduced to reflect the lost time.
Reporting partnership/LLC contributions
Partnership/LLC contributions are included in the total figure reported for "Contributions from Individuals/Persons other than Political Committees" on the Detailed Summary Page of Form 3X (Line 11(a)(i)) and itemized.
A committee reports the value of an itemized in-kind contribution received from a partnership or LLC on Schedule A in the same way it reports an itemized monetary contribution from an individual or any other person eligible to make in-kind contributions on Schedule A. Moreover, an in-kind contribution itemized on Schedule A must also be itemized on a Schedule B for operating expenditures. Note that information about a partner itemized as a memo entry on Schedule A does not have to be reported on Schedule B.