A limited liability company (LLC) partially owned by a member of Congress may provide free or discounted use of its recreational boat to the member’s campaign as an in-kind contribution, subject to the LLC's contribution limits. The campaign must pay the usual and normal charge for any rental value of the boat that exceeds the LLC's limits, just as any other political committee would.
Rep. Randy Neugebauer, along with several members of his family, formed an LLC under Texas law that elected to be treated as a partnership for federal income tax purposes. Rep. Neugebauer and his wife own a sixty-percent share in the company, with the remaining forty percent held by family. After its formation, the LLC purchased a recreational boat to be harbored in the Washington, D.C., area with the intention of renting the boat to third parties at the seasonal fair market value.
The Neugebauer for Congress Committee, Rep. Neugbauer's principal campaign committee, asked if it could use the LLC's boat for campaign events without charge so long as that use did not exceed Rep. Neugebauer's right to use the boat, and if so, whether it could pay the LLC fair-market-value rental charge upon exceeding his right to use. As an alternative, the committee asked if it could simply pay the LLC the fair-market-value rental charge for use of the boat, and if so, whether Rep. Neugebauer could use his personal funds to make that payment. If so, the committee wanted to know how to report such an expenditure as well as whether or not the LLC could rent the boat to other political committees at the fair-market rate.
Candidates for federal office, except Presidential candidates electing to accept public funding, may make unlimited expenditures from personal funds. 11 CFR 110.10. Personal funds include candidate's assets. 2 U.S.C. §431(26); 100.33(a). The facts presented in the request, however, indicate that the boat is an asset of the LLC. Accordingly, the LLC, rather than Rep. Neugebauer, would be providing the use of the boat to the Committee. Thus, any value deriving from the boat would not constitute "personal funds" of Rep. Neugebauer under the Act.
Because the LLC would be providing the use of the boat to the Committee, the Commission analyzed this transaction under the statutory framework applying to LLCs. By allowing the Committee to use the boat for campaign events without charge, the LLC would be providing the rental value of the boat to the Committee for the purpose of influencing the election of Rep. Neugebauer. The Committee's use of the LLC's boat without charge, therefore, would be an in-kind contribution by the LLC.
The Commission generally treats contributions by LLCs consistent with the tax treatment that the entities elect under the Internal Revenue Code. Because the LLC in this case has elected to be treated as a partnership for federal income tax purposes, it would be allowed to contribute up to $2,400 per election. 11 CFR 110.1(b) and (e). Accordingly, the Committee could use the LLC's boat without charge up to $2,400 in rental value of the boat, per election. In this case, the LLC would be contributing the charge for the boat rental at a commercially reasonable rate in the Washington, D.C., area prevailing at the time the services of the boat were rendered to the Committee. 11 CFR 100.52(d)(2).
When the Committee's use of the boat exceeds $2,400 per election, the Committee may continue using the boat if it pays the LLC the usual and normal charge for a comparable boat rental in the Washington, D.C., area. The payment for the use of the boat at the usual and normal charge would not be treated as an in-kind contribution from the LLC to the Committee. 11 CFR 100.52(d)(1) and (d)(2).
The committee would report the free or discounted use as an in-kind contribution from the LLC and its rental payments as operating expenditures. 11 CFR 110.1(b) and (e), also 11 CFR 100.52(d)(1) and (2). Payments from Rep. Neugebauer's personal funds would be reported as in-kind contributions. 11 CFR 104.13. The Commission would treat interactions between the LLC and any other campaign committee, leadership PAC or party committee in the same manner.
AO 2009-07: Date issued: June 26, 2009; Length: 6 pages.