Partnerships and limited liability companies (LLCs) that are treated as partnerships for tax purposes may make contributions to federal candidates and committees, including SSFs. Thus, 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. Note, however, that certain partnerships and partners may be prohibited from contributing. See “Prohibited partnership/LLC contributions” on this page.
Contributions received from a partnership
Contributions received by an SSF from a partnership may not exceed $5,000 per year. As explained, a contribution from a partnership must be attributed to each partner in direct proportion to his or her share of the partnership profits or by agreement of the partners. This means each partner’s proportionate contribution from the partnership also counts against his or her personal contribution limit of $5,000 per year for the same political committee.
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 SSF.
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 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 an 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 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
This 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 the Commission will continue to treat all entities, other than LLCs, that qualify as corporations under state law as corporations for FECA purposes.
Prohibited partnership/LLC contributions
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 because contributions from corporations are unlawful. A professional corporation would follow the rules applicable to any other corporations. 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.
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. 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.
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.
Partnerships or LLCs with federal government contracts
A partnership or LLC that is a federal contractor is prohibited from making contributions between the time it begins to negotiate a contract with the federal government or the time when requests for proposals are sent out, whichever is earlier, and the time it completes the performance of the contract or the time the contract negotiations cease, whichever is later. However, an individual partner in or employee of such a firm may make contributions from personal funds (rather than from funds drawn on the firm’s account).
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.
If a single partnership/LLC contribution exceeds $200, or if several contributions by the same partnership/LLC aggregate over $200 during a calendar year, the committee must itemize the contribution on a Schedule A used for “Contributions from Individuals/Persons Other Than Political Committees” (Line 11(a)(i)).
Additionally, if an individual partner’s share of the contribution exceeds $200 when combined with other contributions received from that partner in the same calendar year, the committee must disclose, as a memo entry, itemized information on the partner (name, address, occupation, date contribution received, partner’s share of contribution and aggregate year-to-date total of contributions made by that partner).
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.