WASHINGTON -- When Republican operatives decided to finally organize an attack on leading presidential candidate Donald Trump, they didn’t launch a super PAC or start a nonprofit. Instead, Trump Card LLC, a limited liability company, was formed. Could this be the start of a new trend in political spending for the post-Citizens United age?
Probably not.
The main problem with doing independent election spending through an LLC is that it has the same benefits and downsides as other available options, plus one significant added cost.
"The practical difference is an LLC is going to have to pay income tax," said Larry Noble, general counsel for the Campaign Legal Center.
As a for-profit business, a LLC, or rather its controlling partners, must pay income tax on the money it receives. This means that a certain percentage of every $1 million contribution from a wealthy individual or corporation goes to the Internal Revenue Service, rather than into efforts to aid candidates.
On the benefits side, an electorally active LLC, like a political nonprofit, would most likely be able to avoid disclosing its contributors. Donor anonymity appears to be a major reason for the formation of Trump Card as an LLC.
"I certainly know donors who are very happy that their fingerprints will be kept off things," Liz Mair, the Republican consultant behind Trump Card, told The Wall Street Journal. She further stated that donors supporting the GOP presidential campaigns of Sen. Ted Cruz (Texas), former Florida Gov. Jeb Bush and Ohio Gov. John Kasich are interested in backing the anti-Trump effort, but don't want their names tied to it.
An LLC would also -- like a nonprofit -- be required to spend at least 51 percent of its time and money on non-electoral activity. While nonprofits must meet this threshold to maintain their nonprofit status with the IRS, an LLC must have a primary purpose other than election spending to avoid having to register as a political committee with the Federal Election Commission. If the LLC were forced to register as a political committee, it would be required to disclose its donors.
Numerous politically minded groups have insisted they don't involve themselves in elections, and thus maintained their nonprofit status, by focusing on funding so-called issue ads, which promote or attack candidates without specifically calling for their election or defeat. An LLC could copy this tactic to help avoid the political committee label.
Any resulting complaints filed against a LLC doing election spending would likely be stalled by the FEC's habit of deadlocking over enforcement of these controversial matters.
Perhaps the clearest sign that LLCs are not the future of independent election spending: Mair told HuffPost that Trump Card may switch from the LLC structure to another form.