After Tennessee's 2011 campaign finance amendment, do LLCs have to register as political campaign committees and follow corporation rules?

Subject

Opinion No. 11-83, Application of Campaign Finance Laws to Limited Liability Companies, December 29, 2011

Plain-English summary

In 2011, the Tennessee General Assembly amended Tenn. Code Ann. § 2-10-102(12)(C) to add the word "corporation" to the third part of the definition of "political campaign committee." 2011 Tenn. Pub. Acts 389. Drew Rawlins, Executive Director of the Registry of Election Finance, asked the AG three follow-on questions. The answer cleared up an ambiguity that had been hanging since a 1999 opinion (No. 99-086).

Question 1: does the addition of "corporation" sweep in LLCs? No. The AG looked at the structure of Tennessee's LLC Act (Tenn. Code Ann. §§ 48-201-101, et seq.) and treated LLCs as distinct legal entities. The Act expressly defines a "corporation" as one organized under the Tennessee Business Corporation Act (Tenn. Code Ann. § 48-202-101(23)) and forbids LLCs from using "corporation" or "incorporated" in their names (§ 48-207-101(a)(1)). The federal courts agree LLCs are hybrid entities, neither corporations nor partnerships. In re Service Merchandise Co.; Thompson v. United States; Alliance Obstetrics. The Federal Election Commission has reached the same conclusion in advisory opinions, holding LLCs without corporate members are not corporations subject to federal corporate contribution bans.

So the campaign finance law's three definitions of "political campaign committee" apply to LLCs as follows. § 2-10-102(12)(A) (combination of two or more individuals making expenditures for or against candidates or measures) can apply if the LLC fits the description. § 2-10-102(12)(B) (corporation or other organization making expenditures to support or oppose a measure) doesn't apply because LLCs aren't corporations. § 2-10-102(12)(C) (committee, club, association, or other group receiving contributions or making expenditures exceeding $250 in a calendar quarter for or against candidates or measures) can apply if the LLC is organized primarily for that political purpose.

That last paragraph is the holding from Opinion 99-086 (April 8, 1999), which the AG reaffirmed: an LLC organized primarily to fund campaign activity is a political campaign committee; an LLC organized primarily for business purposes is a "person" under § 2-10-102(10), even if it occasionally makes contributions.

Question 2: what contribution limits apply? It depends. If the LLC qualifies as a political campaign committee (under the 99-086 analysis), and it gives to two or more candidates or measures, it is a "multicandidate political campaign committee" under § 2-10-109 and subject to the higher caps in § 2-10-302(b) (in 2011: $10,700 to state senate or statewide candidates; $7,100 to state house or other state/local candidates). If the LLC does not qualify as a political campaign committee at all, it is a "person" and subject to the lower caps in § 2-10-302(a) (in 2011: $3,600 to statewide candidates; $1,400 to other state or local candidates). These figures adjust biennially for inflation under § 4 of the 2011 Act.

Question 3: can an LLC opt into the higher caps by voluntarily registering as a multicandidate PAC? No. Whether the multicandidate caps apply depends on whether the LLC actually meets the statutory definition, not on what the LLC chooses to label itself. The reporting and disclosure provisions in §§ 2-10-101 et seq. are separate from the contribution-limit provisions in §§ 2-10-301 et seq. Bryant v. Baptist Health System Home Care of East Tennessee (Tenn. 2006) (expression of one subject implies exclusion of others). An LLC organized for business purposes that wants higher caps cannot reach them by self-registration. It has to actually be the kind of entity the statute targets.

The opinion's footnote adds a small fact: under Tennessee law, corporations are not prohibited from making campaign contributions, so the FEC's caveat about LLCs with corporate members (which matters under federal law's corporate-contribution ban) is irrelevant here.

Currency note

This opinion was issued in 2011. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

The 2011 contribution limits noted in this opinion ($3,600 / $1,400 / $10,700 / $7,100) have been adjusted biennially for inflation since 2011. Anyone working on a current Tennessee campaign should consult the Registry of Election Finance for the current cap. The structural conclusion (LLCs treated as persons unless organized primarily for political activity) has not been disturbed in subsequent statutory amendments as of this opinion's issuance.

Background and statutory framework

The 2011 amendment. 2011 Tenn. Pub. Acts 389, § 1 amended Tenn. Code Ann. § 2-10-102(12)(C) to add the term "corporation" to the third part of the political campaign committee definition.

The political campaign committee definition. Tenn. Code Ann. § 2-10-102(12) (as amended): (A) a combination of two or more individuals (including any political party governing body) making expenditures to support or oppose any candidate or measure; (B) any corporation or other organization making expenditures to support or oppose a measure; (C) any committee, club, association, corporation, or other group of persons which receives contributions or makes expenditures to support or oppose any candidate or measure during a calendar quarter in an aggregate amount exceeding $250.

Multicandidate committee definition. Tenn. Code Ann. § 2-10-109: a political campaign committee that supports or opposes two or more candidates for public office or two or more measures.

Contribution limits. Tenn. Code Ann. § 2-10-302(a) (persons): in 2011, $3,600 to a statewide candidate; $1,400 to any other state or local candidate. § 2-10-302(b) (multicandidate PACs): in 2011, $10,700 to a state senate or statewide candidate; $7,100 to a state house or other state/local candidate. Biennial inflation adjustment under 2011 Acts Ch. 389, § 4.

"Person" definition. Tenn. Code Ann. § 2-10-102(10) (now (10), formerly (10) in 1999) includes LLCs.

The Tennessee LLC Act. Tenn. Code Ann. §§ 48-201-101, et seq. § 48-202-101(11) defines "limited liability company"; § 48-202-101(23) defines "corporation" as an entity organized under the Tennessee Business Corporation Act. § 48-207-101(a)(1) prohibits LLCs from using "corporation" or "incorporated" or abbreviations.

Federal contribution ban (not controlling but instructive). 2 U.S.C. § 441b(a). FEC Advisory Opinions: 1997-17 (Missouri); 1997-4 (Pennsylvania); 1996-13 (D.C.); 1995-11 (Virginia). Each treats LLCs without corporate members as non-corporations.

Tennessee case law on LLC distinctness. In re Service Merchandise Co., 297 B.R. 675, 683 n.2 (Bankr. M.D. Tenn. 2002), aff'd sub nom. Ramco-Gershenson Properties, L.P. v. Service Merchandise Co., 293 B.R. 169 (M.D. Tenn. 2002). Federal courts: Thompson v. United States, 87 Fed. Cl. 728, 729-730 (2009). State courts (Michigan): Alliance Obstetrics and Gynecology v. Department of Treasury, 285 Mich. App. 284, 776 N.W.2d 160, 163 (2009).

Statutory construction. Bryant v. Baptist Health System Home Care of East Tennessee, 213 S.W.3d 743, 749 (Tenn. 2006) (expressio unius est exclusio alterius).

Prior AG opinion reaffirmed. Op. Tenn. Att'y Gen. 99-086 (April 8, 1999).

Common questions

What is the practical effect for an LLC that is a regular business and gives some money to a candidate?

The LLC is treated as a "person" under § 2-10-102(10). It is subject to the lower person caps in § 2-10-302(a). It doesn't have to register with the Registry of Election Finance as a political campaign committee, although the candidate's committee still has to report receiving the contribution.

What if an LLC is set up by a few people specifically to pool campaign donations?

That LLC fits the § 2-10-102(12)(A) or (12)(C) definition of political campaign committee. It must register with the Registry, file disclosures, and abide by either the political-committee caps (single candidate) or the multicandidate-committee caps (two or more candidates).

Why did the legislature add "corporation" to (12)(C) in 2011 if it wasn't going to sweep in LLCs?

The amendment closed a different gap: ensuring that a corporation organized primarily for campaign activity (and making over $250 in expenditures or contributions in a quarter) would be a political campaign committee subject to the disclosure and reporting framework, regardless of which of the three (12)(A), (B), or (C) provisions it fit. The amendment did not address the LLC question because Tennessee LLC law already treats LLCs as separate from corporations.

Could the legislature directly add LLCs to the definition?

Yes. The opinion is an interpretation of existing statute, not a constitutional limit. If the legislature wanted to add LLCs explicitly, it could. Whether such a change would be politically attractive is a separate question.

What if an LLC has only corporate members?

The federal LLC-corporate-membership distinction matters for the federal corporate-contribution ban under 2 U.S.C. § 441b(a). Tennessee law does not prohibit corporate campaign contributions, so the issue is irrelevant for state-law purposes. An LLC's tax classification or membership composition doesn't change its status as an LLC for Tennessee campaign finance purposes.

Does this analysis affect Tennessee's recent rules on independent expenditures or super PACs?

The opinion addressed contribution limits, not independent expenditures. Independent expenditure committees ("super PACs") operate under different constitutional and statutory rules following Citizens United and SpeechNow.org. The opinion did not address that framework.

Citations

• Tenn. Code Ann. § 2-10-102(12)(C)
• Tenn. Code Ann. § 2-10-102(12)(A)
• Tenn. Code Ann. § 2-10-102(12)
• Tenn. Code Ann. § 2-10-102(10)
• Tenn. Code Ann. § 2-10-102(9)
• Tenn. Code Ann. § 2-10-105(e)
• Tenn. Code Ann. § 2-10-109
• Tenn. Code Ann. § 2-10-302(a)
• Tenn. Code Ann. § 2-10-302(b)
• Tenn. Code Ann. §§ 2-10-101, et seq.
• Tenn. Code Ann. §§ 2-10-301, et seq.
• Tenn. Code Ann. §§ 48-201-101, et seq.
• Tenn. Code Ann. § 48-202-101(11)
• Tenn. Code Ann. § 48-202-101(23)
• Tenn. Code Ann. § 48-207-101(a)(1)
• 2 U.S.C. § 441b(a)
• 2011 Tenn. Pub. Acts 389
• In re Service Merchandise Co., 297 B.R. 675 (Bankr. M.D. Tenn. 2002)
• Ramco-Gershenson Properties, L.P. v. Service Merchandise Co., 293 B.R. 169 (M.D. Tenn. 2002)
• Thompson v. United States, 87 Fed. Cl. 728 (2009)
• Alliance Obstetrics and Gynecology v. Department of Treasury, 285 Mich. App. 284, 776 N.W.2d 160 (2009)
• Bryant v. Baptist Health System Home Care of East Tennessee, 213 S.W.3d 743 (Tenn. 2006)
• F.E.C. Advisory Op. 1997-17 (September 19, 1997) (Missouri)
• F.E.C. Advisory Op. 1997-4 (April 25, 1997) (Pennsylvania)
• F.E.C. Advisory Op. 1996-13 (June 10, 1996) (District of Columbia)
• F.E.C. Advisory Op. 1995-11 (April 27, 1995) (Virginia)
• Op. Tenn. Att'y Gen. 99-086 (April 8, 1999)

Source

• Landing page: https://www.tn.gov/attorneygeneral/opinions.html
• Original PDF: https://www.tn.gov/content/dam/tn/attorneygeneral/documents/ops/2011/op11-083.pdf

Original opinion text

December 29, 2011
Opinion No. 11-83
Application of Campaign Finance Laws to Limited Liability Companies

QUESTIONS

1. In light of the recent amendments to Tenn. Code Ann. § 2-10-102(12)(C) by Chapter 389 of the 2011 Tennessee Public Acts, should a limited liability company (LLC) be treated as a corporation and required to register as a political campaign committee or, if contributions are made to more than one candidate or measure, register as a multicandidate political campaign committee, in accordance with Tenn. Code Ann. § 2-10-105(e)?

2. Are LLCs subject to the political contribution limits for multicandidate political campaign committees set forth in Tenn. Code Ann. § 2-10-302(b) or the lower political contributions limits applicable to "persons" set forth in Tenn. Code Ann. § 2-10-302(a)?

3. If an LLC is not required to register as either a political campaign committee or multicandidate political campaign committee, could an LLC voluntarily register as a multicandidate political campaign committee and thereby be subject to the higher contribution limits for multicandidate political campaign committees instead of the contribution limits for "persons"?

OPINIONS

1. No. The term "corporation" as added to the definition of "political campaign committee" in Tenn. Code Ann. § 2-10-102(12)(C) does not encompass the inclusion of LLCs, thus the enactment of Chapter 389 does not alter the findings in Tennessee Attorney General Opinion 99-086, issued on April 8, 1999.

2. If an LLC qualifies as a political campaign committee and makes expenditures or contributions to support or oppose two or more candidates for political office or two or more measures, then it would qualify as a multicandidate political campaign committee and be subject to the higher contribution limits.

3. No, the determination of whether the contribution limit for multicandidate political campaign committees applies to an LLC depends upon whether the LLC meets the definition of a multicandidate political campaign. An LLC cannot become a multicandidate political campaign committee by simply registering as such a committee; it must instead satisfy the statutory criteria.

ANALYSIS

1. Prior to the passage of Chapter 389 of the 2011 Tennessee Public Acts, a "political campaign committee" for purposes of the Campaign Financial Disclosure Act, Tenn. Code Ann. §§ 2-10-101, et seq., and the Campaign Contribution Limits Act, Tenn. Code Ann. §§ 2-10-301, et seq. (hereinafter "campaign finance laws"), was defined to include the following entities:

(A) A combination of two (2) or more individuals, including any political party governing body, whether state or local, making expenditures, to support or oppose any candidate for public office or measure, but does not include a voter registration program;

(B) Any corporation or any other organization making expenditures, except as provided in subdivision (4), to support or oppose a measure; or

(C) Any committee, club, association or other group of persons which receives contributions or makes expenditures to support or oppose any candidate for public office or measure during a calendar quarter in an aggregate amount exceeding two hundred fifty dollars ($250).

Tenn. Code Ann. § 2-10-102(12) (2010).

The General Assembly amended Tenn. Code Ann. § 2-10-102(12)(C) in 2011 to include the term "corporation" in the third part of the definition of a "political campaign committee." See 2011 Tenn. Pub. Acts 389, § 1.

In light of this amendment, you have asked whether limited liability corporations ("LLC") should be treated as corporations and required to register as a political campaign committee or, if contributions are made to more than one candidate or measure, register as a multicandidate political campaign committee. A "multicandidate political campaign committee" is defined as a "political campaign committee to support or oppose two (2) or more candidates for public office or two (2) or more measures." Tenn. Code Ann. § 2-10-109 (2011).

Tennessee Attorney General Opinion 99-086 addressed the central question of how a LLC should be treated for purposes of the campaign finance laws. Op. Tenn. Atty. Gen. 99-086 (April 8, 1999). This Office opined that if an LLC is organized primarily for the purpose of receiving contributions or making expenditures to support or oppose any candidate for public office or measure, then such LLC would qualify as a political campaign committee under the definition in Tenn. Code Ann. § 2-10-102(10)(A) (now § 2-10-102(12)(A)). If, however, an LLC is organized primarily for some other purpose, then the LLC would not qualify as a political campaign committee but instead would be treated as a "person," as defined at Tenn. Code Ann. § 2-10-102(10), for purposes of the campaign finance laws. This Office further determined that if an LLC is organized primarily for the purpose of receiving contributions and making expenditures to support or oppose any candidate for public office or measure and receives contributions or makes expenditures in excess of $250 in a calendar quarter, then such company would qualify as a political campaign committee under Tenn. Code Ann. § 2-10-102(10)(C) (now § 2-10-102(12)(C)).

The addition of the term "corporation" to the third definition of a political campaign committee under Tenn. Code Ann. § 2-10-102(12) does not change the analysis in Opinion 99-086, given that an LLC is not a corporation (although corporations may be a member of an LLC). An examination of the Tennessee Limited Liability Company Act, Tenn. Code Ann. §§ 48-201-101, et seq. ("the Act"), reveals these business entities are intended to be separate and distinct from corporations. For example, a "limited liability company" is defined under the Act as a "limited liability company organized under chapters 201-248 of this title," while a "corporation" is defined as a "corporation for profit, which is not a foreign corporation, incorporated under or subject to the provisions of the Tennessee Business Corporation Act, compiled in chapters 11-27 of this title, as amended." Tenn. Code Ann. § 48-202-101(11) and (23). The Act further specifically prohibits a limited liability company, whether foreign or domestic, from operating under a name containing the word "corporation" or "incorporated," or any abbreviation of these words. Tenn. Code Ann. § 48-207-101(a)(1). Accordingly, a limited liability company is not a corporation for purposes of the campaign finance laws, including the definition of a political campaign committee contained in Tenn. Code Ann. § 2-10-102(12)(C). See also In re Service Merchandise Co., 297 B.R. 675, 683 n. 2 (Bankr. M.D. Tenn. 2002), aff'd sub nom. Ramco-Gershenson Properties, L.P. v. Service Merchandise Co., 293 B.R. 169 (M.D. Tenn. 2002) (stating an LLC is a form of legal entity that has the attributes of both a corporation and a partnership but is not formally characterized as either one).

Other jurisdictions have reached the same conclusion under similar circumstances. For example, federal law prohibits corporate donations to various federal elections. 2 U.S.C. § 441b(a). The Federal Election Commission has issued several advisory opinions concluding that an LLC, created under the laws of various jurisdictions, is not a corporation subject to this ban so long as it has no corporate members. F.E.C. Advisory Op. 1997-17 (September 19, 1997) (Missouri); F.E.C. Advisory Op. 1997-4 (April 25, 1997) (Pennsylvania); F.E.C. Advisory Op. 1996-13 (June 10, 1996) (District of Columbia); F.E.C. Advisory Op. 1995-11 (April 27, 1995) (Virginia).[1] In each of these opinions, the Federal Election Commission reviewed the statutory scheme governing limited liability companies and concluded the statutory scheme recognized a limited liability company as an entity distinct from a corporation or a partnership. See also Thompson v. United States, 87 Fed. Cl. 728, 729-730 (2009) (Claims court finding in a federal tax context that LLCs are hybrid entities that under state laws are neither partnerships nor corporations); Alliance Obstetrics and Gynecology v. Department of Treasury, 285 Mich. App. 284, 776 N.W.2d 160, 163 (2009) (noting in a state tax case that LLCs are not corporations under Michigan law).

2. You also asked what contribution limits are applicable to limited liability companies. Such limits are determined by reference to Tenn. Code Ann. §§ 2-10-102 and 2-10-302. Tenn. Code Ann. § 2-10-302(a) states no "person" shall make contributions in the aggregate of more than $3,600 to any candidate in a statewide election and more than $1,400 to any candidate in any other state or local election. The term "person" includes an LLC. Tenn. Code Ann. § 2-10-102(10). Tenn. Code Ann. § 2-10-302(b) provides that no "multicandidate political campaign committee" shall make contributions in the aggregate of more than $10,700 to any candidate for state senate or in a statewide election and more than $7,100 to any candidate for state house or any other state or local election. These contribution limits are to be adjusted every two years to reflect the percentage of change in the average consumer price index. See 2011 Acts, Ch. 389, § 4. A multicandidate political campaign committee is a political campaign committee that supports or opposes two or more candidates for public office or two or more measures. Tenn. Code Ann. § 2-10-102(9).

Accordingly, if an LLC qualifies as a political campaign committee under the analysis set forth in response to your first question and contributes to two or more candidates for public office or two or more measures, then it would qualify as a multicandidate political campaign committee and be subject to the contribution limits set forth in Tenn. Code Ann. § 2-10-302(b). Otherwise, the LLC would constitute a "person" and be subject to the lower contribution limits set forth in Tenn. Code Ann. § 2-10-302(a).

3. Your last question asks whether a limited liability company that fails to meet the criteria for a multicandidate political campaign committee could nonetheless voluntarily register as a multicandidate political campaign committee and thereby be subject to the higher contribution limits for multicandidate political campaign committees rather than the contribution limits for persons. The Legislature clearly intended the reporting and disclosure requirements for candidates, political campaign committees and multicandidate political campaign committees contained in Tenn. Code Ann. §§ 2-10-101, et seq., to be separate and distinct from the contribution limits for persons, including LLCs, contained in Tenn. Code Ann. §§ 2-10-301, et seq. Thus, the determination of whether the contribution limit for multicandidate political campaign committees applies to a LLC depends upon whether the LLC meets the definition of a multicandidate political campaign and not whether the LLC has voluntarily registered as a multicandidate political campaign committee. Such a finding comports with the general rule of statutory construction that the Legislature's expression to include one subject implies the exclusion of other things not expressly mentioned. See, e.g., Bryant v. Baptist Health System Home Care of East Tennessee, 213 S.W.3d 743, 749 (Tenn. 2006).

[1] The issue of corporate membership in an LLC is irrelevant in Tennessee as Tennessee law does not prohibit corporations from making campaign contributions.

ROBERT E. COOPER, JR.
Attorney General and Reporter

WILLIAM E. YOUNG
Solicitor General

JANET M. KLEINFELTER
Deputy Attorney General

Requested by:
The Honorable Drew Rawlins
Executive Director
Bureau of Ethics and Campaign Finance
Registry of Election Finance
404 James Robertson Parkway, Suite 104
Nashville, TN 37243-1360