An advisory opinion has been requested whether the following contributions are treated as having been made by a single entity for purposes of the contribution limit of New York City Administrative Code §3-703(1) (f) : a contribution made by a corporation with two individual shareholders, each of whom "own" fifty percent of the corporation, and contributions made by each individual shareholder.
Campaign Finance Board Rule 102(a) (2) provides:
Contributions...made by corporations...and the persons or entities who or which control such corporations...shall be deemed to be made by a single entity for purposes of the contribution limit.
In Advisory Opinion No. 1989-38, dated July 24, 1989, the Board concluded that:
an individual may be said to "control" a corporation, for purposes of the single source of Rule 102(a) (2), only when that person beneficially owns, holds, or has the power to vote stock constituting more than fifty percent of the combined voting power of all classes of stock in the corporation.
Thus, the corporation and the individuals who each own a fifty percent share of the corporation would not be treated as a single source under Rule 102(a) (2).
Campaign Finance Board Rule 102(n) provides:
If a contributor makes a contribution to a political committee and indicates to the committee an intended ultimate recipient of the contribution, the amount of that contribution shall be attributed to the contributor and the political committee for purposes of determining compliance with the contribution limit of Section 3-703(1) (f) of the code.
The term "political committee" includes corporations. Administrative Code §3-702(11).
There is a significant risk that a corporation wholly "owned" by two shareholders may function as a conduit for contributions actually made by the shareholders in excess of the contribution limit applicable under Administrative Code §3-703(1) (f) and in violation of Rule 102(n). Because of this risk the Board will require, pursuant to Administrative Code §3-703(1) (d), that each principal committee treasurer make written disclosure to the Board of each instance in which the candidate or an agent of the candidate has reason to believe that the aggregate amount of contributions accepted from a corporation and two individuals, who together "own" one hundred percent of the corporation, exceeds the amount of the contribution limit applicable under Administrative Code §3-703(1) (f). The Board shall determine whether the corporate contribution in fact constitutes a contribution by an individual shareholder in excess of the contribution limit.
NEW YORK CITY CAMPAIGN FINANCE BOARD