How to spend $1 million in NH politics

There are many ways businesses can tip the balance of power at the State House every two years

“Corporations are people, my friend.” — Former presidential candidate Mitt Romney

Say you own a business and want to impact state elections and you have a million dollars to spend. Can you do it?

Under New Hampshire’s campaign finance laws, there are actually many avenues for business leaders to make investments in the 430 state races that can tip the balance of power at the State House every two years — especially in a small state where spending in the vast majority of legislative races rarely exceeds several thousand dollars for house seats.

Many of these avenues are made possible by New Hampshire law, which acknowledges corporate personhood separate and apart from natural person owners or shareholders.

Controversial as Governor Romney’s statement and the U.S. Supreme Court’s Citizens United decision are, corporations are “people” under New Hampshire law in the current campaign finance arena.

While this article presents options for corporate financial participation in elections for governor, the Executive Council, and the NH Legislature, it contains no comment on the business decision-making or moral calculus a given business would need to entertain should it endeavor to make sizable corporate contributions.

Direct corporate contributions

Since a 1998 New Hampshire U.S. District Court case decided under the First Amendment, corporations have been allowed to contribute the legal maximum of $7,000 to state candidates in the pre-filing period ($5,000 for the exploratory period and $1,000 each for the primary and general election). With a million dollars, a business could make maximum contributions (“max out”) to 142 of 430 state races in the pre-filing period.

Contributions by multiple LLCs

The “LLC” loophole is alive and well in New Hampshire. Corporate owners who control a large number of individual LLCs (say a commercial developer or a franchisee of a large number of stores or restaurants) can each max out to state campaigns, even though a small handful of individuals may control the LLCs. Dunkin’ Donuts and Planet Fitness franchisees and Brady Sullivan Properties have utilized multiple LLCs to exert significant political clout through hundreds of thousands of dollars in contributions — especially in gubernatorial races — in the last decade.

A political committee

A corporation or group of companies can team up and establish and fund or contribute to a state political committee (colloquially known as a “PAC”), and that political committee can transfer some or all of a million dollars to one or more candidate’s political committees in the pre-filing period.

During the pre-filing period, transfers between political committees are unlimited – a long-standing practice the New Hampshire Attorney General’s Office confirmed was lawful during the 2014 governor’s race.

Funding a 501(c)(4)

If political anonymity is prized by a corporation, it can contribute a million dollars to a 501(c)(4) organization that may then spend unlimited amounts supporting or opposing candidates of choice, so long as the group doesn’t directly coordinate with candidates.

Identities of donors to 501(c)(4)s are shielded by federal tax law. Many associations, industry groups, and even nonprofits have established 501(c)(4)s to facilitate discrete political spending, and the Attorney General’s Office has interpreted a new law requiring reporting of 501(c)(4) spending so narrowly that some groups may cease doing so. (The Attorney General’s office concluded in the autumn of 2015 that only if a political communication could solely be construed as political would it be subject to the reporting; even mailings on the eve of the election that ostensibly could be construed as issue advocacy or educational aren’t necessarily political communications).

Corporations that can’t contribute

Nonprofit 501(c)(3)’s are strictly prohibited from making political contributions. Further, state law technically still contains a prohibition on contributions by partnerships and unions, but these provisions barring union and partnership gifts are of dubious constitutionality in the post-Citizens United world.

Practical considerations

New Hampshire campaign finance is fraught with pitfalls for the unwary – little-known administrative law precedents, stringent registration and reporting requirements, and a politically charged backdrop where campaign finance missteps (or alleged missteps) can become the subject of banner headlines. Therefore, consultation with counsel is generally advisable.

It is also easier for sole proprietors or closely held companies to spend on state political races than it may be for a company with accountability to a board or shareholders. Finally, just as some businesses have no hesitation about building political operations in order to further goals, others may want to avoid the press and political scrutiny large contributions may garner.

Jay Surdukowski is a member of the Concord-based law firm of Sulloway & Hollis who litigates and advises on political law, in addition to defending medical negligence cases and other litigated matters.

Categories: Legal Advice