[EL] Citizens United, avoidance of double-taxation, and another Bloomberg question

[Mark Scarberry]

List members will know that, in the usual case, a corporation pays income tax on its earnings, and then shareholders pay income tax on dividends. I suppose that before Citizens United, shareholders who controlled a corporation and wanted to use corporate resources to make independent campaign expenditures would have had to first distribute corporate funds to themselves as dividends and then spend that money as individuals. The money would have been double-taxed, assuming the corporation is taxed as the typical S-corporation.

Do candidates and others now avoid double taxation by having their corporations make the expenditures? Sorry if this is an obvious point. Self-funded campaigns, like Bloomberg’s, raise this issue starkly, unless their corporations are entitled to elect and have elected “pass through” taxation.

A separate question: Would Bloomberg violate the law by allowing the Democratic nominee for President (if, as seems likely, it isn’t him) to use his campaign offices and infrastructure? It seems so. I have read that he has promised to keep his offices open. But maybe he would only use them to facilitate his own independent efforts in support of the nominee. Sen. Sanders has said, I think, that he would not accept this assistance from Bloomberg, which may suggest that Bloomberg is planning to coordinate his efforts or allow the nominee to use the offices.

Mark

Mark S. Scarberry
Professor of Law
Pepperdine University
Rick J. Caruso School of Law

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