[EL] A clarification — Re: Citizens United, avoidance of double-taxation, and another Bloomberg question

[Mark Scarberry]

A clarification of my poorly expressed first question, with an apology for taking up list members’ time with unlikely possibilities:

Of course Bloomberg’s corporations cannot contribute to his campaign. And all of the many ads that I’ve seen say they were approved by him, so obviously they are not independent expenditures. He has not avoided double taxation of funds used to put on those ads (or to build infrastructure).

But what if his corporations contribute to super-PACs that at least nominally make only independent expenditures? Is that a realistic possibility? I don’t know what regulations might apply in such a case, and I may only be digging a deeper hole.

Is it conceivable that a corporation owned by him might make independent expenditures as a result of decisions made by independent directors? That seems highly dubious for reasons suggested offlist, such as that he is the corporate CEO (at least of some of his corporations).

But I suppose that if his corporations make independent expenditures in favor of a candidate other than himself (e.g., Bernie Sanders, if he is the nominee), then he does avoid double taxation. Someone must have written on that issue.

Mark

Mark S. Scarberry
Professor of Law
Pepperdine University
Rick J. Caruso School of Law
________________________________
From: Mark Scarberry <mark.scarberry at pepperdine.edu>
Sent: Saturday, February 29, 2020 9:43 AM
To: Election Law Listserv
Subject: Citizens United, avoidance of double-taxation, and another Bloomberg question

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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