Advisory Opinion 07-06
This Advisory Opinion responds to a person who asked what the limits are for contributions from a sole proprietor (“Proprietor”) to a political party.
A sole proprietorship is “a business in which one person owns all the assets, owes all the liabilities, and operates in his or her personal capacity.”1 “[A] sole proprietorship has no legal identity apart from its owner.”2 “At common law, sole proprietorships are not ‘legal entities’.”3 Further, “sole proprietorships . . . are deemed to be merely the alter egos of the proprietor.4 Finally, a Proprietor is not required by the Internal Revenue Code to maintain a separate business account.5
The only persons allowed to make contributions are individuals, committees, or corporations and companies directly from their treasuries to candidates.6
- HRS section 11-191 defines an “individual” as “a natural person.”
- A “committee” is defined in HRS section 11-191, in relevant part, as “[a]ny organization, association, or individual that accepts or makes a contribution or makes an expenditure for or against any” candidate. Additionally, HRS section 11-191 exempts an “individual” from the definition of “committee” when making a contribution or expenditure of the individual’s own funds, effectively exempting the individual from registration and reporting requirement thresholds.7
- An “organization” is defined in Black’s Law Dictionary as “[a] body of persons (such as a union or corporation) formed for a common purpose.”8
- An “association” is defined, in pertinent part, in Black’s Law Dictionary as “a gathering of people for a common purpose; the persons so joined” and “[a]n unincorporated business organization that is not a legal entity separate from the persons who compose it.”9 (Emphases added.)
A sole proprietorship has no legal identity apart from its owner, and a Proprietor is merely the alter ago of the owner. A Proprietor is not a “committee” as it is not an “organization” (a body of persons) or “association” (involves persons, not a single person). Thus, a Proprietor is an “individual” as defined in HRS section 11-191, and may contribute up to a maximum of $25,000 to a political party in a two-year election period pursuant to HRS section 11-204 (j).
The Commission provides this Advisory Opinion as a means of stating its current interpretation of the Hawaii Campaign Spending laws provided under HRS section 11-191, et seq. and the administrative rules of the Commission provided in chapter 2-14, Hawaii Administrative Rules. The Commission may adopt, revise or revoke the Advisory Opinion upon the enactment of amendments to the Hawaii Revised Statutes or the adoption of administrative rules by the Commission.
Dated: Honolulu, Hawaii, October 10, 2007.
CAMPAIGN SPENDING COMMISSION
Steven E. Olbrich
Michael E. Weaver
1 Black’s Law Dictionary 1398 (7th ed. 1999).
2 Credit Associates of Maui. Ltd v. Carlbom, 98 Hawai’i 462, 465, 50 P.3d 431, 4343 (Haw.App. 2002)
3 Id. at 466, 50 P.3d 431, 435.
5 IRS Forms 1040, Schedule C “Profit or Loss From Business”, Schedule SE “Self-Employment Tax”.
6 A Maui Circuit Court judge ruled in the Charmaine Tavares Campaign litigation that a corporation or company that makes contributions directly from its treasury to candidates is not a noncandidate committee. However, this ruling is being appealed by the Commission to the Intermediate Court of Appeals.
7 “Notwithstanding any of the foregoing, the term ‘committee’ shall not include any individual making a contribution or expenditure of the individual’s own funds.”
8 Black’s Law Dictionary 1126 (7th ed. 1999).
9 Black’s Law Dictionary 119 (7th ed. 1999).