Shed Light on Secret LLCs – Senator Hoylman and Assemblyman Gallagher Introduce LLC Transparency Legislation
New bill would help target assets of international oligarchs, force tax evaders to pay their fair share and ensure bad owners are held accountable for their crimes
NEW YORK—Today, Sen. Brad Hoylman (D/WFP-Manhattan) and Assemblywoman Emily Gallagher (D/WFP-Brooklyn) introduced a new bill to shed light on the murky world of New York limited liability companies (LLCs) by requiring them to disclose the names and addresses of their beneficial owners to the New York State Department of State. This legislation could be used to help New York State uncover the assets of international buyers of New York real estate.
Specifically, this bill:
- Require LLCs to disclose their owners to the New York State Department of State and include this information in their annual tax returns.
- Require DOS to create a public database where people could find out which LLCs share common ownership, though individual information is protected subject to a FOIL request.
Senator Hoylman said: “CLCs have operated in near total darkness for too long and our legislation would bring much-needed light to them. For the international super-rich, LLCs are used as front companies to move vast sums of money without worrying about detection. I am proud to introduce this LLC Transparency Bill with Assemblyman Emily Gallagher to help our state and federal governments target international financial criminals, force tax evaders to pay their fair share, and ensure that all commercial operators in our state – including bad owners – are held accountable for any wrongdoing.”
Assemblyman Gallagher said: “Money laundering, tax evasion, penalty evasion and systemic code violations have been shielded for too long in New York by the LLC’s veil of anonymity. Sometimes tenants don’t even know who their landlord is. Senator Holyman and I believe it is time to shine a light on shell companies, such as LLCs, so that we can truly enforce our state’s laws, regardless of the wealth or power of the economic operator. Our legislation is simple, effective and urgent.
LLCs allow owners to hide their identity and limit their personal exposure to debt and other obligations. Under current New York law, to organize an LLC, owners need only register an official name, the county in which it will operate, and a PO Box.
Recent reports have shown covert New York real estate investment schemes among international elites through anonymous limited liability companies and the use of New York limited liability companies by wealthy Russian nationals in the state of New York to buy luxury homes.
Owners Anonymous LLCs have contributed to code violations for years in the Hudson Valley, prompting a Senate investigation in 2019. Owners Anonymous LLCs have also withheld tens of thousands of ERAP requests l last year, which unnecessarily delayed rent relief for tenants.
The Wyoming state legislature invented LLCs in 1977, in part to exploit a loophole in federal tax law; they were not brought to New York until 1994 after the IRS blessed them in 1988. Although they have legitimate uses, LLCs and other shell companies have been used for money laundering and l tax evasion since then.
The international community has been working for a decade to eliminate all forms of anonymous corporate ownership, starting with commitments from the G8 in 2013, the G20 in 2014, the UK in 2016 and the EU in 2018. Leaks like the Panama Papers and the Pandora Papers continued to emphasize the need for transparency in corporate ownership. The United States National Defense Authorization Act of 2021 required that beneficial ownership information be disclosed to the Treasury Department. Therefore, requiring disclosure of this information to the New York State government is not a significant burden.
Sociologists have documented the existence of an “LLC effect” among owners, where anonymity and limited liability combine to cause owners to be more negligent than they otherwise would be, leading to code violations and increased costs for tenants and cities.