The amount of money that firms winning public works projects can contribute to politicians should be limited, an LDP advisory panel's final report recommended Wednesday.
The panel, however, did not specify how much the maximum donation should be.
But the report says a ceiling on political donations should be variable, depending on how much of a company's income is generated by public works contracts.
For example, it says a company whose public works projects amount to more than 50 percent of its sales should have its political donation ceiling lowered by 50 percent.
The panel, which consists of academics and business leaders, was established last month amid a spate of money-related scandals involving former senior Liberal Democratic Party lawmakers Muneo Suzuki and Koichi Kato.
Prime Minister Junichiro Koizumi has instructed party leaders to consider a blanket ban on political donations from companies that win contracts for public works, but the panel watered down the recommendation in the final document due to strong opposition from within the LDP.
The report also calls for establishing a time frame in which lawmakers would be banned from accepting political donations from firms that have been slapped with administrative punishment.
In addition, it says contributions from corporations should be made only via deposits or checks to ensure greater transparency.
Political fund records should also be disclosed on the Internet, the report says.
The panel submitted the report to LDP Secretary General Taku Yamasaki; the document will be further discussed within the party's political reform committee.
The LDP is expected to draft a bill based on the report by the end of the year.