26 U.S.C. § 527 : US Code - Section 527: Political organizations

Search 26 U.S.C. § 527 : US Code - Section 527: Political organizations

    (a) General rule
      A political organization shall be subject to taxation under this
    subtitle only to the extent provided in this section. A political
    organization shall be considered an organization exempt from income
    taxes for the purpose of any law which refers to organizations
    exempt from income taxes.
    (b) Tax imposed
      (1) In general
        A tax is hereby imposed for each taxable year on the political
      organization taxable income of every political organization. Such
      tax shall be computed by multiplying the political organization
      taxable income by the highest rate of tax specified in section
      11(b).
      (2) Alternative tax in case of capital gains
        If for any taxable year any political organization has a net
      capital gain, then, in lieu of the tax imposed by paragraph (1),
      there is hereby imposed a tax (if such a tax is less than the tax
      imposed by paragraph (1)) which shall consist of the sum of - 
          (A) a partial tax, computed as provided by paragraph (1), on
        the political organization taxable income determined by
        reducing such income by the amount of such gain, and
          (B) an amount determined as provided in section 1201(a) on
        such gain.
    (c) Political organization taxable income defined
      (1) Taxable income defined
        For purposes of this section, the political organization
      taxable income of any organization for any taxable year is an
      amount equal to the excess (if any) of - 
          (A) the gross income for the taxable year (excluding any
        exempt function income), over
          (B) the deductions allowed by this chapter which are directly
        connected with the production of the gross income (excluding
        exempt function income), computed with the modifications
        provided in paragraph (2).
      (2) Modifications
        For purposes of this subsection - 
          (A) there shall be allowed a specific deduction of $100,
          (B) no net operating loss deduction shall be allowed under
        section 172, and
          (C) no deduction shall be allowed under part VIII of
        subchapter B (relating to special deductions for corporations).
      (3) Exempt function income
        For purposes of this subsection, the term "exempt function
      income" means any amount received as - 
          (A) a contribution of money or other property,
          (B) membership dues, a membership fee or assessment from a
        member of the political organization,
          (C) proceeds from a political fundraising or entertainment
        event, or proceeds from the sale of political campaign
        materials, which are not received in the ordinary course of any
        trade or business, or
          (D) proceeds from the conducting of any bingo game (as
        defined in section 513(f)(2)),

      to the extent such amount is segregated for use only for the
      exempt function of the political organization.
    (d) Certain uses not treated as income to candidate
      For purposes of this title, if any political organization - 
        (1) contributes any amount to or for the use of any political
      organization which is treated as exempt from tax under subsection
      (a) of this section,
        (2) contributes any amount to or for the use of any
      organization described in paragraph (1) or (2) of section 509(a)
      which is exempt from tax under section 501(a), or
        (3) deposits any amount in the general fund of the Treasury or
      in the general fund of any State or local government,

    such amount shall be treated as an amount not diverted for the
    personal use of the candidate or any other person. No deduction
    shall be allowed under this title for the contribution or deposit
    of any amount described in the preceding sentence.
    (e) Other definitions
      For purposes of this section - 
      (1) Political organization
        The term "political organization" means a party, committee,
      association, fund, or other organization (whether or not
      incorporated) organized and operated primarily for the purpose of
      directly or indirectly accepting contributions or making
      expenditures, or both, for an exempt function.
      (2) Exempt function
        The term "exempt function" means the function of influencing or
      attempting to influence the selection, nomination, election, or
      appointment of any individual to any Federal, State, or local
      public office or office in a political organization, or the
      election of Presidential or Vice-Presidential electors, whether
      or not such individual or electors are selected, nominated,
      elected, or appointed. Such term includes the making of
      expenditures relating to an office described in the preceding
      sentence which, if incurred by the individual, would be allowable
      as a deduction under section 162(a).
      (3) Contributions
        The term "contributions" has the meaning given to such term by
      section 271(b)(2).
      (4) Expenditures
        The term "expenditures" has the meaning given to such term by
      section 271(b)(3).
      (5) Qualified State or local political organization
        (A) In general
          The term "qualified State or local political organization"
        means a political organization - 
            (i) all the exempt functions of which are solely for the
          purposes of influencing or attempting to influence the
          selection, nomination, election, or appointment of any
          individual to any State or local public office or office in a
          State or local political organization,
            (ii) which is subject to State law that requires the
          organization to report (and it so reports) - 
              (I) information regarding each separate expenditure from
            and contribution to such organization, and
              (II) information regarding the person who makes such
            contribution or receives such expenditure,

          which would otherwise be required to be reported under this
          section, and
            (iii) with respect to which the reports referred to in
          clause (ii) are (I) made public by the agency with which such
          reports are filed, and (II) made publicly available for
          inspection by the organization in the manner described in
          section 6104(d).
        (B) Certain State law differences disregarded
          An organization shall not be treated as failing to meet the
        requirements of subparagraph (A)(ii) solely by reason of 1 or
        more of the following:
            (i) The minimum amount of any expenditure or contribution
          required to be reported under State law is not more than $300
          greater than the minimum amount required to be reported under
          subsection (j).
            (ii) The State law does not require the organization to
          identify 1 or more of the following:
              (I) The employer of any person who makes contributions to
            the organization.
              (II) The occupation of any person who makes contributions
            to the organization.
              (III) The employer of any person who receives
            expenditures from the organization.
              (IV) The occupation of any person who receives
            expenditures from the organization.
              (V) The purpose of any expenditure of the organization.
              (VI) The date any contribution was made to the
            organization.
              (VII) The date of any expenditure of the organization.
        (C) De minimis errors
          An organization shall not fail to be treated as a qualified
        State or local political organization solely because such
        organization makes de minimis errors in complying with the
        State reporting requirements and the public inspection
        requirements described in subparagraph (A) as long as the
        organization corrects such errors within a reasonable period
        after the organization becomes aware of such errors.
        (D) Participation of Federal candidate or office holder
          The term "qualified State or local political organization"
        shall not include any organization otherwise described in
        subparagraph (A) if a candidate for nomination or election to
        Federal elective public office or an individual who holds such
        office - 
            (i) controls or materially participates in the direction of
          the organization,
            (ii) solicits contributions to the organization (unless the
          Secretary determines that such solicitations resulted in de
          minimis contributions and were made without the prior
          knowledge and consent, whether explicit or implicit, of the
          organization or its officers, directors, agents, or
          employees), or
            (iii) directs, in whole or in part, disbursements by the
          organization.
    (f) Exempt organization, which is not political organization, must
      include certain amounts in gross income
      (1) In general
        If an organization described in section 501(c) which is exempt
      from tax under section 501(a) expends any amount during the
      taxable year directly (or through another organization) for an
      exempt function (within the meaning of subsection (e)(2)), then,
      notwithstanding any other provision of law, there shall be
      included in the gross income of such organization for the taxable
      year, and shall be subject to tax under subsection (b) as if it
      constituted political organization taxable income, an amount
      equal to the lesser of - 
          (A) the net investment income of such organization for the
        taxable year, or
          (B) the aggregate amount so expended during the taxable year
        for such an exempt function.
      (2) Net investment income
        For purposes of this subsection, the term "net investment
      income" means the excess of - 
          (A) the gross amount of income from interest, dividends,
        rents, and royalties, plus the excess (if any) of gains from
        the sale or exchange of assets over the losses from the sale or
        exchange of assets, over
          (B) the deductions allowed by this chapter which are directly
        connected with the production of the income referred to in
        subparagraph (A).

      For purposes of the preceding sentence, there shall not be taken
      into account items taken into account for purposes of the tax
      imposed by section 511 (relating to tax on unrelated business
      income).
      (3) Certain separate segregated funds
        For purposes of this subsection and subsection (e)(1), a
      separate segregated fund (within the meaning of section 610 of
      title 18) or of any similar State statute, or within the meaning
      of any State statute which permits the segregation of dues moneys
      for exempt functions (within the meaning of subsection (e)(2))
      which is maintained by an organization described in section
      501(c) which is exempt from tax under section 501(a) shall be
      treated as a separate organization.
    (g) Treatment of newsletter funds
      (1) In general
        For purposes of this section, a fund established and maintained
      by an individual who holds, has been elected to, or is a
      candidate (within the meaning of paragraph (3)) for nomination or
      election to, any Federal, State, or local elective public office,
      for use by such individual exclusively for the preparation and
      circulation of such individual's newsletter shall, except as
      provided in paragraph (2), be treated as if such fund constituted
      a political organization.
      (2) Additional modifications
        In the case of any fund described in paragraph (1) - 
          (A) the exempt function shall be only the preparation and
        circulation of the newsletter, and
          (B) the specific deduction provided by subsection (c)(2)(A)
        shall not be allowed.
      (3) Candidate
        For purposes of paragraph (1), the term "candidate" means, with
      respect to any Federal, State, or local elective public office,
      an individual who - 
          (A) publicly announces that he is a candidate for nomination
        or election to such office, and
          (B) meets the qualifications prescribed by law to hold such
        office.
    (h) Special rule for principal campaign committees
      (1) In general
        In the case of a political organization, which is a principal
      campaign committee, paragraph (1) of subsection (b) shall be
      applied by substituting "the appropriate rates" for "the highest
      rate".
      (2) Principal campaign committee defined
        (A) In general
          For purposes of this subsection, the term "principal campaign
        committee" means the political committee designated by a
        candidate for Congress as his principal campaign committee for
        purposes of - 
            (i) section 302(e) of the Federal Election Campaign Act of
          1971 (2 U.S.C. 432(e)), and
            (ii) this subsection.
        (B) Designation
          A candidate may have only 1 designation in effect under
        subparagraph (A)(ii) at any time and such designation - 
            (i) shall be made at such time and in such manner as the
          Secretary may prescribed by regulations, and
            (ii) once made, may be revoked only with the consent of the
          Secretary.

        Nothing in this subsection shall be construed to require any
        designation where there is only one political committee with
        respect to a candidate.
    (i) Organizations must notify Secretary that they are section 527
      organizations
      (1) In general
        Except as provided in paragraph (5), an organization shall not
      be treated as an organization described in this section - 
          (A) unless it has given notice to the Secretary
        electronically that it is to be so treated, or
          (B) if the notice is given after the time required under
        paragraph (2), the organization shall not be so treated for any
        period before such notice is given or, in the case of any
        material change in the information required under paragraph
        (3), for the period beginning on the date on which the material
        change occurs and ending on the date on which such notice is
        given.
      (2) Time to give notice
        The notice required under paragraph (1) shall be transmitted
      not later than 24 hours after the date on which the organization
      is established or, in the case of any material change in the
      information required under paragraph (3), not later than 30 days
      after such material change.
      (3) Contents of notice
        The notice required under paragraph (1) shall include
      information regarding - 
          (A) the name and address of the organization (including any
        business address, if different) and its electronic mailing
        address,
          (B) the purpose of the organization,
          (C) the names and addresses of its officers, highly
        compensated employees, contact person, custodian of records,
        and members of its Board of Directors,
          (D) the name and address of, and relationship to, any related
        entities (within the meaning of section 168(h)(4)),
          (E) whether the organization intends to claim an exemption
        from the requirements of subsection (j) or section 6033, and
          (F) such other information as the Secretary may require to
        carry out the internal revenue laws.
      (4) Effect of failure
        In the case of an organization failing to meet the requirements
      of paragraph (1) for any period, the taxable income of such
      organization shall be computed by taking into account any exempt
      function income (and any deductions directly connected with the
      production of such income) or, in the case of a failure relating
      to a material change, by taking into account such income and
      deductions only during the period beginning on the date on which
      the material change occurs and ending on the date on which notice
      is given under this subsection. For purposes of the preceding
      sentence, the term "exempt function income" means any amount
      described in a subparagraph of subsection (c)(3), whether or not
      segregated for use for an exempt function.
      (5) Exceptions
        This subsection shall not apply to any organization - 
          (A) to which this section applies solely by reason of
        subsection (f)(1),
          (B) which reasonably anticipates that it will not have gross
        receipts of $25,000 or more for any taxable year, or
          (C) which is a political committee of a State or local
        candidate or which is a State or local committee of a political
        party.
      (6) Coordination with other requirements
        This subsection shall not apply to any person required (without
      regard to this subsection) to report under the Federal Election
      Campaign Act of 1971 (2 U.S.C. 431 et seq.) as a political
      committee.
    (j) Required disclosure of expenditures and contributions
      (1) Penalty for failure
        In the case of - 
          (A) a failure to make the required disclosures under
        paragraph (2) at the time and in the manner prescribed
        therefor, or
          (B) a failure to include any of the information required to
        be shown by such disclosures or to show the correct
        information,

      there shall be paid by the organization an amount equal to the
      rate of tax specified in subsection (b)(1) multiplied by the
      amount to which the failure relates. For purposes of subtitle F,
      the amount imposed by this paragraph shall be assessed and
      collected in the same manner as penalties imposed by section
      6652(c).
      (2) Required disclosure
        A political organization which accepts a contribution, or makes
      an expenditure, for an exempt function during any calendar year
      shall file with the Secretary either - 
          (A)(i) in the case of a calendar year in which a regularly
        scheduled election is held - 
            (I) quarterly reports, beginning with the first quarter of
          the calendar year in which a contribution is accepted or
          expenditure is made, which shall be filed not later than the
          fifteenth day after the last day of each calendar quarter,
          except that the report for the quarter ending on December 31
          of such calendar year shall be filed not later than January
          31 of the following calendar year,
            (II) a pre-election report, which shall be filed not later
          than the twelfth day before (or posted by registered or
          certified mail not later than the fifteenth day before) any
          election with respect to which the organization makes a
          contribution or expenditure, and which shall be complete as
          of the twentieth day before the election, and
            (III) a post-general election report, which shall be filed
          not later than the thirtieth day after the general election
          and which shall be complete as of the twentieth day after
          such general election, and

          (ii) in the case of any other calendar year, a report
        covering the period beginning January 1 and ending June 30,
        which shall be filed no later than July 31 and a report
        covering the period beginning July 1 and ending December 31,
        which shall be filed no later than January 31 of the following
        calendar year, or
          (B) monthly reports for the calendar year, beginning with the
        first month of the calendar year in which a contribution is
        accepted or expenditure is made, which shall be filed not later
        than the twentieth day after the last day of the month and
        shall be complete as if the last day of the month, except that,
        in lieu of filing the reports otherwise due in November and
        December of any year in which a regularly scheduled general
        election is held, a pre-general election report shall be filed
        in accordance with subparagraph (A)(i)(II), a post-general
        election report shall be filed in accordance with subparagraph
        (A)(i)(III), and a year end report shall be filed not later
        than January 31 of the following calendar year.
      (3) Contents of report
        A report required under paragraph (2) shall contain the
      following information:
          (A) The amount, date, and purpose of each expenditure made to
        a person if the aggregate amount of expenditures to such person
        during the calendar year equals or exceeds $500 and the name
        and address of the person (in the case of an individual,
        including the occupation and name of employer of such
        individual).
          (B) The name and address (in the case of an individual,
        including the occupation and name of employer of such
        individual) of all contributors which contributed an aggregate
        amount of $200 or more to the organization during the calendar
        year and the amount and date of the contribution.

      Any expenditure or contribution disclosed in a previous reporting
      period is not required to be included in the current reporting
      period.
      (4) Contracts to spend or contribute
        For purposes of this subsection, a person shall be treated as
      having made an expenditure or contribution if the person has
      contracted or is otherwise obligated to make the expenditure or
      contribution.
      (5) Coordination with other requirements
        This subsection shall not apply - 
          (A) to any person required (without regard to this
        subsection) to report under the Federal Election Campaign Act
        of 1971 (2 U.S.C. 431 et seq.) as a political committee,
          (B) to any State or local committee of a political party or
        political committee of a State or local candidate,
          (C) to any organization which is a qualified State or local
        political organization,
          (D) to any organization which reasonably anticipates that it
        will not have gross receipts of $25,000 or more for any taxable
        year,
          (E) to any organization to which this section applies solely
        by reason of subsection (f)(1), or
          (F) with respect to any expenditure which is an independent
        expenditure (as defined in section 301 of such Act).
      (6) Election
        For purposes of this subsection, the term "election" means - 
          (A) a general, special, primary, or runoff election for a
        Federal office,
          (B) a convention or caucus of a political party which has
        authority to nominate a candidate for Federal office,
          (C) a primary election held for the selection of delegates to
        a national nominating convention of a political party, or
          (D) a primary election held for the expression of a
        preference for the nomination of individuals for election to
        the office of President.
      (7) Electronic filing
        Any report required under paragraph (2) with respect to any
      calendar year shall be filed in electronic form if the
      organization has, or has reason to expect to have, contributions
      exceeding $50,000 or expenditures exceeding $50,000 in such
      calendar year.
    (k) Public availability of notices and reports
      (1) In general
        The Secretary shall make any notice described in subsection
      (i)(1) or report described in subsection (j)(7) available for
      public inspection on the Internet not later than 48 hours after
      such notice or report has been filed (in addition to such public
      availability as may be made under section 6104(d)(7)).
      (2) Access
        The Secretary shall make the entire database of notices and
      reports which are made available to the public under paragraph
      (1) searchable by the following items (to the extent the items
      are required to be included in the notices and reports):
          (A) Names, States, zip codes, custodians of records,
        directors, and general purposes of the organizations.
          (B) Entities related to the organizations.
          (C) Contributors to the organizations.
          (D) Employers of such contributors.
          (E) Recipients of expenditures by the organizations.
          (F) Ranges of contributions and expenditures.
          (G) Time periods of the notices and reports.

    Such database shall be downloadable.
    (l) Authority to waive
      The Secretary may waive all or any portion of the - 
        (1) tax assessed on an organization by reason of the failure of
      the organization to comply with the requirements of subsection
      (i), or
        (2) amount imposed under subsection (j) for a failure to comply
      with the requirements thereof,

    on a showing that such failure was due to reasonable cause and not
    due to willful neglect.