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.