Internal Revenue Code:Sec. 527. Political organizations
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Location in Internal Revenue Code
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter F - Exempt Organizations
PART VI - POLITICAL ORGANIZATIONS
Statute
Sec. 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).
(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 and in writing, 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.
(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.
(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)), and
(E) 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).
(5) Exceptions
This subsection shall not apply to any organization -
(A) to which this section applies solely by reason of
subsection (f)(1), or
(B) which reasonably anticipates that it will not have gross
receipts of $25,000 or more for any taxable year.
(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.
(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 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 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 reasonably anticipates that it
will not have gross receipts of $25,000 or more for any taxable
year,
(D) to any organization to which this section applies solely
by reason of subsection (f)(1), or
(E) 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.
Sources
(Added Pub. L. 93-625, Sec. 10(a), Jan. 3, 1975, 88 Stat. 2116;
amended Pub. L. 94-455, title XIX, Sec. 1901(b)(33)(C), Oct. 4,
1976, 90 Stat. 1801; Pub. L. 95-502, title III, Sec. 302(a), Oct.
21, 1978, 92 Stat. 1702; Pub. L. 95-600, title III, Sec. 301(b)(6),
Nov. 6, 1978, 92 Stat. 2821; Pub. L. 97-34, title I, Sec. 128(a),
Aug. 13, 1981, 95 Stat. 203; Pub. L. 98-369, div. A, title IV,
Sec. 474(r)(16), title VII, Sec. 722(c), July 18, 1984, 98 Stat.
843, 973; Pub. L. 99-514, title I, Sec. 112(b)(1), Oct. 22, 1986,
100 Stat. 2108; Pub. L. 100-647, title I, Sec. 1001(b)(3)(B), Nov.
10, 1988, 102 Stat. 3349; Pub. L. 106-230, Sec. 1(a), 2(a), July 1,
2000, 114 Stat. 477, 479.)
References in Text
REFERENCES IN TEXT
Section 610 of title 18, referred to in subsec. (f)(3), was
repealed by Pub. L. 94-283, title II, Sec. 201(a), May 11, 1976, 90
Stat. 496. See section 441b of Title 2, The Congress.
The Federal Election Campaign Act of 1971, referred to in
subsecs. (i)(6) and (j)(5)(A), is Pub. L. 92-225, Feb. 7, 1972, 86
Stat. 3, as amended, which is classified principally to chapter 14
(Sec. 431 et seq.) of Title 2, The Congress. Section 301 of the Act
is classified to section 431 of Title 2. For complete
classification of this Act to the Code, see Short Title note set
out under section 431 of Title 2 and Tables.
Miscellaneous
AMENDMENTS
2000 - Subsec. (i). Pub. L. 106-230, Sec. 1(a), added subsec.
(i).
Subsec. (j). Pub. L. 106-230, Sec. 2(a), added subsec. (j).
1988 - Subsec. (e)(2). Pub. L. 100-647 inserted at end ''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).''
1986 - Subsec. (g)(1). Pub. L. 99-514, Sec. 112(b)(1)(A),
substituted ''paragraph (3)'' for ''section 24(c)(2)''.
Subsec. (g)(3). Pub. L. 99-514, Sec. 112(b)(1)(B), added par.
(3).
1984 - Subsec. (g)(1). Pub. L. 98-369, Sec. 474(r)(16),
substituted ''section 24(c)(2)'' for ''section 41(c)(2)''.
Subsec. (h)(2)(B). Pub. L. 98-369, Sec. 722(c), inserted
''Nothing in this subsection shall be construed to require any
designation where there is only one political committee with
respect to a candidate.''
1981 - Subsec. (h). Pub. L. 97-34 added subsec. (h).
1978 - Subsec. (b)(1). Pub. L. 95-600 substituted ''Such tax
shall be computed by multiplying the political organization taxable
income by the highest rate of tax specified in section 11(b)'' for
''Such tax shall consist of a normal tax and a surtax computed as
provided in section 11 as though the political organization were a
corporation and as though the political organization taxable income
were the taxable income referred to in section 11'' and struck out
provision that for purposes of this subsection, the surtax
exemption provided by section 11(d) not be allowed.
Subsec. (c)(3)(D). Pub. L. 95-502 added subpar. (D).
1976 - Subsec. (b)(2). Pub. L. 94-455 substituted ''net capital
gain'' for ''net section 1201 gain'' after ''organization has a''.
EFFECTIVE DATE OF 2000 AMENDMENT
Pub. L. 106-230, Sec. 1(d), July 1, 2000, 114 Stat. 479, provided
that:
''(1) In general. - Except as provided in paragraphs (2) and (3),
the amendments made by this section (amending this section and
sections 6104 and 6652 of this title) shall take effect on the date
of the enactment of this section (July 1, 2000).
''(2) Organizations already in existence. - In the case of an
organization established before the date of the enactment of this
section, the time to file the notice under section 527(i)(2) of the
Internal Revenue Code of 1986, as added by this section, shall be
30 days after the date of the enactment of this section.
''(3) Information availability. - The amendment made by
subsection (b)(2) (amending section 6104 of this title) shall take
effect on the date that is 45 days after the date of the enactment
of this section.''
Pub. L. 106-230, Sec. 2(d), July 1, 2000, 114 Stat. 482, provided
that: ''The amendment made by subsection (a) (amending this
section) shall apply to expenditures made and contributions
received after the date of the enactment of this Act (July 1,
2000), except that such amendment shall not apply to expenditures
made, or contributions received, after such date pursuant to a
contract entered into on or before such date.''
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by Pub. L. 100-647 effective, except as otherwise
provided, as if included in the provision of the Tax Reform Act of
1986, Pub. L. 99-514, to which such amendment relates, see section
1019(a) of Pub. L. 100-647, set out as a note under section 1 of
this title.
EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by Pub. L. 99-514 applicable to taxable years beginning
after Dec. 31, 1986, see section 151(a) of Pub. L. 99-514, set out
as a note under section 1 of this title.
EFFECTIVE DATE OF 1984 AMENDMENT
Amendment by section 474(r)(16) of Pub. L. 98-369 applicable to
taxable years beginning after Dec. 31, 1983, and to carrybacks from
such years, see section 475(a) of Pub. L. 98-369, set out as a note
under section 21 of this title.
Section 722(c) of Pub. L. 98-369 provided that the amendment made
by that section is effective for taxable years beginning after Dec.
31, 1981.
EFFECTIVE DATE OF 1981 AMENDMENT
Section 128(b) of Pub. L. 97-34 provided that: ''The amendments
made by this section (amending this section) shall apply to taxable
years beginning after December 31, 1981.''
EFFECTIVE DATE OF 1978 AMENDMENT
Amendment by section 301(b)(6) of Pub. L. 95-600 applicable to
taxable years beginning after Dec. 31, 1978, see section 301(c) of
Pub. L. 95-600, set out as a note under section 11 of this title.
EFFECTIVE DATE OF 1978 AMENDMENT; ELECTION CAMPAIGN CONTRIBUTIONS;
COLLATERAL
Section 302(b) of Pub. L. 95-502, as amended by Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
''(1) The amendment made by subsection (a) (amending this
section) shall apply to taxable years beginning after December 31,
1974, except that notwithstanding any other provision of law to the
contrary, no amounts held at the date of enactment of this bill
(Oct. 21, 1978) by an organization described in section 527(e)(1)
of the Internal Revenue Code of 1986 (formerly I.R.C. 1954) in
escrow, in separate accounts for the payment of Federal taxes, or
in any other fund which are proceeds described in section
527(c)(3)(D) of such Code may be used, directly or indirectly, to
make a contribution or expenditure (as defined in section 301(e)
and (f) of the Federal Election Campaign Act of 1971; 2 U.S.C.
431(f)) in connection with any election held before January 1,
1979.
''(2) Such amounts as described in (1) above shall not be
considered as security or collateral for any loan by any State or
national bank or any other person or organization.''
EFFECTIVE DATE OF 1976 AMENDMENT
Amendment by Pub. L. 94-455 applicable with respect to taxable
years beginning after Dec. 31, 1976, see section 1901(d) of Pub. L.
94-455, set out as a note under section 2 of this title.
EFFECTIVE DATE
Section 10(e) of Pub. L. 93-625 provided that: ''The amendments
made by subsections (a), (b), (c), and (d) (enacting this section
and amending sections 501 and 6012 of this title) shall apply to
taxable years beginning after December 31, 1974.''
References
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 84, 2501, 6012, 6033,
6104, 6113, 6652, 6711 of this title.
