§ 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
(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—
(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—
(3)
Exempt function income
For purposes of this subsection, the term “exempt function income” means any amount received as—
(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
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).
(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,
(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).
(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—
(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
(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—
(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.
(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—
(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
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—
(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,
(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
(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.
(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
(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,
(6)
Election
For purposes of this subsection, the term “election” means—
(B)
a convention or caucus of a political party which has authority to nominate a candidate for Federal office,
(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.
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
on a showing that such failure was due to reasonable cause and not due to willful neglect.