
From the U.S. Code Online via GPO Access
[wais.access.gpo.gov]
[Laws in effect as of January 2, 2001]
[Document affected by Public Law 106-230 Section 1(a)]
[Document affected by Public Law 106-230 Section 2(a)]
[Document affected by Public Law 106-230 Section 1(d)]
[Document affected by Public Law 106-230 Section 2(d)]
[CITE: 26USC527]

 
                     TITLE 26--INTERNAL REVENUE CODE
 
                        Subtitle A--Income Taxes
 
                  CHAPTER 1--NORMAL TAXES AND SURTAXES
 
                   Subchapter F--Exempt Organizations
 
                    PART VI--POLITICAL ORGANIZATIONS
 
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.

(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, 
Secs. 1(a), 2(a), July 1, 2000, 114 Stat. 477, 479.)

                       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.


                               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.''

                  Section Referred to in Other Sections

    This section is referred to in sections 84, 2501, 6012, 6033, 6104, 
6113, 6652, 6711 of this title.
