Understanding Political Campaigns: 527S Explained

Political campaigns are subject to taxation under IRC section 527. This includes campaign committees for candidates for federal, state, or local office, as well as political parties and political action committees. 527s, as they are commonly known, are political committees that are granted tax-exempt status under Section 527 of the Internal Revenue Code. While technically almost all political committees are 527s, the term is usually applied to organizations that are not regulated under state or federal campaign finance laws because they do not expressly advocate for or against a candidate. These organizations must register with the IRS, disclose their donors, and file periodic reports, but they face few financial restrictions and are not bound by spending limits.

Are political campaigns 527s?

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Political parties, campaign committees, and political action committees are all 527s

Political parties, campaign committees, and political action committees (PACs) are all 527s. A 527 organization is a political organization under IRC § 527 of the US tax code. This includes political parties, campaign committees for candidates for federal, state, or local office, and PACs. These organizations are subject to specific tax rules and may have filing requirements with the Internal Revenue Service (IRS).

Technically, almost all political committees are 527s, including state, local, and federal candidate committees, traditional PACs, Super PACs, and political parties. However, in common practice, the term "527" is often applied to organizations that are not regulated under state or federal campaign finance laws because they do not "expressly advocate" for or against a specific candidate or political party. These organizations are not bound by contribution or spending limits and can receive funds from any source. They must register with the IRS, publicly disclose their donors, and file periodic reports on their financial activities.

Examples of 527s include Swift Boat Veterans for Truth, The Media Fund, America Coming Together, the Progress for America Voter Fund, and the Secretary of State Project. The rise of 527s can be traced back to the Bipartisan Campaign Reform Act, which limited the ability of political parties to raise money. 527s gained prominence as they could accept unlimited contributions and spend heavily on political advertising. For instance, during the 2004 election, Swift Boat Veterans for Truth ran controversial ads criticizing the Democratic candidate, John Kerry, with funding from just three private individuals totaling $9.45 million.

It is important to distinguish 527s from Super PACs, which are independent expenditure-only committees that can also receive unlimited contributions. Unlike 527s, Super PACs are allowed to expressly advocate for or against a candidate. The distinction between these organizations has blurred over time, with court decisions like Speechnow.org v. Federal Election Commission and Citizens United impacting the landscape of political communication and the strategies employed by these groups.

527s are tax-exempt and must register with the IRS

527 organizations, or 527s, are political organizations that are tax-exempt under Section 527 of the Internal Revenue Code. They are formed to influence the selection, nomination, or election of candidates to public office. 527s include various political committees, such as state, local, and federal candidate committees, traditional political action committees (PACs), "Super PACs", and political parties.

While almost all political committees fall under the category of 527s, the term is typically used for organizations that are not regulated by state or federal campaign finance laws. This is because they do not "expressly advocate" for or against a specific candidate or party. There are no restrictions on contributions to 527s, and they are not subject to spending limits.

To maintain their tax-exempt status, 527s must register with the Internal Revenue Service (IRS) and comply with specific filing requirements. They are required to publicly disclose their donors and file periodic reports on contributions and expenditures, such as Form 8872, Form 990, and Form 1120-POL. Additionally, they must electronically file notice of their Section 527 status (Form 8871) to claim tax exemption.

It is important to note that 527s are prohibited from coordinating with any candidate's campaign. This independence allows them to raise money for issue advocacy and voter mobilization without being bound by the same restrictions as political campaigns. The lack of restrictions on contributions and spending, coupled with the tax-exempt status, makes 527s a powerful force in political fundraising and advertising.

527s can buy political ads but may need to file additional disclosures

527 organizations are non-profit political committees that are formed under Section 527 of the Internal Revenue Code, which grants them tax-exempt status. They are allowed to buy political ads, but there are some important considerations and potential additional disclosure requirements that apply.

Firstly, 527s must comply with certain regulations regarding the content of their advertisements. At the federal level, 527s cannot coordinate with or contribute directly to a federal candidate. They are also prohibited from expressly advocating for the election or defeat of a specific federal candidate. However, they can portray federal candidates in a way that implies their support or opposition. On the other hand, at the state level, 527s can give money directly to state and local candidates.

Secondly, the timing of the advertisements is crucial. The McCain-Feingold law, also known as the Bipartisan Campaign Reform Act, imposes restrictions on broadcast advertisements that are run within 60 days of a general election or 30 days of a primary election. If these advertisements mention a candidate, regardless of whether they contain "express advocacy", they fall under the purview of this law. Therefore, 527s must be cautious about the timing of their ad campaigns to avoid potential legal issues.

Additionally, 527s are required to comply with specific disclosure and reporting requirements. They must register with the Internal Revenue Service (IRS), publicly disclose their donors, and file periodic reports of contributions and expenditures. These reports, known as Form 8872, are filed with the IRS and provide detailed information about the organization's financial activities. By maintaining transparency in their funding and expenditures, 527s can ensure compliance with the applicable laws and regulations.

In conclusion, while 527s can buy political ads, they must navigate complex regulations regarding content, timing, and disclosures. By adhering to these requirements, 527s can effectively participate in the political process while remaining within the boundaries set by federal and state laws.

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527s can receive donations from any type of donor, including foreign contributions

527 organizations, or 527s, are political committees that include state, local, and federal candidate committees, traditional political action committees (PACs), "Super PACs", and political parties. These groups are the result of a loophole that was opened when the Internal Revenue Service (IRS) broadened its definition of the types of groups eligible for tax-exempt, non-profit status as political committees. The definition allowed these groups to gain political committee status under tax law while avoiding regulation under federal election law.

While 527s are required to register with the IRS and publicly disclose their donors, there are no upper limits on contributions to 527s, and they can receive donations from any type of donor, including foreign contributions. This means that there are no restrictions on who may contribute to these organizations, and there are no spending limits imposed on them. However, they are not allowed to "expressly advocate" for specific candidates or coordinate with any candidate's campaign. As a result, many 527s focus on issue advocacy and voter mobilization.

The heavy spending of some 527 groups to attack presidential candidates has brought complaints of illegal coordination between the groups and political rivals. Federal Election Commission (FEC) rulings after the 2004 election attempted to extend the reach of the law to advertisements that questioned a candidate's character and fitness for office, specifically off-limits to 527s. However, a Federal Appeals Court in Washington, D.C., ruled in 2009 that these groups have a First Amendment right to raise and spend freely to influence elections as long as they do not coordinate their activities with a candidate or a party.

While 527s can receive foreign contributions, it is important to note that corporations or unions are not allowed to give money directly to campaigns or coordinate their activities with campaigns. Instead, they may seek to influence the voting public through independent expenditure groups.

527s cannot coordinate with or contribute to federal candidates

527 organizations are political organizations identified by their tax filings with the Internal Revenue Service (IRS). They are non-profit organizations formed under Section 527 of the Internal Revenue Code, which grants tax-exempt status to political committees at the national, state, and local levels. While 527s can include a wide range of political committees, in common practice, the term is typically applied to organizations that are not regulated under state or federal campaign finance laws. This is because they do not "expressly advocate" for or against a specific candidate or political party. Due to this lack of explicit advocacy, 527s cannot coordinate with or contribute directly to federal candidates or their campaigns.

The distinction between 527s and other political committees lies in their level of involvement and advocacy in elections. While 527s actively influence elections and policy debates, they do not explicitly advocate for the election or defeat of candidates. This means that they cannot coordinate their activities with a candidate or political party. The Federal Election Commission (FEC) has ruled that 527s are independent organizations, and their activities must not align with those of a candidate or campaign. Any form of coordination between a 527 group and a federal candidate's campaign is prohibited under federal election law.

The lack of explicit advocacy and coordination with candidates allow 527s to operate in a legal grey area. They can raise and spend money without the restrictions imposed on traditional political committees. There are no limits on contributions to 527s, and they can accept funds from individuals, corporations, or labor unions. However, they must register with the IRS, publicly disclose their donors, and file periodic reports on their financial activities. These reports include details on contributions received and expenditures made by the 527s.

While 527s cannot contribute directly to federal candidates, they can establish federal political action committees (PACs) to raise funds for this purpose. These PACs, often referred to as "Super PACs," can expressly advocate for or against a candidate and make contributions to their campaigns. The distinction between 527s and Super PACs lies in their level of involvement with candidates and their regulatory status under campaign finance laws. Super PACs, while still needing to disclose finances to the FEC, can operate independently and spend unlimited amounts of money to influence elections.

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