Malcolm Rivera
Political campaigns are subject to tax under IRC section 527, which includes campaign committees for candidates for federal, state, or local office. These political organizations are required to file periodic reports on Form 8872 with the IRS, detailing contributions and expenditures. Taxable income for political organizations includes various sources, such as contributions, membership dues, and proceeds from fundraising events or sales of campaign materials. While charitable donations are typically tax-deductible, donations made to political campaigns or candidates are not. This applies to both monetary and time contributions, with no tax breaks for citizens who support political campaigns.
| Characteristics | Values |
|---|---|
| Political organizations subject to tax | IRC section 527 |
| Requirements | Must have an employer identification number (EIN) |
| Must file Form SS-4, Application for Employer Identification Number | |
| Must file periodic reports electronically | |
| Must file Form 8872, Political Organization Report of Contributions & Expenditures | |
| Must file Form 8871 | |
| Taxable income | Income set aside for exempt functions, such as contributions or membership dues |
| Investment income or income from trade or business | |
| Gross income excluding exempt function income and allowed deductions |
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What You'll Learn
Donations to political campaigns are not tax-deductible
Political campaigns are subject to tax under IRC section 527. However, donations made to political campaigns are not tax-deductible. This includes donations to political organisations, political candidates, political parties, campaign committees, newsletters, and even admission to dinners or programs that benefit a political party or candidate.
Businesses cannot deduct political contributions on their tax returns. These donations include in-kind donations and advertisements in political convention bulletins. Donations of time or effort to a political campaign, political candidate, political action committee (PAC), or any group that seeks to influence legislation are also not tax-deductible expenses.
It is important to distinguish between political contributions and charitable donations. Charitable donations typically refer to gifts made to organisations that qualify under Section 501(c)(3) of the Internal Revenue Code, and many of these donations are tax-deductible. To be sure, the IRS provides a Tax-Exempt Organisation Search Tool that can be used to check if an organisation qualifies as a charitable organisation.
While political contributions are not tax-deductible, they are still subject to certain regulations and reporting requirements. The Federal Election Commission (FEC), for example, limits how much individuals can contribute to federal candidates and political committees. For the 2024 election cycle, the donation limit to a candidate is $3,300 per election, per candidate.
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Political organisations are taxed on their taxable income
The taxable income of a political organisation includes its gross income, excluding any exempt function income, and less any allowable deductions. Exempt function income refers to specific types of income that the organisation sets aside for its exempt function. This can include contributions of money or property, membership dues or fees, proceeds from political fundraising events or sales of campaign materials outside of regular business, and proceeds from conducting certain bingo games.
For example, if a political organisation receives a donation of $1000, which is considered exempt function income, and has allowable deductions of $200, its taxable income would be $800. The tax on this income would then be calculated using the appropriate tax rates specified in §11(b) of the tax code.
It is important to note that political organisations must also comply with specific filing requirements, such as obtaining an employer identification number (EIN) and electronically filing periodic reports, including Form 8872, with the IRS. These requirements ensure compliance with tax laws and maintain transparency in the financial activities of political organisations.
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Donations to political candidates are not tax-deductible
Political campaigns are subject to tax under IRC section 527. While charitable donations are generally tax-deductible, any donations made to political organizations or candidates are not. This includes donations to a political party, campaign committee, or newsletter, as well as admission to dinners or programs that benefit a political party or candidate.
The IRS provides a Tax-Exempt Organization Search Tool to help determine if an organization qualifies as tax-exempt. Typically, deductible charitable contributions are made to organizations that are tax-exempt under §501(c)(3) of the Internal Revenue Code. These organizations are specifically barred from attempting to influence legislation or participating in any political campaigns.
It is important to note that political contribution limits are enforced primarily by the Federal Election Commission, not the IRS. While political contributions are not tax-deductible, many citizens still choose to donate money, time, and effort to support political campaigns and candidates.
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Political organisations must file Form 8872
Political organizations are subject to tax under IRC Section 527. These organizations are generally required to file Form 8872, a Political Organization Report of Contributions and Expenditures. This form is used to report certain contributions received and expenditures made, unless an exception applies.
Form 8872 must be filed with the IRS and is required under IRC Section 527. Organizations must file within 30 days of receiving $25,000, and they can choose to file on a monthly, quarterly, or semi-annual basis. However, they must maintain the same basis for the entire calendar year. It's important to note that the timing of the reports is based on federal elections, and the requirement to file is based on accepting contributions or making expenditures for an exempt function under Section 527(e)(2).
The Form 8872 online filing program has certain limitations, such as not allowing organizations to enter foreign addresses for contributions and expenditures. As a temporary solution, organizations can enter the foreign address in a specific format, with the country entered in the "City" field and "DC" along with the ZIP code "20000" to indicate a foreign address.
It's worth mentioning that not all political organizations are required to file periodic reports on Form 8872. Section 527(j)(5) provides exceptions for certain organizations, including committees of state or local candidates, who are not required to have formal organizational documents.
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Political organisations need an EIN
Political organisations are subject to tax under Internal Revenue Code (IRC) section 527. These organisations are required to file periodic reports and returns. To do so, they must obtain an Employer Identification Number (EIN).
An EIN is a unique, nine-digit number that the IRS assigns to businesses for tax filing and reporting purposes. It is used to identify taxpayers who are required to file various business tax returns. An organisation must have an EIN even if it does not have any employees. To obtain an EIN, an organisation must file Form SS-4, Application for Employer Identification Number. This can be done online.
Many political organisations must file their periodic reports electronically. To do so, they will need the username and password issued to them after filing their initial notice. If this username and password are forgotten, TE/GE Customer Account Services can be contacted to request a replacement.
It is important to note that there are different rules and requirements for tax-exempt political organisations when it comes to obtaining an EIN.
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Frequently asked questions
Yes, political campaigns are subject to tax under IRC section 527.
IRC section 527 outlines the tax requirements for political organizations, which include political parties, campaign committees for candidates for federal, state, or local office, and political action committees.
Political campaigns may need to file Form 8871, Form 8872, and Form 1120-POL. Form 8871 is an initial notice, Form 8872 is a periodic report on contributions and expenditures, and Form 1120-POL is the U.S. Income Tax Return for Certain Political Organizations.
