Malcolm Rivera
Political organizations, including political parties, campaign committees for candidates, and political action committees, are subject to taxation under IRC Section 527. These organizations are required to file periodic reports, such as Form 8872, and must disclose their contributions and expenditures. The tax calculation for a political organization is based on its taxable income, which includes certain types of income like contributions and membership dues. On the other hand, businesses and individuals cannot deduct political contributions or donations made to political campaigns or candidates from their tax returns. Certain activities, such as non-partisan voter education and encouragement of electoral participation, may be exempt from being considered prohibited political campaign activities.
Characteristics and Values of Political Campaigns as per the IRS
| Characteristics | Values |
|---|---|
| Type of Organization | Political parties, campaign committees for candidates for federal, state, or local office, and political action committees |
| Tax Requirements | Subject to tax under IRC Section 527; taxable income calculated by multiplying taxable income by the highest rate specified in §11(b) or using graduated rates if the organization is the principal campaign committee of a candidate for U.S. Congress |
| Filing Requirements | Must file Form 8871 (Political Organization Notice of Section 527 Status) and Form 8872 (Political Organization Report of Contributions and Expenditures) electronically; may also need to file Form 990 and Form 1120-POL (U.S. Income Tax Return for Certain Political Organizations) |
| EIN Requirement | Must have an Employer Identification Number (EIN), even if no employees are present |
| Reporting Periodicity | Required to file periodic reports on financial contributions and expenditures |
| Restrictions | Prohibited from participating or intervening in any political campaign on behalf of or in opposition to any candidate for elective public office; violation may result in denial or revocation of tax-exempt status |
| Exempt Function Income | Includes contributions, membership dues, fees, proceeds from political fundraising events or sale of campaign materials, and proceeds from conducting bingo games |
| Voter Education Activities | Allowed to conduct non-partisan voter education and registration activities, such as presenting public forums, publishing voter guides, voter registration drives, and get-out-the-vote drives |
| Legislative Activities | Treated differently from political activities and subject to different rules and consequences |
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What You'll Learn
- Political organizations are subject to tax under IRC Section 527
- Tax-exempt political organizations must file periodic reports
- Political campaign intervention is prohibited for 501(c)(3) tax-exempt organizations
- Voter registration and get-out-the-vote drives are allowed if conducted impartially
- Political organizations must file Form 8872 electronically
Political organizations are subject to tax under IRC Section 527
To file electronically, organizations need the username and password provided by the IRS after filing their initial notice (Form 8871). This form, the Political Organization Notice of Section 527 Status, must be completed before any other forms are submitted. Organizations must also have their own Employer Identification Number (EIN), even if they have no employees.
The term "contributions" is defined by section 271(b)(2), while "expenditures" are defined by section 271(b)(3). A "qualified state or local political organization" refers to an organization whose sole purpose is to influence the selection, nomination, or appointment of an individual to a state or local public office or organization.
Additionally, there are specific rules regarding tax exemption for political organizations. For instance, if a tax-exempt organization under section 501(c) spends any amount during the taxable year for an exempt function, that amount is subject to tax under subsection (b) as if it were political organization taxable income.
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Tax-exempt political organizations must file periodic reports
Political parties, campaign committees for candidates for federal, state, or local office, and political action committees are all political organizations subject to tax under IRC Section 527. These organizations are generally required to file periodic reports with the IRS.
The specific form required for these periodic reports is Form 8872, the Political Organization Report of Contributions and Expenditures. This form can be filed electronically using the organization's username and password, which is issued by the IRS upon the initial notice filing (Form 8871). It is important to note that Form 8872 does not allow organizations to enter foreign addresses for contributions and expenditures. As a temporary solution, organizations may need to enter foreign addresses manually by following a specific format.
To obtain an Employer Identification Number (EIN), which is mandatory even for organizations without employees, Form SS-4 (Application for Employer Identification Number) must be filed. Additionally, certain tax-exempt political organizations may be eligible for relief from penalties if they can establish that their failure to file Form 8872 was due to reasonable cause and not willful neglect, as outlined in Revenue Procedure 2007-27.
The IRS provides a Political Organization Filing and Disclosure Website, where organizations can electronically file, search for, and view submitted forms, including both paper and electronic filings. This website also offers links to download various forms, including Forms 8871, 8872, and 990, which are commonly required for political organizations.
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Political campaign intervention is prohibited for 501(c)(3) tax-exempt organizations
Political campaigns are a type of business organization that falls under the tax regulations outlined by the Internal Revenue Service (IRS). Specifically, they are considered political organizations under IRC Section 527 and are subject to specific tax and filing requirements.
Among the political organizations outlined in IRC Section 527 are political parties, campaign committees for candidates for federal, state, or local office, and political action committees. These organizations are required to file periodic reports, such as Form 8871 and Form 8872, electronically with the IRS.
Now, when it comes to 501(c)(3) tax-exempt organizations, the rules are different. These organizations are absolutely prohibited from directly or indirectly participating in or intervening in any political campaign on behalf of or in opposition to any candidate for elective public office. This prohibition includes contributions to political campaign funds or public statements of position made by the organization favoring or opposing any candidate. Violating this prohibition may result in the denial or revocation of tax-exempt status and the imposition of excise taxes.
However, certain activities are permitted for 501(c)(3) organizations. They can engage in nonpartisan voter registration, get-out-the-vote drives, and voter education activities. These activities must be conducted in a non-partisan manner without favoring or opposing any specific candidate. Additionally, they can engage in advocacy and lobbying activities, as long as these activities are not related to a specific political campaign and do not expend a substantial amount of the organization's resources.
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Voter registration and get-out-the-vote drives are allowed if conducted impartially
Political campaigns are considered political organizations under IRC § 527, and are therefore subject to taxation. This includes political parties, campaign committees for candidates for federal, state, or local office, and political action committees. These organizations are required to file periodic reports, such as Form 8872, with the IRS.
Voter registration and get-out-the-vote (GOTV) drives are allowed if conducted impartially. This means that corporations, labor organizations, trade associations, or incorporated membership organizations can conduct these drives as long as they do not urge their restricted class to register with a particular party or vote for a specific candidate. If the drive is nonpartisan, it will not be considered a contribution or expenditure. However, if the drive is partisan, it must not be coordinated with a candidate or party committee to avoid making a prohibited contribution.
Corporations and labor organizations can provide transportation to the place of registration or to the polls as part of their voter registration or GOTV drive. They can also establish phone banks to communicate with their restricted class, urging them to register or vote without specifying a particular candidate or party. When conducting these drives, it is important to ensure that registration information, voting assistance, and other services are offered regardless of the voter's political preference. Individuals conducting the drive must not be incentivized based on the number of individuals registered or transported who support a particular candidate or party.
To maintain impartiality, voter registration and GOTV drives directed at the general public by corporations or labor organizations must follow specific guidelines. These entities can expressly advocate for the election or defeat of a clearly identified candidate or the candidates of a particular party. However, they must comply with the requirements for independent expenditures, and the drives must not be coordinated with any candidate or political party. Furthermore, if the payments for express advocacy communications exceed $2,000 for any election, the organization must report these payments on Form 7.
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Political organizations must file Form 8872 electronically
Political organizations are subject to tax under IRC Section 527 and are required to file periodic reports with the IRS. These include political parties, campaign committees for candidates for federal, state, or local office, and political action committees.
Form 8872, Political Organization Report of Contributions and Expenditures, is one such periodic report that most tax-exempt political organizations must file. This form provides a comprehensive overview of a political organization's financial activities, including contributions received and funds expended.
Since January 1, 2020, the IRC Section 527(j) has mandated the electronic filing of Form 8872 for all political organizations. This means that political organizations must submit their Form 8872 online, rather than through traditional paper filings. This electronic filing requirement simplifies the reporting process, enhances data security, and facilitates faster processing times for the IRS.
To file Form 8872 electronically, political organizations must possess the username and password provided by the IRS upon their initial electronic filing of Form 8871, Political Organization Notice of Section 527 Status. This initial notice is crucial for establishing the organization's tax-exempt status under IRC Section 527. By using the provided login credentials, organizations can securely access the IRS website and submit their Form 8872 online.
It is important to note that Form 8872 has specific requirements regarding the disclosure of personal information. Organizations are reminded not to include Social Security numbers or any other unnecessary personal information in their filings. Additionally, when reporting contributions and expenditures, organizations should be aware that the Form 8872 online filing program does not currently accommodate foreign addresses. A temporary solution is provided, where organizations can enter the foreign address in a specific format, using Address Line 1 for the street address and combining the state/ZIP Code as "DC" and "20000" to indicate a foreign address.
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Frequently asked questions
Political parties, campaign committees for candidates for federal, state, or local office, and political action committees are all considered political organizations under IRC § 527 and are subject to taxation.
Political organizations are required to file Form 8871 (Political Organization Notice of Section 527 Status) and Form 8872 (Political Organization Report of Contributions and Expenditures) with the IRS. They must also have an employer identification number (EIN) and may need to file Form 1120-POL for taxable income.
Taxable income for a political organization includes gross income excluding exempt function income, such as contributions, membership dues, and proceeds from political fundraising events or the sale of campaign materials.
Yes, under the Internal Revenue Code, Section 501(c)(3) organizations are prohibited from participating or intervening in any political campaign on behalf of or in opposition to any candidate for elective public office. Violating this prohibition may result in the loss of tax-exempt status and the imposition of excise taxes.
Yes, certain political organizations can be tax-exempt, but they are still required to file periodic reports with the IRS and may need to disclose their taxable income.
