| A political organization subject to Section 527 of the Internal Revenue Code (usually called a 527 organization) is a party, committee, association, fund, or any other type of organization run primarily to directly or indirectly to accept contributions and/or make expenditures for an exempt function. The exempt function of a political organization is influencing or attempting to influence the nomination, election, or any other type of selection of an individual to any public office or to an office in a political organization.
In order to qualify for tax-exempt status, the political organization must be organized for the primary purpose of carrying on exempt function activities. The organization is permitted to engage in other non-exempt function activities, but these may not be the primary activities.
Exempt function income of a political organization is income set aside for use in its exempt function. The income must be received as one of the following: contribution money or property; membership dues, fees, or assessments; proceeds from political fundraising; or proceeds from conducting bingo games. Any income other than exempt function income is subject to federal income tax.
Under the Internal Revenue Code, certain political organizations must periodically file public disclosure reports with the Internal Revenue Service rather than with the Federal Election Commission. The mandatory filing includes data about the support and operations of 527 organizations so that this information is available to the public before elections are held. The filings are available to the public on the IRS web site.
The IRS is attempting to improve reporting and disclosure by 527 organizations as part of its renewed emphasis on enforcement of the tax laws. It will begin by contacting a cross-section of these political groups concerning incomplete, late, or amended filings that were materially different from the original filings prior to future filing deadlines. Any 527 organization that is not in compliance with the law without reasonable cause is required to pay 35 percent of the total amount of the contributions and expenditures to which a failure relates. Copyright 2010 LexisNexis, a division of Reed Elsevier Inc. |