Top individual contributors to 527 committees:
Who is funding the opposition? How much are they contributing?
What is a 527 committee?
As you will read, a 527 committee need not be a political action committee. USA Public Affairs Committee is not a political action committee.
527 committees fall under a section of the Internal Revenue Code governing organizations that primarily attempt to influence election campaigns. Originally, the section applied to political committees (such as candidate or party committees) that contributed to, or otherwise directly supported or opposed candidates. In the case of federal elections, such committees are subject to federal election law limits on amounts and sources of contributions.
The newer '527s' do not (1) use words that expressly advocate someone's election or defeat, and/or (2) directly subsidize federal campaigns themselves. Therefore, lawyers have successfully argued to the Federal Election Commission, they are exempt from the restrictions of federal campaign law and allowed to collect soft money which is unlimited donations from corporations, unions and wealthy individuals.
There are basically two kinds of 527s active in federal politics: those that exist to promote specific politicians and those that exist to promote certain ideas, interests and partisan orientations in election campaigns. USApac is the second type.
A political organization subject to 527 is 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. The exempt function of a political organization is influencing or attempting to influence the selection, nomination, election or appointment of an individual to a federal, state, or local public office or office in a political organization.
What structure is required?
A political organization does not need to be formally chartered or established as a corporation, trust, or association; a separate bank account in which political campaign funds are deposited and disbursed only for political campaign expenses can qualify as a political organization. Thus, an organization may maintain a separate bank account used solely for exempt political activities and the account itself could qualify as a Section 527 political organization.
The IRS filing rules changed in 2002, as summarized in IRS News Release 2002-123.
What filings are required?
Section 527 organizations are generally required to file one or more of the following:
- An initial notice
- Periodic reports on contributions and expenditures
- Annual income tax returns and
- Annual information returns
- A political organization must have its own employer identification number (EIN).
Additionally, many political organizations must electronically file their periodic reports. In order to electronically file these reports, an organization needs the username and password issued to it after
filing its initial notice.
The initial notice:
To notify the IRS, the organization must file Form 8871, Political Organization Notice of Section 527 Status.
After electronically submitting Form 8871, the political organization must print, sign, date, and send Form 8453-X, Political Organization Declaration for Electronic Filing of Notice of Section 527 Status, to Internal Revenue Service, Ogden, UT 84201.
Upon receipt of the Form 8453-X, the IRS will send the organization a username and password that must be used to file an amended or final Form 8871 or to electronically file Form 8872.
There are certain exceptions, where Form 8871 is not required, including any organization reasonably anticipating that it will always have less than $25,000 for any taxable year.
Periodic Reports:
An organization must electronically file Form 8872 if it has, or expects to have, contributions or expenditures exceeding $50,000 for the calendar year. To file electronically, the organization must have
the username and password it received from the IRS after filing its Form 8871. An organization that does not meet the above threshold may file the Form 8872 either electronically or on paper.
Form 8872:
Instructions for Form 8872:
Form 8872 Filing Dates:
Annual Income Tax Returns:
Political organizations with taxable income after taking the $100 specific deduction must file Form 1120-
POL.
Annual Information Returns:
Tax-exempt political organizations with gross receipts of $25,000 or more for taxable years beginning after June 30, 2000, are required to file Form 990. Certain small political organizations may file Form
990-EZ instead. See the Form 990 Instructions for more information. Political organizations that receive contributions of $5,000 or more from any one contributor will be required to include Form 990 Schedule
B with their return. Qualified state and local political organizations are only required to file Form 990 if they have gross receipts of $100,000 or more for taxable years beginning after June 30, 2000.
A tax-exempt political organization is not required to file Form 990 if it is (1) not required to file Form 8871 (including an organization required to file as a political committee with the FEC) or (2) a caucus or association of state or local officials.
FAQs regarding the Annual Form Filing Requirements:
Fact Sheet 2002-13:
Revenue Ruling 2003-49:
Federal Election Commission:
The organization may also need to file with the Federal Election Commission. Currently, the FEC requires a 527 group to file regular disclosure reports if it is a political party or political action committee (PAC) that engages in either activities expressly advocating the election or defeat of a federal candidate, or in electioneering communications. Otherwise, it must file either with the government of the state in which it is located or the Internal Revenue Service. Many 527s run by special interest groups raise unlimited "soft money," which they use for voter mobilization and certain types of issue advocacy, but not for efforts that expressly advocate the election or defeat of a federal candidate or amount to electioneering communications.
Solicitation Notice:
Section 6113 of the Internal Revenue Code provides that certain tax-exempt organizations that are not eligible to receive tax deductible charitable contributions must disclose in "an express statement (in a conspicuous and easily recognizable format)" that contributions to the organization are not deductible for federal income tax purposes as charitable contributions. This provision applies to organizations that are not eligible to receive deductible charitable contributions and are described in either section 501(c),
section 501(d), or section 527. The Service issued Notice 88-120 to provide safe harbors for meeting the requirements of section 6113.
The law in this area is subject to change. Revisions are proposed regularly.
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