§271 — Title 26 Internal Revenue Code | U.S. Code

Summary

A taxpayer, except for banks as defined in section 581, cannot take a tax deduction for a debt owed by a political party. In plain terms, you may not claim a bad-debt loss or a loss for worthless securities when the money is owed by a political party. The law says "political party" covers the party itself, its national, state, or local committees, and any group that accepts contributions or makes spending to influence elections. "Contributions" means gifts, loans, advances, deposits, or promises to give money or value. "Expenditures" means payments, loans, advances, deposits, gifts, or promises to spend money or value. If a taxpayer uses the accrual method of accounting, the rule does not apply to a debt that came from a real sale of goods or services in the normal business course, but only if in the taxable year when the receivable arose more than 30 percent of that year’s ordinary receivables were from political parties and the taxpayer made substantial, ongoing efforts to collect the debt.

Title 26, §271

Internal Revenue Code — Source: USLM XML via OLRC

(a)In the case of a taxpayer (other than a bank as defined in section 581) no deduction shall be allowed under section 166 (relating to bad debts) or under section 165(g) (relating to worthlessness of securities) by reason of the worthlessness of any debt owed by a political party.

(b)(1)For purposes of subsection (a), the term “political party” means—

(A)a political party;

(B)a national, State, or local committee of a political party; or

(C)a committee, association, or organization which accepts contributions or makes expenditures for the purpose of influencing or attempting to influence the election of presidential or vice-presidential electors or of any individual whose name is presented for election to any Federal, State, or local elective public office, whether or not such individual is elected.

(2)For purposes of paragraph (1)(C), the term “contributions” includes a gift, subscription, loan, advance, or deposit, of money, or anything of value, and includes a contract, promise, or agreement to make a contribution, whether or not legally enforceable.

(3)For purposes of paragraph (1)(C), the term “expenditures” includes a payment, distribution, loan, advance, deposit, or gift, of money, or anything of value, and includes a contract, promise, or agreement to make an expenditure, whether or not legally enforceable.

(c)In the case of a taxpayer who uses an accrual method of accounting, subsection (a) shall not apply to a debt which accrued as a receivable on a bona fide sale of goods or services in the ordinary course of the taxpayer’s trade or business if—

(1)for the taxable year in which such receivable accrued, more than 30 percent of all receivables which accrued in the ordinary course of the trades and businesses of the taxpayer were due from political parties, and

(2)the taxpayer made substantial continuing efforts to collect on the debt.

Notes & Related Subsidiaries

Editorial Notes

Amendments

1976—Subsec. (c). Pub. L. 94–455 added subsec. (c).

Statutory Notes and Related Subsidiaries

Effective Date

of 1976 Amendment Pub. L. 94–455, title XXI, § 2104(b), Oct. 4, 1976, 90 Stat. 1902, provided that: “The amendment made by subsection (a) [amending this section] shall apply to taxable years beginning after December 31, 1975.”

§271 Debts owed by political parties, etc.