PRIA, Government Policy, Made Personal

Summary

You cannot take a tax deduction for a bad debt or a worthless security if the debt is owed by a political party. Political party — a party itself, its national/state/local committees, or any committee or group that accepts contributions or makes expenditures to try to influence elections. Contributions — money or anything of value, including loans or promises to give. Expenditures — payments or transfers, including loans or promises to spend. Exception: If you use the accrual method of accounting, the rule does not apply to a debt that came from a real sale of goods or services in your normal business, but only if more than 30 percent of that year’s receivables were from political parties and you made substantial, ongoing efforts to collect the debt.

Title 26, §271

Internal Revenue Code, Source: USLM XML via OLRC

(a)General rule

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)Definitions

(1)Political party

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)Contributions

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)Expenditures

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)Exception

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.