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

Summary

You can’t claim a tax deduction for a bad debt or a worthless security if the money is owed by a political party. That rule applies to regular taxpayers but not to banks. “Political party” here means: a political party itself; a national, State, or local party committee; or any committee, group, or organization that takes contributions or spends money to try to influence elections. “Contributions” and “expenditures” each include money, gifts, loans, promises, or anything of value. If you use accrual accounting, the rule doesn’t apply to a genuine sale of goods or services if, in that year, more than 30 percent of your business’s receivables came from political parties and you made strong, 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.