§4955 Taxes on Political Expenditures of Section 501(c)(3) Organizations

Summary

A 10% tax must be paid by any 501(c)(3) organization for each political expenditure it makes. If an organization manager agrees to a known political expenditure, that manager must pay a 2½% tax on the amount unless the agreement was not willful and was for a reasonable cause. If the 10% tax is charged and the group does not fix the problem within the taxable period, the organization must pay an extra tax equal to 100% of the expenditure. If a manager refused to agree to all or part of the fix, that manager must pay an extra tax equal to 50% of the expenditure. Multiple managers can be held together for these manager taxes. The manager tax under the first rule cannot be more than $5,000 for any one expenditure, and the extra manager tax cannot be more than $10,000 for any one expenditure. A political expenditure means money a 501(c)(3) spends to take part in or try to influence a campaign for or against a candidate, including making or sharing campaign statements. For groups set up mainly to promote a candidate or run by a candidate, it also covers payments for that person’s speeches, travel, polls or studies, ads, fundraising, or other expenses that mainly boost that person. An organization manager is an officer, director, trustee, similar leader, or an employee who had authority over the spending. To “correct” a political expenditure means trying to recover money, putting in safeguards, or taking other steps the IRS requires. The taxable period runs from the date of the spending to the earlier of a mailed notice of deficiency under section 6212 or the date the 10% tax is assessed. If a tax under these rules is paid, that spending is not treated as a taxable expenditure under section 4945 or as an excess benefit under section 4958.