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

Summary

Taxes apply when a section 501(c)(3) charity takes part in a political campaign for or against a candidate. The charity must pay a tax equal to 10 percent of each political spending. Any officer, director, trustee, or employee who agrees to a known political spending must pay 2½ percent of that amount, unless they did not willfully agree and had a reasonable cause. If the charity does not fix the problem during the “taxable period,” the charity must pay an extra tax equal to 100 percent of the spending. If a manager refused to agree to part or all of the fix, that manager must pay an extra tax equal to 50 percent of the spending. If more than one manager is liable, each can be held fully responsible. The manager tax for one spending cannot exceed $5,000 at first and $10,000 for the extra tax. “Political spending” means any participation or intervention in a political campaign, including published statements. It also covers certain payments by an organization mainly set up to promote a candidate, such as fees for speeches, travel, polls or advertising, and other expenses that mainly boost the candidate’s recognition. If this tax is charged, the same payment won’t be treated as a taxable expenditure under section 4945 or an excess benefit under section 4958. Other terms: “section 501(c)(3) organization” means a group that would qualify under that rule; “organization manager” means the people named above or employees in charge of the spending; “correction” means getting back money or fixing procedures; “taxable period” runs from the date of the spending until the IRS mails a deficiency notice or the tax is assessed, whichever comes first.