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Title 26 — Internal Revenue CodeRelease 119-73not60

§504 Status After Organization Ceases to Qualify for Exemption Under Section 501(c)(3) Because of Substantial Lobbying or Because of Political Activities

Title 26 › Subtitle Subtitle A— Income Taxes › Chapter 1— NORMAL TAXES AND SURTAXES › Subchapter F— Exempt Organizations › Part I— GENERAL RULE › § 504

Last updated Apr 5, 2026|Official source

Summary

If a group that used to be tax-exempt under 501(c)(3) loses that status because it tried to influence laws a lot or took part in political campaigns, the IRS must make rules to stop people from getting around that loss. Those rules can stop the group from simply moving money or property to other organizations run by the same people. The rule does not apply if the group was a "disqualified organization" under 501(h)(5) (for example, churches and similar groups) in the year before it first lost 501(c)(3) status.

Full Legal Text

Title 26, §504

Internal Revenue Code — Source: USLM XML via OLRC

(a)An organization which—
(1)was exempt (or was determined by the Secretary to be exempt) from taxation under section 501(a) by reason of being an organization described in section 501(c)(3), and
(2)is not an organization described in section 501(c)(3)—
(A)by reason of carrying on propaganda, or otherwise attempting, to influence legislation, or
(B)by reason of participating in, or intervening in, any political campaign on behalf of (or in opposition to) any candidate for public office,
(b)The Secretary shall prescribe such regulations as may be necessary or appropriate to prevent the avoidance of subsection (a), including regulations relating to a direct or indirect transfer of all or part of the assets of an organization to an organization controlled (directly or indirectly) by the same person or persons who control the transferor organization.
(c)Subsection (a) shall not apply to any organization which is a disqualified organization within the meaning of section 501(h)(5) (relating to churches, etc.) for the taxable year immediately preceding the first taxable year for which such organization is described in paragraph (2) of subsection (a).

Legislative History

Notes & Related Subsidiaries

Editorial Notes

Prior Provisions

A prior section 504, acts Aug. 16, 1954, ch. 736, 68A Stat. 168; Oct. 22, 1968, Pub. L. 90–630, § 6(a), 82 Stat. 1330, related to denial of exemption, prior to repeal by Pub. L. 91–172, title I, § 101(j)(15), Dec. 30, 1969, 83 Stat. 527. For

Effective Date

of repeal, see section 101(k)(2)(B) of Pub. L. 91–172, set out as an

Effective Date

note under section 4940 of this title.

Amendments

1987—Pub. L. 100–203, § 10711(b)(2)(A), substituted “substantial lobbying or because of political activities” for “substantial lobbying” in section catchline. Subsec. (a)(2). Pub. L. 100–203, § 10711(b)(1), amended par. (2) generally. Prior to amendment, par. (2) read as follows: “is not an organization described in section 501(c)(3) by reason of carrying on propaganda, or otherwise attempting, to influence legislation,”.

Statutory Notes and Related Subsidiaries

Effective Date

of 1987 AmendmentAmendment by Pub. L. 100–203 applicable with respect to activities after Dec. 22, 1987, see section 10711(c) of Pub. L. 100–203, set out as a note under section 170 of this title.

Construction

of Amendment Pub. L. 94–455, title XIII, § 1307(a)(3), Oct. 4, 1976, 90 Stat. 1722, provided that: “It is the intent of Congress that enactment of this section [amending section 501 and enacting section 504 of this title] is not to be regarded in any way as an approval or disapproval of the decision of the Court of Appeals for the Tenth Circuit in Christian Echoes National Ministry, Inc. versus United States, 470 F.2d 849 (1972), or of the reasoning in any of the opinions leading to that decision.”

Reference

Citations & Metadata

Citation

26 U.S.C. § 504

Title 26 — Internal Revenue Code

Last Updated

Apr 5, 2026

Release point: 119-73not60