Frequently Asked Questions
Who is eligible for the Political Organization Exempt Function Income?
Requires the organization to be organized primarily for influencing elections and to provide electronic notice to the Secretary (Form 8871).
How does the Political Organization Exempt Function Income work?
Excludes contributions, membership dues, and political fundraising proceeds from the gross income of a political organization if used for exempt functions.
What law authorizes the Political Organization Exempt Function Income?
The Political Organization Exempt Function Income is authorized under IRC §527 of the Internal Revenue Code (Title 26, United States Code).
Statutory Text — IRC §527
Source: Internal Revenue Code, Title 26, United States Code
§ 527. Political organizations(a) General ruleA political organization shall be subject to taxation under this subtitle only to the extent provided in this section. A political organization shall be considered an organization exempt from income taxes for the purpose of any law which refers to organizations exempt from income taxes.
(b) Tax imposedA tax is hereby imposed for each taxable year on the political organization taxable income of every political organization. Such tax shall be computed by multiplying the political organization taxable income by the highest rate of tax specified in section 11(b).
(c) Political organization taxable income defined(1) Taxable income definedFor purposes of this section, the political organization taxable income of any organization for any taxable year is an amount equal to the excess (if any) of—(A) the gross income for the taxable year (excluding any exempt function income), over
(B) the deductions allowed by this chapter which are directly connected with the production of the gross income (excluding exempt function income), computed with the modifications provided in paragraph (2).
(2) ModificationsFor purposes of this subsection—(A) there shall be allowed a specific deduction of $100,
(B) no net operating loss deduction shall be allowed under section 172, and
(C) no deduction shall be allowed under part VIII of subchapter B (relating to special deductions for corporations).
(3) Exempt function incomeFor purposes of this subsection, the term “exempt function income” means any amount received as—(A) a contribution of money or other property,
(B) membership dues, a membership fee or assessment from a member of the political organization,
(C) proceeds from a political fundraising or entertainment event, or proceeds from the sale of political campaign materials, which are not received in the ordinary course of any trade or business, or
(D) proceeds from the conducting of any bingo game (as defined in section 513(f)(2)),
to the extent such amount is segregated for use only for the exempt function of the political organization.
(d) Certain uses not treated as income to candidateFor purposes of this title, if any political organization—(1) contributes any amount to or for the use of any political organization which is treated as exempt from tax under subsection (a) of this section,
(2) contributes any amount to or for the use of any organization described in paragraph (1) or (2) of section 509(a) which is exempt from tax under section 501(a), or
(3) deposits any amount in the general fund of the Treasury or in the general fund of any State or local government,
such amount shall be treated as an amount not diverted for the personal use of the candidate or any other person. No deduction shall be allowed under this title for the contribution or deposit of any amount described in the preceding sentence.
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