Cases: Taxation With Representation of Washington v. Regan, 676 F.2d 715 (D.C. Cir. 1982)
Forms: Form 5768
Final rules 1
(a) Tax imposed
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(1) In general There is hereby imposed on the excess lobbying expenditures of any organization to which this section applies a tax equal to 25 percent of the amount of the excess lobbying expenditures for the taxable year.
(2) Organizations to which this section applies This section applies to any organization with respect to which an election under section 501(h) (relating to lobbying expenditures by public charities) is in effect for the taxable year.
(b) Excess lobbying expenditures For purposes of this section, the term “excess lobbying expenditures” means, for a taxable year, the greater of—
(1) the amount by which the lobbying expenditures made by the organization during the taxable year exceed the lobbying nontaxable amount for such organization for such taxable year, or
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(2) the amount by which the grass roots expenditures made by the organization during the taxable year exceed the grass roots nontaxable amount for such organization for such taxable year.
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(c) Definitions For purposes of this section—
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(1) Lobbying expenditures The term “lobbying expenditures” means expenditures for the purpose of influencing legislation (as defined in subsection (d)).
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(2) Lobbying nontaxable amount The lobbying nontaxable amount for any organization for any taxable year is the lesser of (A) $1,000,000 or (B) the amount determined under the following table: If the exempt purpose expenditures are—The lobbying nontaxable amount is— Not over $500,00020 percent of the exempt purpose expenditures. Over $500,000 but not over $1,000,000$100,000, plus 15 percent of the excess of the exempt purpose expenditures over $500,000. Over $1,000,000 but not over $1,500,000$175,000 plus 10 percent of the excess of the exempt purpose expenditures over $1,000,000. Over $1,500,000$225,000 plus 5 percent of the excess of the exempt purpose expenditures over $1,500,000.
Amended 1978
- 1978 Pub. L. 95-600 Pub. L. 95–600 substituted “exempt purpose expenditures” for “proposed expenditures” in heading of table.
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(3) Grass roots expenditures The term “grass roots expenditures” means expenditures for the purpose of influencing legislation (as defined in subsection (d) without regard to paragraph (1)(B) thereof).
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(4) Grass roots nontaxable amount The grass roots nontaxable amount for any organization for any taxable year is 25 percent of the lobbying nontaxable amount (determined under paragraph (2)) for such organization for such taxable year.
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(d) Influencing legislation
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(1) General rule Except as otherwise provided in paragraph (2), for purposes of this section, the term “influencing legislation” means—
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(A) any attempt to influence any legislation through an attempt to affect the opinions of the general public or any segment thereof, and
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(B) any attempt to influence any legislation through communication with any member or employee of a legislative body, or with any government official or employee who may participate in the formulation of the legislation.
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(2) Exceptions For purposes of this section, the term “influencing legislation”, with respect to an organization, does not include—
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(A) making available the results of nonpartisan analysis, study, or research;
(B) providing of technical advice or assistance (where such advice would otherwise constitute the influencing of legislation) to a governmental body or to a committee or other subdivision thereof in response to a written request by such body or subdivision, as the case may be;
(C) appearances before, or communications to, any legislative body with respect to a possible decision of such body which might affect the existence of the organization, its powers and duties, tax-exempt status, or the deduction of contributions to the organization;
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(D) communications between the organization and its bona fide members with respect to legislation or proposed legislation of direct interest to the organization and such members, other than communications described in paragraph (3); and
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(E) any communication with a governmental official or employee, other than—
(i) a communication with a member or employee of a legislative body (where such communication would otherwise constitute the influencing of legislation), or
(ii) a communication the principal purpose of which is to influence legislation.
(3) Communications with members
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(A) A communication between an organization and any bona fide member of such organization to directly encourage such member to communicate as provided in paragraph (1)(B) shall be treated as a communication described in paragraph (1)(B).
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(B) A communication between an organization and any bona fide member of such organization to directly encourage such member to urge persons other than members to communicate as provided in either subparagraph (A) or subparagraph (B) of paragraph (1) shall be treated as a communication described in paragraph (1)(A).
(e) Other definitions and special rules For purposes of this section—
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(1) Exempt purpose expenditures
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(A) In general The term “exempt purpose expenditures” means, with respect to any organization for any taxable year, the total of the amounts paid or incurred by such organization to accomplish purposes described in section 170(c)(2)(B) (relating to religious, charitable, educational, etc., purposes).
(B) Certain amounts included The term “exempt purpose expenditures” includes—
(i) administrative expenses paid or incurred for purposes described in section 170(c)(2)(B), and
(ii) amounts paid or incurred for the purpose of influencing legislation (whether or not for purposes described in section 170(c)(2)(B)).
(2) Legislation The term “legislation” includes action with respect to Acts, bills, resolutions, or similar items by the Congress, any State legislature, any local council, or similar governing body, or by the public in a referendum, initiative, constitutional amendment, or similar procedure.
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(3) Action The term “action” is limited to the introduction, amendment, enactment, defeat, or repeal of Acts, bills, resolutions, or similar items.
(4) Depreciation, etc., treated as expenditures In computing expenditures paid or incurred for the purpose of influencing legislation (within the meaning of subsection (b)(1) or (b)(2)) or exempt purpose expenditures (as defined in paragraph (1)), amounts properly chargeable to capital account shall not be taken into account. There shall be taken into account a reasonable allowance for exhaustion, wear and tear, obsolescence, or amortization. Such allowance shall be computed only on the basis of the straight-line method of depreciation. For purposes of this section, a determination of whether an amount is properly chargeable to capital account shall be made on the basis of the principles that apply under subtitle A to amounts which are paid or incurred in a trade or business.
(f) Affiliated organizations
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(1) In general Except as otherwise provided in paragraph (4), if for a taxable year two or more organizations described in section 501(c)(3) are members of an affiliated group of organizations as defined in paragraph (2), and an election under section 501(h) is effective for at least one such organization for such year, then—
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(A) the determination as to whether excess lobbying expenditures have been made and the determination as to whether the expenditure limits of section 501(h)(1) have been exceeded shall be made as though such affiliated group is one organization,
(B) if such group has excess lobbying expenditures, each such organization as to which an election under section 501(h) is effective for such year shall be treated as an organization which has excess lobbying expenditures in an amount which equals such organization’s proportionate share of such group’s excess lobbying expenditures,
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(C) if the expenditure limits of section 501(h)(1) are exceeded, each such organization as to which an election under section 501(h) is effective for such year shall be treated as an organization which is not described in section 501(c)(3) by reason of the application of 501(h), and
(D) subparagraphs (C) and (D) of subsection (d)(2), paragraph (3) or subsection (d), and clause (i) of subsection (e)(1)(C) shall be applied as if such affiliated group were one organization.
(2) Definition of affiliation For purposes of paragraph (1), two organizations are members of an affiliated group of organizations but only if—
(A) the governing instrument of one such organization requires it to be bound by decisions of the other organization on legislative issues, or
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(B) the governing board of one such organization includes persons who—
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(i) are specifically designated representatives of another such organization or are members of the governing board, officers, or paid executive staff members of such other organization, and
(ii) by aggregating their votes, have sufficient voting power to cause or prevent action on legislative issues by the first such organization.
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(3) Different taxable years If members of an affiliated group of organizations have different taxable years, their expenditures shall be computed for purposes of this section in a manner to be prescribed by regulations promulgated by the Secretary.
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(4) Limited control If two or more organizations are members of an affiliated group of organizations (as defined in paragraph (2) without regard to subparagraph (B) thereof), no two members of such affiliated group are affiliated (as defined in paragraph (2) without regard to subparagraph (A) thereof), and the governing instrument of no such organization requires it to be bound by decisions of any of the other such organizations on legislative issues other than as to action with respect to Acts, bills, resolutions, or similar items by the Congress, then—
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(A) in the case of any organization whose decisions bind one or more members of such affiliated group, directly or indirectly, the determination as to whether such organization has paid or incurred excess lobbying expenditures and the determination as to whether such organization has exceeded the expenditure limits of section 501(h)(1) shall be made as though such organization has paid or incurred those amounts paid or incurred by such members of such affiliated group to influence legislation with respect to Acts, bills, resolutions, or similar items by the Congress, and
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(B) in the case of any organization to which subparagraph (A) does not apply, but which is a member of such affiliated group, the determination as to whether such organization has paid or incurred excess lobbying expenditures and the determination as to whether such organization has exceeded the expenditure limits of section 501(h)(1) shall be made as though such organization is not a member of such affiliated group.