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Unlike other categories of tax-exempt organizations, political organizations classified under section 527 are permitted to engage in substantial candidate-related campaign activity. A section 527 political organization is a party, committee, association, fund, or other entity whose primary purpose is raising and spending money in an effort to influence elections. Such organizations also seek to influence appointments to public office. In general, the money a political organization raises for these purposes is not taxable.
An organization seeking section 527 classification must file Form 8871, “Political Organization Notice of Section 527 Status,” with the IRS. Unless it qualifies for an exception, a political organization periodically must file reports with the IRS. Form 8872, “Political Organization Report of Contributions and Expenditures,” must be filed if the organization has, or expects to have, contributions or expenditures above $50,000 during the calendar year.
Also, political organizations with taxable income are required to file Form 1120-POL, “U.S. Income Tax Return for Certain Political Organizations,” and organizations with gross receipts of $25,000 or above must file Form 990, “Return of Organization Exempt From Income Tax.”
Tax Analysts has subject matter experts available to discuss controversies regarding nonprofit status for political groups, and cases addressing the interplay between political organizations and the Internal Revenue Code. To schedule an interview or a background session, please contact us at firstname.lastname@example.org or 1-800-955-2444.