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Home / About this Project / Tax and legal terms

Tax and legal terms

Posted on 08-19-2004 1:14 PM EDT

501(c)(3). Section of the IRS tax code reserved for organizations operated exclusively for religious, charitable, scientific and educational purposes, also known broadly as charities. These groups have tax-exempt status and may receive tax-deductible contributions. They may not devote a substantial amount of their activities to lobbying, which the IRS defines as attempts to influence legislation. These groups are also prohibited from intervening in political campaigns to support or oppose candidates. Section 501(c)(3) groups must make their annual tax forms available to the public but are not required to disclose contributors’ names.

  501(c)(4). Section of the IRS tax code reserved for civic leagues and other organizations operated exclusively for the promotion of social welfare. These groups have tax-exempt status but may not receive tax-deductible contributions. They may engage in unlimited amounts of lobbying activity, which the IRS defines as attempts to influence legislation, but they may not be primarily engaged in efforts to affect the outcomes of elections. Those groups that attempt to influence elections are required to pay taxes on their election-oriented expenditures or their organization’s overall investment income for the year, whichever is less. Section 501(c)(4) groups must make their annual tax forms available to the public but are not required to disclose contributors’ names.

501(c)(5). Section of the IRS tax code reserved for labor, agricultural or horticultural organizations. These groups have tax-exempt status but may not receive tax-deductible contributions. They may engage in unlimited amounts of lobbying activity, which the IRS defines as attempts to influence legislation, but they may not be primarily engaged in efforts to affect the outcomes of elections. Those groups that attempt to influence elections are required to pay taxes on their election-oriented expenditures or their organization’s overall investment income for the year, whichever is less. Section 501(c)(5) groups must make their annual tax forms available to the public but are not required to disclose contributors’ names.

501(c)(6). Section of the IRS tax code reserved for business leagues. These groups have tax-exempt status. Members of business leagues may categorize their dues as tax deductible business expenses, but not the portion of dues that the business league uses for lobbying and political purposes. Section 501(c)(6) groups may engage in unlimited amounts of lobbying activity, which the IRS defines as attempts to influence legislation, but they may not be primarily engaged in efforts to affect the outcomes of elections. Those groups that attempt to influence elections are required to pay tax on their election-oriented expenditures or their organization’s overall investment income for the year, whichever is less. Section 501(c)(6) groups must make their annual tax forms available to the public but are not required to disclose contributors’ names.

527. Section of the IRS tax code reserved for political organizations, encompassing parties, committees and other organizations that exist primarily for the purpose of influencing the outcomes of elections. Organizations that file under Section 527 must report their contributions and expenditures to the IRS, which posts the data on its Web site.

Bipartisan Campaign Reform Act of 2002 (BCRA). Also known as the McCain-Feingold law. It amended the Federal Election Campaign Act (FECA) by banning large, unrestricted contributions known as “soft money” to political parties and prohibiting independent organizations from spending money from corporations or unions for “electioneering communications” within 30 days of a primary election and 60 days of a general election. BCRA was ratified by Congress and signed into law in March 2002, took effect on Nov. 6, 2002, and was upheld by the U.S. Supreme Court on Dec. 10, 2003.

Electioneering communication. Official term for a broadcast message that refers to a federal candidate, is publicly aired within 60 days of a general election or 30 days of a primary or convention, and is targeted to voters in the candidate's district. BCRA banned groups from using money from unions or corporations to pay for electioneering communications, though such ads may be paid financed with contributions from individuals, which are not limited. Independent organizations are required to report itemized contributions and expenditures for such communications to the Federal Election Commission within 24 hours.

Express advocacy.  Communications or other actions that overtly promote the election or defeat of a candidate. The term derives from a 1976 Supreme Court opinion in Buckley v. Valeo, which upheld portions of a law imposing limits on campaign contributions. In Buckley, the court defined ads subject to federal regulation as those that “in express terms advocate the election or defeat of a clearly identified candidate for federal office." A footnote furnished such examples of express advocacy as “vote for,” “elect,” “support," and “cast your ballot for.”

Hard money. Informal term referring to contributions to political campaigns, committees and parties that are regulated by federal election law, limited in scope, and subject to public disclosure. Individuals are permitted to contribute a maximum of $2,000 to a federal candidate per election, $5,000 to a political action committee per year, and up to $25,000 to a national political party per year. Additionally, individuals are limited to $95,000 in contributions every two years ­-­- $37,500 to candidates and $57,500 to national parties and federal PACs.

Independent expenditure. An expenditure for communications expressly advocating the election or defeat of a candidate that is not made in cooperation with a candidate or political party. Such expenditures generally must be made with federally regulated “hard money” and itemized contributors and expenditures for such communications must be reported to the Federal Election Commission.

Political action committee (PAC). A federally regulated organization that is free to make campaign contributions and engage in express advocacy for the election or defeat of political candidates. Contributions to PACs must come in the form of “hard money,” subject to federal contribution limits and disclosure requirements.

Political expenditure. IRS term for money spent to influence the selection, nomination, election, or appointment of anyone to a federal, state or local public office, or office in a political organization, or as presidential or vice presidential electors.

Qualified non-profit corporation (QNC). An ideological 501(c)(4) group that is exempt from the prohibition against corporations making express advocacy communications in federal elections by a decision of the U.S. Supreme Court. Qualified non-profit corporations are permitted to accept unlimited contributions from individuals and spend that money for express advocacy communications, as well as for electioneering communications. QNCs may not accept money from corporations or unions, have substantial business income, nor have electioneering as their major purpose. The groups are required to disclose expenditures to the Federal Election Commission (FEC) but are generally not required to disclose contributions, unless the contributions are specifically earmarked for the electioneering activity. These groups are also known as Massachusetts Citizens for Life groups (or MCFLs), referring to the pro-life group that successfully challenged the law banning corporations from making express advocacy communications in federal elections.

Soft money. Informal term that refers to campaign funds derived directly from corporate or union treasuries or wealthy individuals in excess of the hard money contribution limits of the Federal Election Campaign Act (FECA).

 

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