IRS To Scrutinize Tax-Exempt Political Groups

by Leroy Baker, Tax-News.com, New York

23 August 2004

The Internal Revenue Service on Thursday announced new steps to improve reporting and disclosure by tax-exempt ‘section 527’ political groups.

The new initiative will involve contacting section 527 political groups whose filings appear to be incomplete, were filed late, or were amended and are materially different from the original filing.

The initiative’s launch is timed in advance of key upcoming filing dates so that correct information is available to the public as intended by Congress.

“This effort will help improve the completeness and accuracy of these important public disclosures,” observed Steven T. Miller, Commissioner of the IRS Tax-Exempt and Government Entities Division, adding that: “Our job is to ensure compliance with the law.”

Under section 527 of the Internal Revenue Code, as modified in June of 2000 and November 2002, certain political groups must periodically file public disclosure reports with the IRS, rather than the Federal Election Commission.

The statute requires these organizations to report their contributions and disbursements so that their support and operations are in the public domain in advance of elections.

The IRS has identified concerns about dozens of filings from groups representing a wide variety of political and policy interests.

Martha Sullivan, IRS Director of Exempt Organizations, explained that the new effort is intended to step up enforcement of the reporting rules at a critical period.

“The statute is very clear that those tax-exempt political organizations reporting to us must make the required disclosures in a timely, accurate manner.”

An organization that fails to report in a timely fashion, fails to include all required information about contributions and disbursements, or reports incorrect information is required to pay 35% of the amount related to the failure. Exceptions will, however, be made for businesses with reasonable causes for failure.

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