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IRS to Crack Down on Section 527 Organizations

(Aug. 25, 2004) Section 527 political groups, which have become very controversial during the current Presidential campaign, will now have to be more accountable to the Internal Revenue Service (IRS).

The IRS recently announced that it would seek to improve reporting and disclosure by tax-exempt Section 527 political groups, so named for the section of the Internal Revenue Code under which they are classified. These types of organizations have come under fire from both Democrats and Republicans because of the millions of dollars some have raised and the advertisements that they are running on television.

Charities have not been unaffected by the controversies surrounding Section 527 groups. Earlier this year in response to questions regarding Section 527 organizations, the Federal Election Commission proposed broad new rules that would have curtailed the fundraising and lobbying capacities of all nonprofits. For now, it looks as though those proposed regulations will not be implemented and will probably be narrowed to affect only Section 527 groups.

The purpose of Section 527 groups is to engage in political activities. Under section 527 of the Internal Revenue Code, these groups must periodically file public disclosure reports with the IRS rather than the Federal Election Commission.

'This effort will help improve the completeness and accuracy of these important public disclosures,' said Steven. T. Miller, Commissioner of the IRS Tax-Exempt and Government Entities Division. 'Our job is to ensure compliance with the law.'

Several Section 527 organizations have played key roles this summer during the presidential campaign. The focus of these groups, depending on what side of the political fence they fall, has been to criticize either President Bush or Democratic presidential candidate John Kerry.

Bush has indicated he does not want Section 527's to exist and thinks they should be eliminated from the Internal Revenue Code. "All of them," the president said when asked if he thought Section 527 groups should be banned. "I don't think we ought to have 527's.'

The new initiative by the IRS will include 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 important upcoming filing dates so that correct information is available to the public.

For more information about Section 527 organizations, go to the Political Organizations area of the IRS website.

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