[Federal Register Volume 59, Number 239 (Wednesday, December 14, 1994)]
[Unknown Section]
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From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-30729]
[[Page Unknown]]
[Federal Register: December 14, 1994]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Parts 1, 53 and 301
[EE-48-90]
RIN 1545-A077
Political Expenditures by Section 501(c)(3) Organizations
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Notice of proposed rulemaking.
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SUMMARY: This document contains proposed regulations regarding excise
taxes, accelerated tax assessments, and injunctions imposed for certain
political expenditures made by organizations that (without regard to
any political expenditure) would be described in section 501(c)(3) and
exempt from taxation under section 501(a). These sanctions were enacted
as part of the Revenue Act of 1987.
DATES: Written comments and requests for a public hearing must be
received by March 14, 1995.
ADDRESSES: Send submissions to: CC:DOM:CORP:T:R (EE-48-90), room 5228,
Internal Revenue Service, POB 7604, Ben Franklin Station, Washington,
DC 20044. In the alternative, submissions may be hand delivered between
the hours of 8 a.m. and 5 p.m. to: CC:DOM:CORP:T:R (EE-48-90),
Courier's Desk, Internal Revenue Service, 1111 Constitution Avenue NW.,
Washington, DC.
FOR FURTHER INFORMATION CONTACT: Cynthia Morton or Paul Accettura,
(202) 622-6070 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
This document provides proposed amendments to the Income Tax
Regulations to supply rules under sections 4955, 6852, and 7409 of the
Internal Revenue Code of 1986 (Code). Sections 4955, 6852, and 7409
were enacted by the Omnibus Budget Reconciliation Act of 1987 (OBRA),
Public Law 100-203.
In addition, proposed amendments were made to regulations under
other sections in order to reflect the effects of sections 4955, 6852,
and 7409. Proposed amendments were made to the following regulations
sections: Secs. 1.6091-2, 53.4963-1, 53.6011-1, 53.6071-1, 53.6091-1,
301.6211-1, 301.6212-1, 301.6213-1, 301.6861-1, 301.6863-1, 301.6863-2,
301.7422-1, and 301.7611-1.
These regulations will be effective upon publication of the final
regulations in the Federal Register.
Explanation of Provisions
Section 501(a) exempts from income tax any organization described
in section 501(c). Section 501(c)(3) describes organizations that are
organized and operated exclusively for charitable purposes. An
organization is not described in section 501(c)(3) if it participates
or intervenes in any political campaign on behalf of (or in opposition
to) any candidate for public office (political intervention).
Before sections 4955, 6852, and 7409 were enacted in 1987,
revocation of the recognition of exemption was the sole sanction
available against political intervention by public charities. In
contrast, private foundations have been subject since 1969 to the
section 4945 excise tax on taxable expenditures such as political
expenditures. The sanctions in sections 4955, 6852, and 7409 apply to
all organizations described in section 501(c)(3) (public charities and
private foundations).
Congress enacted sections 4955, 6852, and 7409 because it
determined that revocation of exemption was not a sufficient sanction
to enforce effectively the prohibition on political intervention by
section 501(c)(3) organizations. For example, if an organization
engaged in significant, uncorrected political intervention, revocation
could be ineffective as a penalty or deterrent, particularly if the
organization used all its assets for political intervention and then
ceased operations. On the other hand, if an organization made a small,
unintentional political expenditure and subsequently adopted procedures
to assure no similar future expenditures (particularly if the
responsible managers left the organization), the revocation was also
ineffective because it was considered a disproportionate penalty and,
therefore, not used.
Section 4955 was modeled on the section 4945 excise tax on
political expenditures (taxable expenditures) according to the
legislative history, while sections 6852 and 7409 provide new sanctions
against flagrant political expenditures and flagrant political
intervention, respectively. Section 4955 provides a two-tiered excise
tax on the political expenditures of a section 501(c)(3) organization
and on the agreement of its managers to make the expenditures. Section
6852 allows the immediate assessment of section 4955 taxes and income
taxes against a section 501(c)(3) organization in the case of flagrant
political expenditures by the organization. Section 7409 enables the
Service to seek an injunction against further political expenditures by
a 501(c)(3) organization after flagrant political intervention by the
organization.
The proposed regulations address the following issues:
A. Political Intervention Prohibition for Section 501(c)(3)
Organization Unaltered
Consistent with the legislative history, the proposed regulations
under section 4955 provide that the excise taxes imposed by section
4955 do not affect the substantive standards for tax exemption under
section 501(c)(3), under which an organization is described in section
501(c)(3) only if it does not participate or intervene in any political
campaign on behalf of any candidate for public office. Revocation is
generally a separate issue from the application of sections 4955, 6852,
and 7409, and is not governed by the proposed regulations. Therefore,
sections 4955, 6852, and 7409 may be employed independent of the
presence or absence of revocation proceedings, except for the
accelerated assessment of income tax under section 6852.
B. Amplification of Political Expenditure Definition
Section 4955(d) provides two definitions of political expenditures.
One definition covers amounts paid or incurred by a section 501(c)(3)
organization to participate or intervene in the political campaign of
any candidate for public office. For purposes of this first definition,
any expenditure that would cause an organization that makes the
expenditure to be classified as an action organization by reason of
Sec. 1.501(c)(3)-1(c)(3)(iii) is a political expenditure. Section
1.501(c)(3)-1(c)(3)(iii) defines candidate for public office and
provides that political intervention can be direct or indirect.
The other statutory definition of political expenditures includes
certain expenditures of organizations that are formed primarily for the
purpose of promoting a person's candidacy, or used primarily for that
purpose and effectively controlled by the candidate. The proposed
regulations follow the legislative history by providing that whether
the primary purpose of an organization is promoting an individual's
candidacy or prospective candidacy depends upon facts and circumstances
such as whether the surveys, studies, and other materials prepared by
the organization are made available only to one candidate or are made
available to the general public, and whether the organization pays for
speeches and travel expenses for only one individual or for several
persons. The proposed regulations provide that an organization is
considered as effectively controlled by a candidate or prospective
candidate only if the individual has a continuing, substantial
involvement in the day-to-day operations or management of the
organization.
C. Imposition of Initial Taxes on Organization Manager Under Section
4955
Consistent with the intention expressed in the legislative history
that section 4955 be applied in a similar manner to section 4945
(regarding excise taxes for political expenditures), the proposed
section 4955 regulations follow the section 4945 regulations in
providing guidance on the first tier tax on organization managers.
Under section 4955(a)(2), there is a first tier tax imposed on the
agreement of any organization manager to the making of any expenditure,
knowing that it is a political expenditure, unless such agreement is
not willful and is due to reasonable cause. The proposed section 4955
regulations follow the section 4945 regulations in specifying the type
of organization managers and the type of agreement covered by the
statute. The proposed section 4955 regulations also explain how to
determine when an organization manager knows an expenditure is a
political expenditure and when the agreement is willful and without
reasonable cause.
D. Abatement, Refund or No Assessment of Initial Section 4955 Taxes
The proposed section 4955 regulations follow the legislative
history in providing that an initial tax under section 4955(a) will be
abated, refunded, or not assessed if the organization or an
organization manager establishes to the satisfaction of the IRS that
the political expenditure was not willful and flagrant, and that the
political expenditure was corrected.
E. Correction of Political Expenditures Under Section 4955
As noted above, the excise taxes provided in section 4955 follow
the two-tiered approach of the taxes on taxable expenditures by private
foundations provided in section 4945. Thus, section 4955 imposes
initial taxes at moderate rates, to be followed by more severe taxes if
the political expenditure in question is not corrected within a
prescribed period. Correction of a political expenditure, as defined in
section 4955(f)(3), requires recovery of the expenditure to the extent
possible. The proposed regulations, following the regulations under
section 4945, provide that an organization is not required to initiate
legal action to recover an expenditure if the action would in all
probability not result in the satisfaction of execution on a judgment.
F. Procedures for Taxation Under Section 6852
Section 6852 provides for accelerated assessment of income taxes
and section 4955 excise taxes in cases in which a section 501(c)(3)
organization makes political expenditures that constitute a flagrant
violation of the prohibition against making such expenditures. The
accelerated assessment provisions authorize the Secretary to make an
immediate determination and assessment of taxes payable. Any income
taxes assessed under section 6852 are computed as if the taxpayer's
taxable year ended on the date of the determination.
The proposed regulations prescribe procedures to be followed in
making an accelerated assessment under section 6852. The regulations
provide that such an assessment must be authorized by the District
Director. In addition, the regulations provide that an organization
cannot be subject to an accelerated assessment of income taxes under
section 6852 unless the organization makes political expenditures that
result in revocation of the organization's tax exemption under section
501(a).
The proposed regulations require a taxpayer subject to an
assessment under section 6852 to pay the amount assessed within 10 days
after the District Director sends the notice and demand for immediate
payment. Finally, the regulations provide that cases involving
assessments under section 6852 are not cases in which the collection of
tax is in jeopardy. Therefore, an assessment under section 6852 does
not suspend the normal collection procedures.
G. Procedures for Seeking an Injunction Under Section 7409
The proposed regulations under section 7409 provide procedures for
the IRS to use in seeking an injunction against further political
expenditures by a section 501(c)(3) organization that has flagrantly
participated in, or intervened in any political campaign on behalf of
(or in opposition to) any candidate for public office (flagrant
political intervention). The procedural framework for seeking an
injunction consists of a letter from the Assistant Commissioner
(Employee Plans and Exempt Organizations) to the organization notifying
it of the Service's intention to seek an injunction if the flagrant
intervention does not stop or the charge is not refuted, a 10-day
period for the organization to respond to the letter, and the personal
determination by the Commissioner regarding whether to seek an
injunction. The power given to the Commissioner cannot be delegated.
Special Analysis
It has been determined that this notice of proposed rulemaking is
not a significant regulatory action as defined in EO 12866. Therefore,
a regulatory assessment is not required. It has also been determined
that section 553(b) of the Administrative Procedure Act (5 U.S.C.
chapter 5) and the Regulatory Flexibility Act (5 U.S.C. chapter 6) do
not apply to these regulations, and, therefore, a Regulatory
Flexibility Analysis is not required. Pursuant to section 7805(f) of
the Internal Revenue Code, this notice of proposed rulemaking will be
submitted to the Chief Counsel for Advocacy of the Small Business
Administration for comment on its impact on small business.
Comments and Requests for a Public Hearing
Before these proposed regulations are adopted as final regulations,
consideration will be given to any written comments (preferably a
signed original and eight (8) copies) that are submitted timely to the
IRS. All comments will be available for public inspection and copying.
A public hearing may be scheduled if requested in writing by a person
that timely submits written comments. If a public hearing is scheduled,
notice of the date, time, and place for the hearing will be published
in the Federal Register.
Drafting Information
The principal author of these regulations is Cynthia D. Morton,
Office of Associate Chief Counsel (Employee Benefits and Exempt
Organizations). However, other personnel from the IRS and Treasury
Department participated in their development.
List of Subjects
26 CFR Part 1
Income taxes, Reporting and recordkeeping requirements.
26 CFR Part 53
Excise taxes, Foundations, Investments, Lobbying, Reporting and
recordkeeping requirements.
26 CFR Part 301
Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income
taxes, Penalties, Reporting and recordkeeping requirements.
Proposed Amendments to the Regulations
Accordingly, 26 CFR parts 1, 53, and 301 are amended as follows:
PART 1--INCOME TAXES
Paragraph 1. The authority citation for part 1 continues to read in
part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 1.6091-2 is amended by adding paragraph (g) to read
as follows:
Sec. 1.6091-2 Place for filing income tax returns.
* * * * *
(g) Returns of persons subject to a termination assessment.
Notwithstanding paragraph (c) of this section, income tax returns of
persons with respect to whom an income tax assessment was made under
section 6852(a) with respect to the taxable year must be filed with the
district director as provided in paragraphs (a) and (b) of this
section.
PART 53--FOUNDATION AND SIMILAR EXCISE TAXES
Par. 3. The authority citation for part 53 continues to read as
follows:
Authority: 26 U.S.C. 7805.
Par. 4. Section 53.4955-1 is added under subpart K to read as
follows:
Sec. 53.4955-1 Tax on political expenditures.
(a) Relationship between section 4955 excise taxes and substantive
standards for exemption under section 501(c)(3). The excise taxes
imposed by section 4955 do not affect the substantive standards for tax
exemption under section 501(c)(3), under which an organization is
described in section 501(c)(3) only if it does not participate or
intervene in any political campaign on behalf of any candidate for
public office.
(b) Imposition of initial taxes on organization managers--(1) In
general. The excise tax under section 4955(a)(2) of the Internal
Revenue Code on the agreement of any organization manager to the making
of a political expenditure by a section 501(c)(3) organization is
imposed only in cases where--
(i) A tax is imposed by section 4955(a)(1);
(ii) The organization manager knows that the expenditure to which
the manager agrees is a political expenditure; and
(iii) The agreement is willful and is not due to reasonable cause.
(2) Type of organization managers covered--(i) In general. The tax
under section 4955(a)(2) is imposed only on those organization managers
who are authorized to approve, or to exercise discretion in
recommending approval of, the making of the expenditure by the
organization and on those organization managers who are members of a
group (such as the organization's board of directors or trustees) which
is so authorized.
(ii) Officer. For purposes of section 4955(f)(2)(A), a person is an
officer of an organization if--
(A) That person is specifically so designated under the certificate
of incorporation, bylaws, or other constitutive documents of the
foundation; or
(B) That person regularly exercises general authority to make
administrative or policy decisions on behalf of the organization.
Independent contractors, acting in a capacity as attorneys,
accountants, and investment managers and advisors, are not officers.
(iii) Employee. For purposes of section 4955(f)(2)(B), an
individual rendering services to an organization is an employee of the
organization only if that individual is an employee within the meaning
of section 3121(d)(2).
(3) Type of agreement required. An organization manager agrees to
the making of a political expenditure if the manager manifests approval
of the expenditure which is sufficient to constitute an exercise of the
organization manager's authority to approve, or to exercise discretion
in recommending approval of, the making of the expenditure by the
organization. The manifestation of approval need not be the final or
decisive approval on behalf of the organization.
(4) Knowing--(i) General rule. For purposes of section 4955, an
organization manager is considered to have agreed to an expenditure
knowing that it is a political expenditure only if--
(A) The manager has actual knowledge of sufficient facts so that,
based solely upon these facts, the expenditure would be a political
expenditure;
(B) The manager is aware that such an expenditure under these
circumstances may violate the provisions of federal tax law governing
political expenditures; and
(C) The manager negligently fails to make reasonable attempts to
ascertain whether the expenditure is a political expenditure, or the
manager is aware that it is a political expenditure.
(ii) Amplification of general rule. For purposes of section 4955,
knowing does not mean having reason to know. However, evidence tending
to show that an organization manager has reason to know of a particular
fact or particular rule is relevant in determining whether the manager
had actual knowledge of the fact or rule. Thus, for example, evidence
tending to show that an organization manager has reason to know of
sufficient facts so that, based solely upon those facts, an expenditure
would be a political expenditure is relevant in determining whether the
manager has actual knowledge of the facts.
(5) Willful. An organization manager's agreement to a political
expenditure is willful if it is voluntary, conscious, and intentional.
No motive to avoid the restrictions of the law or the incurrence of any
tax is necessary to make an agreement willful. However, an organization
manager's agreement to a political expenditure is not willful if the
manager does not know that it is a political expenditure.
(6) Due to reasonable cause. An organization manager's actions are
due to reasonable cause if the manager has exercised his or her
responsibility on behalf of the organization with ordinary business
care and prudence.
(7) Advice of counsel. An organization manager's agreement to an
expenditure is ordinarily not considered knowing or willful and is
ordinarily considered due to reasonable cause if the manager, after
full disclosure of the factual situation to legal counsel (including
house counsel), relies on the advice of counsel expressed in a reasoned
written legal opinion that an expenditure is not a political
expenditure under section 4955 (or that expenditures conforming to
certain guidelines are not political expenditures). For this purpose, a
written legal opinion is considered reasoned even if it reaches a
conclusion which is subsequently determined to be incorrect, so long as
the opinion addresses itself to the facts and applicable law. A written
legal opinion is not considered reasoned if it does nothing more than
recite the facts and express a conclusion. However, the absence of
advice of counsel with respect to an expenditure does not, by itself,
give rise to any inference that an organization manager agreed to the
making of the expenditure knowingly, willfully, or without reasonable
cause.
(8) Cross reference. For provisions relating to the burden of proof
in cases involving the issue of whether an organization manager has
knowingly agreed to the making of a political expenditure, see section
7454(b).
(c) Amplification of political expenditure definition--(1) General
rule. Any expenditure that would cause an organization that makes the
expenditure to be classified as an action organization by reason of
Sec. 1.501(c)(3)-1(c)(3)(iii) is a political expenditure within the
meaning of section 4955(d)(1).
(2) Other political expenditures--(i) For purposes of section
4955(d)(2), an organization is effectively controlled by a candidate or
prospective candidate only if the individual has a continuing,
substantial involvement in the day-to-day operations or management of
the organization. An organization is not effectively controlled by a
candidate or a prospective candidate merely because it is affiliated
with the candidate, or merely because the candidate knows the
directors, officers, or employees of the organization. The effectively
controlled test is not met merely because the organization carries on
its research, study, or other educational activities with respect to
subject matter or issues in which the individual is interested or with
which the individual is associated.
(ii) For purposes of section 4955(d)(2), a determination of whether
the primary purpose of an organization is promoting the candidacy or
prospective candidacy of an individual for public office is made on the
basis of all the facts and circumstances. The factors to be considered
include whether the surveys, studies, materials, etc. prepared by the
organization are made available only to the candidate or are made
available to the general public; and whether the organization pays for
speeches and travel expenses for only one individual, or for speeches
or travel expenses of several persons. The fact that a candidate or
prospective candidate utilizes studies, papers, materials, etc.,
prepared by the organization (such as in a speech by the candidate) is
not to be considered as a factor indicating that the organization has a
purpose of promoting the candidacy or prospective candidacy of that
individual where such studies, papers, materials, etc. are not made
available only to that individual.
(iii) Expenditures for voter registration, voter turnout, or voter
education constitute other expenses, treated as political expenditures
by reason of section 4955(d)(2)(E), only if the expenditures violate
the prohibition on political activity provided in section 501(c)(3).
(d) Abatement, refund, or no assessment of initial tax. No initial
(first-tier) tax will be imposed under section 4955(a), or the initial
tax will be abated or refunded, if the organization or an organization
manager establishes to the satisfaction of the IRS that--
(1) The political expenditure was not willful and flagrant; and
(2) The political expenditure was corrected.
(e) Correction--(1) Recovery of Expenditure. For purposes of
section 4955(f)(3) and this section, correction of a political
expenditure is accomplished by recovering part or all of the
expenditure to the extent recovery is possible, and, where full
recovery cannot be accomplished, by any additional corrective action
which the Commissioner may prescribe. The organization making the
political expenditure is not under any obligation to attempt to recover
the expenditure by legal action if the action would in all probability
not result in the satisfaction of execution on a judgment.
(2) Establishing safeguards. Correction of a political expenditure
must also involve the establishment of sufficient safeguards to prevent
future political expenditures by the organization. The determination of
whether safeguards are sufficient to prevent future political
expenditures by the organization is made by the District Director.
(f) Effective date. This section is effective the date these
regulations are published as final regulations in the Federal Register.
Sec. 53.4963-1 [Amended]
Par. 5. In Sec. 53.4963-1, paragraphs (a), (b), and (c) are amended
by adding the reference ``4955,'' immediately after the reference
``4952,''.
Sec. 53.6011-1 [Amended]
Par. 6. In section Sec. 53.6011-1, paragraph (b) is amended as
follows: 1. In the first sentence, the language ``or 4945(a),'' is
removed and ``, 4945(a) or 4955(a),'' is added in its place.
2. In the last sentence, the language ``or 4955(a)'' is added
immediately following the language ``section 4945(a)''.
Par. 7. Section 53.6071-1(a) is amended by adding paragraph (e) to
read as follows:
Sec. 53.6071-1 Time for filing returns.
* * * * *
(e) Taxes related to political expenditures of organizations
described in section 501(c)(3) of the Internal Revenue Code. A Form
4720 required to be filed by Sec. 53.6011-1(b) for an organization
liable for tax imposed by section 4955(a) must be filed by the
unextended due date for filing its annual information return under
section 6033 or, if the organization is exempt from filing, the date
the organization would be required to file an annual information return
if it was not exempt from filing. The Form 4720 of a person whose
taxable year ends on a date other than that on which the taxable year
of the organization described in section 501(c)(3) ends must be filed
on or before the 15th day of the fifth month following the close of the
person's taxable year.
Par. 8. Section 53.6091-1 is amended by adding paragraph (d) to
read as follows:
Sec. 53.6091-1 Place for filing chapter 42 tax returns.
* * * * *
(d) Returns of persons subject to a termination assessment.
Notwithstanding paragraph (c) of this section, income tax returns of
persons with respect to whom a chapter 42 tax assessment was made under
section 6852(a) with respect to the taxable year must be filed with the
district director as provided in paragraphs (a) and (b) of this
section.
PART 301--PROCEDURE AND ADMINISTRATION
Par. 9. The authority citation for part 301 continues to read in
part as follows:
Authority: 26 U.S.C. 7805 * * *
Sec. 301.6211-1 [Amended]
Par. 10. In Sec. 301.6211-1, the last sentence of paragraph (b) is
amended by adding ``or 6852'' immediately after ``section 6851''.
Sec. 301.6212-1 [Amended]
Par. 11. In Sec. 301.6212-1, the second sentence of paragraph (c)
is amended by adding ``termination assessments in section 6851 or
6852,'' immediately after ``section 6213(b)(1),''.
Sec. 301.6213-1 [Amended]
Par. 12. Section 301.6213-1 is amended as follows:
1. Paragraph (a)(2), first sentence, is amended by adding ``,
6852,'' immediately after ``section 6851''.
2. Paragraph (e), first sentence, is amended by adding ``4955,''
immediately after ``4952,''.
Par. 13. Section 301.6852-1 is added immediately following
Sec. 301.6851-1 to read as follows:
Sec. 301.6852-1 Termination assessments of tax in the case of flagrant
political expenditures of section 501(c)(3) organizations.
(a) Authority for making. Any assessment under section 6852 as a
result of a flagrant violation by a section 501(c)(3) organization of
the prohibition against making political expenditures must be
authorized by the District Director.
(b) Determination of income tax. An organization shall be subject
to an assessment of income tax under section 6852 only if the flagrant
violation of the prohibition against making political expenditures
results in revocation of the organization's tax exemption under section
501(a) because it is not described in section 501(c)(3). An
organization subject to such an assessment is not liable for income
taxes for any period prior to the effective date of the revocation of
the organization's tax exemption.
(c) Payment. Where a District Director has made a determination of
income tax under paragraph (b) of this section or of section 4955
excise tax, notwithstanding any other provision of law, any tax will
become immediately due and payable. The taxpayer is required to pay the
amount of the assessment within 10 days after the District Director
sends the notice and demand for immediate payment regardless of the
filing of an administrative appeal or of a court petition. Regardless
of filing an administrative appeal or of petitioning a court, enforced
collection action may proceed after the 10-day payment period unless
the taxpayer posts the bond described in section 6863. For purposes of
collection procedures such as section 6331 (regarding levy),
assessments under the authority of paragraph (a) of this section do not
constitute situations in which the collection of such tax is in
jeopardy and, therefore, do not suspend normal collection procedures.
(d) Effective date. This section is effective the date these
regulations are published as final regulations.
Sec. 301.6861-1 [Amended]
Par. 14. In Sec. 301.6861-1, paragraph (g) is amended by:
1. Adding the language ``4955(a),'' immediately after ``4952(a),''.
2. Adding the language ``4955(b),'' immediately after ``4952(b),''.
Sec. 301.6863-1 [Amended]
Par. 15. Section 301.6863-1 is amended as follows:
1. Paragraph (a)(1) is amended by adding the language ``, or under
section 6852 (referred to as a political assessment for purposes of
this section)'' immediately after ``for purposes of this section)''.
2. Paragraphs (a)(3), (a)(4), and (b) are amended by adding the
language ``or political assessment'' immediately after ``jeopardy
assessment''.
3. Paragraph (b) is further amended by adding the language ``(or
political assessment)'' immediately after ``jeopardy'' in the last
sentence.
Sec. 301.6863-2 [Amended]
Par. 16. In Sec. 301.6863-2, paragraph (a), the first sentence is
amended by adding the language ``6852,'' immediately after ``section
6851,''.
Par. 17. Section 301.7409-1 is added immediately after
Sec. 301.7406-1 to read as follows:
Sec. 301.7409-1 Action to enjoin flagrant political expenditures of
section 501(c)(3) organizations.
(a) Letter to organization. When the Assistant Commissioner
(Employee Plans and Exempt Organizations) concludes that a section
501(c)(3) organization has engaged in flagrant political intervention
and is likely to continue to engage in political intervention that
involves political expenditures, the Assistant Commissioner (Employee
Plans and Exempt Organizations) shall send a letter to the organization
providing it with the facts based on which the Service believes that
the organization has been engaging in flagrant political intervention
and is likely to continue to engage in political intervention that
involves political expenditures. The organization will have 10 calendar
days after the letter is sent to respond by establishing that it will
immediately cease engaging in political intervention, or by providing
the Service with sufficient information to refute the Service's
evidence that it has been engaged in flagrant political intervention.
The Internal Revenue Service will not proceed to seek an injunction
under section 7409 until after the close of this 10-day response
period.
(b) Determination by Commissioner. If the organization does not
respond within 10 calendar days to the letter under paragraph (a) of
this section in a manner sufficient to dissuade the Assistant
Commissioner (Employee Plans and Exempt Organizations) of the need for
an injunction, the file will be forwarded to the Commissioner of
Internal Revenue. The Commissioner of Internal Revenue will personally
determine whether to forward to the Department of Justice a
recommendation that it immediately bring an action to enjoin the
organization from making further political expenditures. The
Commissioner may also recommend that the court action include any other
action that is appropriate in ensuring that the assets of the section
501(c)(3) organization are preserved for section 501(c)(3) purposes.
The authority of the Commissioner to make the determinations described
in this paragraph may not be delegated to any other persons.
(c) Flagrant political intervention. For purposes of this section,
flagrant political intervention is defined as participation in, or
intervention in (including the publication and distribution of
statements), any political campaign by a section 501(c)(3) organization
on behalf of (or in opposition to) any candidate for public office in
violation of the prohibition on such participation or intervention in
section 501(c)(3) and the regulations thereunder if the participation
or intervention is flagrant.
(d) Effective date. This section is effective the date these
regulations are published as final regulations.
Sec. 301.7422-1 [Amended]
Par. 18. In Sec. 301.7422-1, paragraphs (a), (c) and (d) are
amended by adding the language ``4955,'' immediately after ``4952,''.
Sec. 301.7611-1 [Amended]
Par. 19. In Sec. 301.7611-1, A-6, the first sentence is amended by
adding the language ``or 6852,'' immediately after ``section 6851''.
Margaret Milner Richardson,
Commissioner of Internal Revenue.
[FR Doc. 94-30729 Filed 12-13-94; 8:45 am]
BILLING CODE 4830-01-U
