[Federal Register Volume 60, Number 233 (Tuesday, December 5, 1995)]
[Rules and Regulations]
[Pages 62209-62213]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-29094]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Parts 1, 53 and 301
[TD 8628]
RIN 1545-A077
Political Expenditures by Section 501(c)(3) Organizations
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Final regulations.
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SUMMARY: This document contains final 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 regulations reflect
changes to the law that were enacted as part of the Revenue Act of
1987.
EFFECTIVE DATE: These regulations are effective December 5, 1995.
FOR FURTHER INFORMATION CONTACT: Cynthia Morton or Paul Accettura,
(202) 622-6070 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
On December 14, 1994, proposed regulations Secs. 53.4955-1,
301.6852-1, and 301.7409-1 under sections 4955, 6852 and 7409 were
published in the Federal Register (59 FR 64359). In addition,
amendments were made to regulations under other sections in order to
reflect the effects of sections 4955, 6852, and 7409. Proposed
regulation amendments in 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 were also published in the
Federal Register (59 FR 64359). No public hearing was requested or
held. The IRS received two comments on the proposed regulations, only
one of which offered substantive suggestions. The IRS and the Treasury
Department have considered the public comments on the proposed
regulations, and the regulations are adopted as revised by this
Treasury decision.
Explanation of Provisions
The regulations provide guidance with respect to sections 4955,
6852 and 7409. The sanctions in these sections apply to all
organizations described in section 501(c)(3). Before sections 4955,
6852 and 7409 were enacted in 1987, revocation of recognition of
exemption was the sole sanction available against political
intervention by public charities. Section 4955 was modeled on the
section 4945 excise tax on political expenditures (taxable
expenditures) by private foundations, while sections 6852 and 7409
provide new sanctions against flagrant political expenditures and
flagrant political intervention, respectively.
One comment on the proposed regulations requested that the
regulations define in additional detail the term political expenditure
and provide specific examples of activities that constitute
intervention or participation in a political campaign for or against a
candidate. Section 53.4955-1(c)(1) of the proposed regulations provides
that any expenditure that would cause an organization that makes the
expenditure to be classified as an action organization in accordance
with Sec. 1.501(c)(3)-1(c)(3)(iii) is a political expenditure within
the meaning of section 4955(d)(1). By referring to the long standing
action organization regulations, Sec. 53.4955-1(c)(1) of the proposed
regulations ties the definition of political expenditure in section
4955 to existing IRS and judicial interpretations of when an
organization participates or intervenes in a political campaign on
behalf of or in opposition to any candidate for public office in
violation of the requirements of section 501(c)(3). The IRS and the
Treasury Department believe this direct connection between section 4955
and section 501(c)(3) correctly implements the intent of Congress as
expressed in the statute and the legislative history. To the extent
that further guidance is needed on the interpretation of the terms
political expenditure under section 4955 and intervening in political
campaigns under section 501(c)(3), the IRS and the Treasury Department
believe such guidance should be given in connection with the
requirements for tax exemption under section 501(c)(3). Therefore, the
final regulations have not revised Sec. 53.4955-1(c)(1).
Another comment suggested that the regulations specify whether
there were circumstances under which conduct would result in the
imposition of a tax under section 4955 but not in revocation of
exemption under section 501(c)(3). According to the statutory language
and the legislative history of section 4955, the addition of that
section to the Internal Revenue Code did not affect the substantive
standards for tax exemption under section 501(c)(3). To be exempt from
income tax as an organization described in section 501(c)(3), an
organization may not intervene in any political campaign on behalf of
any candidate for public office. Consistent with this requirement,
section 4955 does not permit a de minimis amount of political
intervention. Therefore, the final regulations have not been revised.
However, there may be individual cases where, based on the facts and
circumstances such as the nature of the political intervention and the
measures that have been taken by the organization to prevent a
recurrence, the IRS may exercise its discretion to impose a tax under
section 4955 but not to seek revocation of the organization's tax-
exempt status.
One comment raised questions about the interpretation of section
4955(d)(2), which relates to organizations formed primarily to promote
the candidacy of a particular individual. The comment requested
clarification of the standard for determining whether an organization
``is formed primarily for purposes of promoting the candidacy (or
prospective candidacy) of an individual for public office'' under
section 4955(d)(2). The comment also requested clarification of the
meaning of the phrase ``availed of'' in the section 4955(d)(2)
reference to organizations availed of primarily to promote an
individual's candidacy for public office. The comment further requested
examples of expenses which have the primary effect of promoting public
recognition or otherwise primarily accruing to the benefit of a
candidate or a prospective candidate.
The legislative history of section 4955 provides that the
determination of whether an organization's primary purpose is the
promotion of the candidacy or prospective candidacy of an individual
for public office is based on all relevant facts and circumstances. The
proposed regulations follow the legislative history. The IRS and the
Treasury Department believe that, if more detailed guidance is
necessary, it would be more appropriate to provide it in a form that
allows for the consideration of a fuller range of facts and
circumstances. Therefore, the final regulations have not been revised.
The comment also asked whether section 4955(d)(2) adds anything to
the
[[Page 62210]]
range of activities that would already be deemed political expenditures
under section 4955(d)(1). The plain language of the statute makes it
clear that the expenditures described in section 4955(d)(2) are
included within the general category of political expenditures that is
described in section 4955(d)(1). Furthermore, the legislative history
states that section 4955(d)(2) ``enumerates certain expenditures as
political expenditures for purposes of the excise tax * * *.'' The IRS
and the Treasury Department believe that organizations described in
section 4955(d)(2) are subject to the same restrictions on political
expenditures as all other section 501(c)(3) organizations. Therefore,
the final regulations have not been revised.
One comment concluded that Sec. 53.4955-1(b) of the proposed
regulations, affecting organization managers under section 4955,
imposed tax on a larger group of employees and officers than are
subject to tax under chapter 42 because the section did not include
language contained in Sec. 53.4946-1(f)(1)(ii) and in Sec. 53.4946-
1(f)(2). The IRS and the Treasury Department agree that the definition
of foundation manager under section 4946(b) should be incorporated into
the definition of organization manager when applying section
4955(f)(2). Therefore, we have clarified the final regulations to make
them consistent with the interpretation in Sec. 53.4946-1(f)(1)(ii) and
in Sec. 53.4946-1(f)(2) by adding a sentence at the end of
Sec. 53.4955-1(b)(2)(ii)(B) and at the end of Sec. 53.4955-
1(b)(2)(iii).
One comment noted that Sec. 53.4955-1(b)(7) of the proposed
regulations provides that, in certain circumstances, if an organization
manager relies on a reasoned legal opinion from legal counsel, the act
of the organization manager will not be considered knowing or willful
and will be considered due to reasonable cause for purposes of section
4955(a)(2). The commentator requested consideration of whether the same
reasoned legal opinion would protect the organization from tax under
section 4955(a)(1). Section 53.4955-1(b)(7) interprets whether an act
is not willful and is due to reasonable cause for purposes of section
4955(a)(2). Unlike section 4955(a)(2), section 4955(a)(1) taxes an
organization without regard to whether its act of making a political
expenditure was willful or due to reasonable cause. Therefore, the
final regulations have not been revised. A reasoned legal opinion from
legal counsel received by the organization prior to making a political
expenditure may be a factor that the IRS takes into account in
determining what action to take in an individual case. Section 53.4955-
1 (d) and (e) of the final regulations are also relevant where an
organization has corrected a political expenditure that was not willful
and flagrant.
One comment requested that the regulations provide more detail on
the type of behavior that would be considered flagrant under sections
6852 and 7409. Since a determination of when a specific act or acts by
an organization is flagrant depends on the facts and circumstances in
individual cases, the IRS and the Treasury Department believe that, to
the extent guidance is necessary on this issue, it is better rendered
in a form other than through regulations. Therefore, the final
regulations do not expand on the definition of flagrant.
One comment suggested that Sec. 301.7409-1 of the proposed
regulations should be modified to allow the IRS, where appropriate, to
provide an organization with less than the 10 days notice required
under the proposed regulations before the Commissioner would recommend
that a petition for injunctive relief be filed. In light of the
important considerations involved when contemplating an injunction of
this sort, the IRS and the Treasury Department believe that an
organization should be allowed a reasonable amount of time to respond
before the IRS takes action. Therefore, the final regulations retain
the 10 day notice period.
Special Analysis
It has been determined that this Treasury Decision 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,
the notice of proposed rulemaking preceding these regulations was
submitted to the Chief Counsel for Advocacy of the Small Business
Administration for comment on its impact on small business.
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.
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. In Sec. 1.6091-2, paragraph (g) is added 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 to 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)
[[Page 62211]]
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.
With respect to any expenditure, any person described in this paragraph
(b)(2)(ii)(B) who has authority merely to recommend particular
administrative or policy decisions, but not to implement them without
approval of a superior, is not an officer.
(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). With respect to any expenditure, an employee
(other than an officer, director, or trustee of the organization) is
described in section 4955(f)(2)(B) only if he or she has final
authority or responsibility (either officially or effectively) with
respect to such expenditure.
(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) of this chapter 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
[[Page 62212]]
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 December 5, 1995.
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,'' in each place it appears.
Sec. 53.6011-1 [Amended]
Par. 6. In 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. In Sec. 53.6071-1, paragraph (e) is added 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. In Sec. 53.6091-1, the section heading is revised and
paragraph (d) is added 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 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 December 5, 1995.
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),''.
[[Page 62213]]
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) first sentence, (a)(4) last sentence, and (b)
first sentence are amended by adding the language ``or political
assessment'' immediately after ``jeopardy assessment'' in each place it
appears.
3. Paragraph (b) is 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) introductory text, the
first sentence is amended by adding the language ``6852,'' immediately
after ``section 6851,''.
Par. 17. Section 301.7409-1 is added under the undesignated
centerheading ``Civil Actions by the United States'' 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 December 5, 1995.
Sec. 301.7422-1 [Amended]
Par. 18. In Sec. 301.7422-1, paragraphs (a) introductory text, (c)
introductory text 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.
Approved: October 26, 1995.
Leslie Samuels,
Assistant Secretary of the Treasury.
[FR Doc. 95-29094 Filed 12-4-95; 8:45 am]
BILLING CODE 4830-01-U
