To amend the Internal Revenue Code of 1986 to provide that the preferential income tax treatment of political organizations shall apply only to principal campaign committees, to provide that a cancellation of a loan to such a committee shall be includible in such committee's taxable income, and for other purposes.

Summary: Amends Internal Revenue Code provisions governing the taxation of political organizations to apply those provisions only to principal campaign committees.  Declares that the cancellation of loans to such a committee and contributions from a lender used directly or indirectly to make payments on the lender's loan are not included in the term "exempt function income," subject to exception. 
Includes in the gross income of any political organization any cash contribution from an individual in excess of $100.  Subjects that excess to taxation.

SECTION 1. PREFERENTIAL INCOME TAX TREATMENT FOR POLITICAL 
              ORGANIZATIONS LIMITED TO PRINCIPAL CAMPAIGN COMMITTEES.

    (a) In General.--The text of section 527 of the Internal Revenue 
Code of 1986 (relating to political organizations) is amended by 
striking ``political organization'' each place it appears and inserting 
``principal campaign committee''.
    (b) Technical and Conforming Amendments.--
            (1) Subsection (b) of section 527 of such Code is amended 
        by striking ``the highest rate'' and inserting ``the 
        appropriate rates''.
            (2) Section 527 of such Code is amended by striking 
        paragraph (1) of subsection (e), by moving paragraph (2) of 
        subsection (h) and inserting it before paragraph (2) of 
        subsection (e) and by redesignating such paragraph as paragraph 
        (1), and by striking the remainder of subsection (h).
            (3) Section 527 of such Code is amended by striking 
        subsection (g) (relating to newsletter funds).
            (4) Paragraph (1) of section 527(f) of such Code is amended 
        by adding at the end the following flush sentence:
        ``In applying subsection (b) for purposes of this subsection, 
        paragraph (1) of subsection (b) shall be applied by 
        substituting `the highest rate' for `the appropriate rates'.''
            (5) The subsection heading for subsection (c) of section 
        527 of such Code is amended by striking ``Political 
        Organization'' and inserting ``Principal Campaign Committee''.
            (6)(A) The section heading for section 527 of such Code is 
        amended to read as follows:

``SEC. 527. PRINCIPAL CAMPAIGN COMMITTEES.''

            (B) The table of sections for part VI of subchapter F of 
        chapter 1 of such Code is amended by striking the item relating 
        to section 527 and inserting the following:

                              ``Sec. 527. Principal campaign 
                                        committees.''
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.

SEC. 2. CANCELLATION OF LOAN TO A PRINCIPAL CAMPAIGN COMMITTEE INCLUDED 
              IN SUCH COMMITTEE'S TAXABLE INCOME.

    (a) In General.--Subsection (c) of section 527 of the Internal 
Revenue Code of 1986 (defining principal campaign committee taxable 
income) is amended by adding at the end the following new paragraph:
            ``(4) Treatment of canceled loans.--
                    ``(A) In general.--The term `exempt function 
                income' shall not include--
                            ``(i) a contribution in the form of the 
                        cancellation of any loan made to the principal 
                        campaign committee, or
                            ``(ii) any other contribution made directly 
                        or indirectly from the lender of any loan to 
                        the principal campaign committee if such 
                        contribution is used directly or indirectly to 
                        make payments on such loan.
                    ``(B) Exceptions.--Subparagraph (A) shall not apply 
                with respect to--
                            ``(i) any loan made by a bank (as defined 
                        in section 581), or
                            ``(ii) any loan made by a candidate for 
                        Congress to the extent that the amount of 
                        contributions referred to in subparagraph (A) 
                        with respect to such loan does not exceed 
                        $2,000.''
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after the date of the enactment of this Act.

SEC. 3. INCLUSION IN GROSS INCOME FOR CONTRIBUTIONS IN EXCESS OF $100 
              TO POLITICAL ORGANIZATIONS.

    (a) In General.--Part VI of subchapter F of chapter 1 of the 
Internal Revenue Code of 1986 (relating to political organizations) is 
amended by adding at the end the following new section:

``SEC. 528. INCLUSION IN GROSS INCOME FOR CONTRIBUTIONS IN EXCESS OF 
              $100 TO POLITICAL ORGANIZATIONS.

    ``(a) In General.--Notwithstanding any other provision of law--
            ``(1) the gross income of any political organization shall 
        include any amount contributed in cash to such organization 
        during a calendar year by any person to the extent the amount 
        contributed directly or indirectly to such organization by such 
        person during such year exceeds $100, and
            ``(2) the amount included in gross income under paragraph 
        (1) shall be subject to tax under this chapter.
    ``(b) Political Organization.--The term `political organization' 
means a party, committee, association, fund, or other organization 
(whether or not incorporated) organized and operated primarily for the 
purpose of directly or indirectly accepting contributions or making 
expenditures, or both, for an exempt function (as defined in section 
527(e)).''
    (b) Clerical Amendment.--The table of sections for such part VI is 
amended by adding at the end the following new item:

                              ``Sec. 528. Inclusion in gross income for 
                                        contributions in excess of $100 
                                        to political organizations.''
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.