To amend the Internal Revenue Code of 1986 to impose penalties for the failure of 527 organizations to comply with disclosure requirements.

Summary: 527 Transparency Act of 2005 - Amends the Internal Revenue Code to revise disclosure requirements for tax-exempt political organizations (527 organizations) to require quarterly (instead of semiannual) reporting of contributions and expenditures in non-election years. Imposes a penalty tax on political organizations that fail to meet disclosure requirements. Denies a gift tax exclusion for donations to political organizations that fail to meet disclosure requirements.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``527 Transparency Act of 2005''.

SEC. 2. REPORTING FREQUENCY IN NON-ELECTION YEARS INCREASED TO 
              QUARTERLY.

    (a) In General.--Clause (ii) of section 527(j)(2)(A) of the 
Internal Revenue Code of 1986 (relating to required disclosure) is 
amended to read as follows:
                            ``(ii) quarterly reports, which shall be 
                        filed not later than the fifteenth day after 
                        the last day of each calendar quarter, and 
                        which shall be complete as of the last day of 
                        each calendar quarter, except that the report 
                        for the quarter ending December 31 shall be 
                        filed not later than January 31 of the 
                        following calendar year.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to taxable years beginning after December 31, 2005.

SEC. 3. FAILURE OF 527 ORGANIZATION TO COMPLY WITH DISCLOSURE 
              REQUIREMENTS.

    (a) Excise Tax on Managers.--
            (1) In general.--Subchapter C of chapter 42 of the Internal 
        Revenue Code of 1986 is amended by adding at the end the 
        following new section:

``SEC. 4956. TAX ON FAILURE OF POLITICAL ORGANIZATIONS TO MEET 
              DISCLOSURE REQUIREMENTS.

    ``(a) Tax Imposed.--In the case of a failure of a political 
organization to meet the disclosure requirements of section 527(j) with 
respect to any contribution to or expenditure from the political 
organization, there is hereby imposed on the political organization a 
tax for each such failure.
    ``(b) Amount of Tax.--The tax imposed by subsection (a) shall be 30 
percent of the total amount of the contribution or expenditure with 
respect to which such failure occurred.
    ``(c) Liability for Tax.--
            ``(1) In general.--Except as provided by paragraph (2), the 
        tax imposed by subsection (a) shall be paid by the political 
        organization.
            ``(2) Joint and several liability of organization 
        managers.--Each organization manager of the political 
        organization shall be jointly and severally liable for any tax 
        imposed under subsection (a).
    ``(d) Organization Manager.--For purposes of this section, the term 
`organization manager' means any officer, director, or trustee of the 
political organization (or individual having powers or responsibilities 
similar to those of an officer, director, or trustee).
    ``(e) Political Organization.--The term `political organization' 
shall have the meaning given such term by section 527(e)(1).''.
            (2) Conforming amendments.--
                    (A) The heading for subchapter C of chapter 42 of 
                such Code is amended by adding at the end the 
                following: ``; Failure of Political Organizations to 
                Meet Reporting Requirements''.
                    (B) The table of sections for such subchapter C is 
                amended by adding at the end the following:

``Sec. 4956. Tax on failure of political organizations to meet 
                            disclosure requirements.''.
                    (C) The item in the table of subchapters of such 
                chapter 42 relating to subchapter C is amended to read 
                as follows:
      ``subchapter c. political expenditures of section 501(c)(3) 
  organizations; failure of political organizations to meet reporting 
                            requirements''.
            (3) Effective date.--The amendments made by this subsection 
        shall apply to taxable years beginning after December 31, 2005.
    (b) Denial of Gift Tax Exclusion.--
            (1) In general.--Paragraph (4) of section 2501(a) of the 
        Internal Revenue Code of 1986 (relating to taxable transfers) 
        is amended to read as follows:
            ``(4) Transfers to political organizations.--
                    ``(A) In general.--Paragraph (1) shall not apply to 
                the transfer of money or other property to a political 
                organization (within the meaning of section 527(e)(1)) 
                for the use of such organization.
                    ``(B) Exception for failure of organization to meet 
                disclosure requirements.--Subparagraph (A) shall not 
                apply to any transfer in a calendar year for which the 
                political organization fails to make the disclosures 
                required by section 527(j).''.
            (2) Notice to contributors of denial of gift tax exception 
        for failure to disclose.--Section 527(j) of such Code is 
        amended by adding at the end the following new paragraph:
            ``(8) Notice to contributors of denial of gift tax 
        exception for failure to disclose.--In the case of a final 
        determination by the Secretary that a failure described in 
        paragraph (1)(A) with respect to an organization occurred, the 
        organization shall, not later than 90 days after the date of 
        such determination, provide written notice of such failure to 
        each contributor to the organization for the calendar year in 
        which such failure occurred. Such notice shall include a 
        statement that the exception under section 2501(a)(4)(A) does 
        not apply to any contribution to the organization in such 
        calendar year.''.
            (3) Effective date.--The amendments made by this subsection 
        shall apply to transfers made after December 31, 2005.