SECTION 1. MODIFICATIONS OF REPORTING REQUIREMENTS FOR CERTAIN STATE 
              AND LOCAL POLITICAL ORGANIZATIONS.

    (a) Notification.--Paragraph (5) of section 527(i) of the Internal 
Revenue Code of 1986 (relating to organizations must notify Secretary 
that they are section 527 organizations) is amended by striking ``or'' 
at the end of subparagraph (A), by striking the period at the end of 
subparagraph (B) and inserting ``, or'', and by adding at the end the 
following new subparagraph:
                    ``(C) which is a political committee of a State or 
                local candidate.''.
    (b) Reporting.--Paragraph (5) of section 527(j) of such Code 
(relating to required disclosures of expenditures and contributions) is 
amended by striking ``or'' at the end of at the end of subparagraph 
(D), by redesignating subparagraphs (C), (D), and (E) as subparagraphs 
(D), (E), and (F), respectively, and by inserting after subparagraph 
(B) the following new subparagraph:
                    ``(C) to any organization which is an exempt State 
                or local political organization,''.
    (c) Annual Return Requirements.--Paragraph (6) of section 6012(a) 
of such Code is amended to read as follows:
            ``(6)(A) Except as provided by subparagraphs (B) and (C), 
        every political organization (within the meaning of section 
        527(e)(1)), and every fund treated under section 527(g) as if 
        it constituted a political organization, which has--
                    ``(i) political organization taxable income (within 
                the meaning of section 527(c)(1)) for the taxable year, 
                or
                    ``(ii) gross receipts of $25,000 or more for the 
                taxable year (other than an organization to which 
                section 527 applies solely by reason of subsection 
                (f)(1) of such section).
            ``(B) Subparagraph (A)(ii) shall not apply to an 
        organization which is a political committee of a State or local 
        candidate (within the meaning of section 527(i)(5)(C)).
            ``(C) In the case of an exempt State or local political 
        organization (as defined in section 527(e)(5)), subparagraph 
        (A)(ii) shall be applied by substituting `$100,000' for 
        `$25,000'.''.
    (d) Exempt State or Local Political Organization.--Subsection (e) 
of section 527 of such (relating to other definitions) is amended by 
adding at the end the following new paragraph:
            ``(5) Exempt state or local political organization.--
                    ``(A) In general.--The term `exempt State or local 
                political organization' means a political organization 
                which--
                            ``(i) does not engage in exempt function 
                        activity other than solely in influencing or 
                        attempting to influence the selection, 
                        nomination, election, or appointment of any 
                        individual to any State or local public office 
                        or office in a State or local political 
                        organization,
                            ``(ii) is subject to State or local 
                        requirements to submit reports (and so 
                        reports)--
                                    ``(I) regarding each separate 
                                expenditure from and contribution to, 
                                such organization, and
                                    ``(II) including information 
                                regarding the person who makes such 
                                contribution or receives such 
                                expenditure,
                        which would otherwise be required to be 
                        reported under this section, and
                            ``(iii) with respect to which the reports 
                        referred to in clause (ii) are made public by 
                        the agency with which such reports are filed 
                        and are publicly available for inspection in a 
                        manner similar to that required by section 
                        6104(d)(1).
                    ``(B) Minimum reportable amounts.--An organization 
                shall not be treated as failing to meet the 
                requirements of subparagraph (A)(ii) solely because the 
                minimum amount of any expenditure or contribution 
                required to be reported under State or local law is not 
                more than $100 greater than the minimum amount required 
                to be reported under subsection (j) with respect to 
                such expenditure or contribution.
                    ``(C) Participation of federal candidate or office 
                holder.--The term `exempt State or local political 
                organization' shall not include any organization 
                otherwise described in subparagraph (A) if a candidate 
                for nomination or election to Federal elective office 
                or an individual who holds such office--
                            ``(i) controls or materially participates 
                        in the direction of the organization,
                            ``(ii) solicits contributions to the 
                        organization, or
                            ``(iii) directs, in whole or in part, 
                        disbursements by the organization.''.
    (e) Waiver of Filing Penalties.--Section 527 of such Code is 
amended by adding at the end the following:
    ``(k) Authority To Waive.--The Secretary may waive all or any 
portion of the--
            ``(1) tax assessed on an organization by reason of the 
        failure of the organization to give notice under subsection 
        (i), or
            ``(2) penalty imposed under subsection (j) for a failure to 
        file a report,
on a showing that such failure was due to reasonable cause and not due 
to willful neglect.''.
    (f) Effective Date.--The amendments made by this section shall take 
effect as if included in the amendments made by Public Law 106-230.

SEC. 2. TECHNICAL CORRECTIONS TO SECTION 527 ORGANIZATION DISCLOSURE 
              PROVISIONS.

    (a) Unsegregated Funds Not To Avoid Penalty.--Paragraph (4) of 
section 527(i) of the Internal Revenue Code of 1986 (relating to 
failure to notify) is amended by adding at the end the following new 
sentence: ``For purposes of the preceding sentence, the term `exempt 
function income' means any amount described in a subparagraph of 
subsection (c)(3), whether or not segregated for use for an exempt 
function.''
    (b) Procedures for Assessment and Collection of Penalty.--Paragraph 
(1) of section 527(j) of such Code (relating to required disclosure of 
expenditures and contributions) is amended by adding at the end the 
following new sentence: ``For purposes of subtitle F, the penalty 
imposed by this paragraph shall be assessed and collected in the same 
manner as penalties imposed by section 6652(c).''
    (c) Application of Fraud Penalty.--Section 7207 of such Code 
(relating to fraudulent returns, statements, and other documents) is 
amended by striking ``pursuant to subsection (b) of section 6047 or 
pursuant to subsection (d) of section 6104'' and inserting ``pursuant 
to section 6047(b), section 6104(d), or subsection (i) or (j) of 
section 527''.
    (d) Duplicate Electronic and Written Filings Not Required.--
            (1) Subparagraph (A) of section 527(i)(1) of such Code is 
        amended by striking ``, electronically and in writing,''.
            (2) Subsection (i) of section 527 of such Code is amended 
        by adding at the end the following new paragraph:
            ``(7) Electronic filing.--The Secretary shall develop 
        procedures for submission in electronic form of notices 
        required to be filed under this subsection and reports required 
        to be filed under subsection (j).''
    (e) Effective Date.--The amendments made by this section shall take 
effect as if included in the amendments made by Public Law 106-230.
Amends the Internal Revenue Code to: (1) exempt State and local candidate committees from specified notification requirements; (2) exempt State and local political committees from specified reporting and annual gross receipts-based return requirements; and (3) authorize the Secretary of the Treasury to waive certain related penalties.Amends related penalty provisions.
To amend the Internal Revenue Code of 1986 to avoid duplicate reporting of information on political activities of certain State and local political organizations, and for other purposes.