I 

109TH CONGRESS 

1ST SESSION H. R. 1942 

To amend the Internal Revenue Code of 1986 to impose penalties for the 

failure of 527 organizations to comply with disclosure requirements. 

IN THE HOUSE OF REPRESENTATIVES 

APRIL 27, 2005 

Mr. SHAW (for himself, Mr. FOLEY, Mr. SAM JOHNSON of Texas, and Mr. 

ENGLISH of Pennsylvania) introduced the following bill; which was referred to the Committee on Ways and Means 

A BILL 

To amend the Internal Revenue Code of 1986 to impose 

penalties for the failure of 527 organizations to comply 

with disclosure requirements. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘527 Transparency Act 

5 of 2005’’. 
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1 SEC. 2. REPORTING FREQUENCY IN NON-ELECTION YEARS 

2 INCREASED TO QUARTERLY. 

3 (a) IN GENERAL.—Clause (ii) of section 527(j)(2)(A) 

4 of the Internal Revenue Code of 1986 (relating to required 

5 disclosure) is amended to read as follows: 

6 ‘‘(ii) quarterly reports, which shall be 

7 filed not later than the fifteenth day after 

8 the last day of each calendar quarter, and 

9 which shall be complete as of the last day 

10 of each calendar quarter, except that the 

11 report for the quarter ending December 31 

12 shall be filed not later than January 31 of 

13 the following calendar year.’’. 

14 (b) EFFECTIVE DATE.—The amendment made by 

15 subsection (a) shall apply to taxable years beginning after 

16 December 31, 2005. 

17 SEC. 3. FAILURE OF 527 ORGANIZATION TO COMPLY WITH 

18 DISCLOSURE REQUIREMENTS. 

19 (a) EXCISE TAX ON MANAGERS.— 

20 (1) IN GENERAL.—Subchapter C of chapter 42 

21 of the Internal Revenue Code of 1986 is amended by 

22 adding at the end the following new section: 
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1 ‘‘SEC. 4956. TAX ON FAILURE OF POLITICAL ORGANIZA2 TIONS TO MEET DISCLOSURE REQUIRE3 MENTS. 

4 ‘‘(a) TAX IMPOSED.—In the case of a failure of a po5 litical organization to meet the disclosure requirements of 

6 section 527(j) with respect to any contribution to or ex7 penditure from the political organization, there is hereby 

8 imposed on the political organization a tax for each such 

9 failure. 

10 ‘‘(b) AMOUNT OF TAX.—The tax imposed by sub11 section (a) shall be 30 percent of the total amount of the 

12 contribution or expenditure with respect to which such 

13 failure occurred. 

14 ‘‘(c) LIABILITY FOR TAX.— 

15 ‘‘(1) IN GENERAL.—Except as provided by 

16 paragraph (2), the tax imposed by subsection (a) 

17 shall be paid by the political organization. 

18 ‘‘(2) JOINT AND SEVERAL LIABILITY OF ORGA19 NIZATION MANAGERS.—Each organization manager 

20 of the political organization shall be jointly and sev21 erally liable for any tax imposed under subsection 

22 (a). 

23 ‘‘(d) ORGANIZATION MANAGER.—For purposes of 

24 this section, the term ‘organization manager’ means any 

25 officer, director, or trustee of the political organization (or 
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1 individual having powers or responsibilities similar to 

2 those of an officer, director, or trustee). 

3 ‘‘(e) POLITICAL ORGANIZATION.—The term ‘political 

4 organization’ shall have the meaning given such term by 

5 section 527(e)(1).’’. 

6 (2) CONFORMING AMENDMENTS.— 

7 (A) The heading for subchapter C of chap8 ter 42 of such Code is amended by adding at 

9 the end the following: ‘‘; Failure of Polit10 ical Organizations to Meet Reporting 

11 Requirements’’. 

12 (B) The table of sections for such sub13 chapter C is amended by adding at the end the 

14 following: 

‘‘Sec. 4956. Tax on failure of political organizations to meet disclosure requirements.’’. 

15 (C) The item in the table of subchapters of 

16 such chapter 42 relating to subchapter C is 

17 amended to read as follows: 

‘‘SUBCHAPTER C. POLITICAL EXPENDITURES OF SECTION 501(C)(3) ORGANIZATIONS; FAILURE OF POLITICAL ORGANIZATIONS TO MEET REPORTING REQUIREMENTS’’. 

18 (3) EFFECTIVE DATE.—The amendments made 

19 by this subsection shall apply to taxable years begin20 ning after December 31, 2005. 

21 (b) DENIAL OF GIFT TAX EXCLUSION.— 
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1 (1) IN GENERAL.—Paragraph (4) of section 

2 2501(a) of the Internal Revenue Code of 1986 (re3 lating to taxable transfers) is amended to read as 

4 follows: 

5 ‘‘(4) TRANSFERS TO POLITICAL ORGANIZA6 TIONS.— 

7 ‘‘(A) IN GENERAL.—Paragraph (1) shall 

8 not apply to the transfer of money or other 

9 property to a political organization (within the 

10 meaning of section 527(e)(1)) for the use of 

11 such organization. 

12 ‘‘(B) EXCEPTION FOR FAILURE OF ORGA13 NIZATION TO MEET DISCLOSURE REQUIRE14 MENTS.—Subparagraph (A) shall not apply to 

15 any transfer in a calendar year for which the 

16 political organization fails to make the disclo17 sures required by section 527(j).’’. 

18 (2) NOTICE TO CONTRIBUTORS OF DENIAL OF

19 GIFT TAX EXCEPTION FOR FAILURE TO DISCLOSE.— 

20 Section 527(j) of such Code is amended by adding 

21 at the end the following new paragraph: 

22 ‘‘(8) NOTICE TO CONTRIBUTORS OF DENIAL OF

23 GIFT TAX EXCEPTION FOR FAILURE TO DISCLOSE.— 

24 In the case of a final determination by the Secretary 

25 that a failure described in paragraph (1)(A) with re-
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1 spect to an organization occurred, the organization 

2 shall, not later than 90 days after the date of such 

3 determination, provide written notice of such failure 

4 to each contributor to the organization for the cal5 endar year in which such failure occurred. Such no6 tice shall include a statement that the exception 

7 under section 2501(a)(4)(A) does not apply to any 

8 contribution to the organization in such calendar 

9 year.’’. 

10 (3) EFFECTIVE DATE.—The amendments made 

11 by this subsection shall apply to transfers made 

12 after December 31, 2005. 

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