I
107TH CONGRESS
1ST SESSION
H. R. 277
To amend the Internal Revenue Code of 1986 to permit tax-exempt
organizations to participate in political campaigns.
IN THE HOUSE OF REPRESENTATIVES
JANUARY 30, 2001
Mr. JONES of North Carolina (for himself and Mr. HOSTETTLER) 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 permit
tax-exempt organizations to participate in political cam-
paigns.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. TAX-EXEMPT ORGANIZATIONS PERMITTED TO
ENGAGE IN POLITICAL CAMPAIGNS, ETC.
(a) IN GENERAL.—Paragraph (3) of section 501(c)
of the Internal Revenue Code of 1986 is amended by strik-
ing ‘‘which does not participate in, or intervene in’’ and
all that follows and inserting ‘‘no substantial part of the
activities of which is participating in, or intervening in (in-
cluding the publishing or distributing of statements), any
political campaign on behalf of (or in opposition to) any
candidate for public office (except as otherwise provided
in subsection (h)).’’.
(b) EXPANSION
OF ELECTION UNDER SECTION
501(h).—
(1) IN GENERAL.—So much of subsection (h) of
section 501 of such Code as precedes paragraph (2)
is amended to read as follows:
‘‘(h) EXPENDITURES BY PUBLIC CHARITIES TO IN-
FLUENCE
LEGISLATION
OR
FOR
POLITICAL
CAM-
PAIGNS.—
‘‘(1) GENERAL RULES.—
‘‘(A) EXPENDITURES TO INFLUENCE LEG-
ISLATION.—In the case of an organization to
which this subsection applies, exemption from
taxation under subsection (a) shall be denied
because a substantial part of the activities of
such organization consists of carrying on propa-
ganda, or otherwise attempting, to influence
legislation, but only if such organization
normally—
‘‘(i) makes lobbying expenditures in
excess of the lobbying ceiling amount for
such organization for each taxable year, or
‘‘(ii) makes grass roots expenditures
in excess of the grass roots ceiling amount
for such organization for each taxable
year.
‘‘(B) EXPENDITURES FOR POLITICAL CAM-
PAIGNS.—In the case of an organization to
which this subsection applies, exemption from
taxation under subsection (a) shall be denied
because a substantial part of the activities of
such organization consists of participating in,
or intervening in (including the publishing or
distributing of statements), any political cam-
paign on behalf of (or in opposition to) any can-
didate for public office, but only if such organi-
zation normally makes political expenditures (as
defined in section 4911(e)) in excess of the po-
litical campaign ceiling amount for such organi-
zation for each taxable year.’’
(2) POLITICAL CAMPAIGN CEILING AMOUNT.—
Paragraph (2) of section 501(h) of such Code is
amended by adding at the end the following new
subparagraphs:
‘‘(E) 
POLITICAL
CAMPAIGN
CEILING
AMOUNT.—The 
political 
campaign 
ceiling
amount for any organization is 150 percent of
the political campaign nontaxable amount, de-
termined under section 4911(e).’’
(3) CONFORMING AMENDMENT.—Paragraph (7)
of section 501(h) of such Code is amended by strik-
ing ‘‘the interpretation’’ and all that follows and in-
serting ‘‘the interpretation under subsection (c)(3)
of the material following ‘private shareholder or indi-
vidual’.’’
(c) COMPARABLE TEST FOR CHARITABLE CONTRIBU-
TION
DEDUCTION.—Subparagraph 
(D) 
of 
section
170(c)(2) of such Code is amended by striking ‘‘and which
does not participate in, or intervene in’’ and inserting ‘‘or
by reason of participating in, or intervening in’’.
(d) REVISION OF EXCISE TAXES.—
(1) So much of chapter 41 of such Code as pre-
cedes subsection (c) of section 4911 is amended to
read as follows:
‘‘CHAPTER 41—PUBLIC CHARITIES
‘‘Sec. 4911. Tax on excess lobbying and political expenditures.
‘‘Sec. 4912. Tax on disqualifying lobbying and political expendi-
tures of certain organizations.
‘‘SEC. 4911. TAX ON EXCESS LOBBYING AND POLITICAL EX-
PENDITURES.
‘‘(a) TAX IMPOSED.—
‘‘(1) IN GENERAL.—There is hereby imposed on
the excess lobbying and political expenditures of any
organization to which this section applies a tax equal
to 25 percent of the amount of the excess lobbying
and political expenditures for the taxable year.
‘‘(2) ORGANIZATIONS TO WHICH THIS SECTION
APPLIES.—This section applies to any organization
with respect to which an election under section
501(h) (relating to lobbying and political expendi-
tures by public charities) is in effect for the taxable
year.
‘‘(b) EXCESS LOBBYING AND POLITICAL EXPENDI-
TURES.—For purposes of this section, the term ‘excess
lobbying and political expenditures’ means, for a taxable
year, the sum of—
‘‘(1) the greater of—
‘‘(A) the amount by which the lobbying ex-
penditures made by the organization during the
taxable year exceed the lobbying nontaxable
amount for such organization for such taxable
year, or
‘‘(B) the amount by which the grass roots
expenditures made by the organization during
the taxable year exceed the grass roots non-
taxable amount for such organization for such
taxable year, plus
‘‘(2) the amount by which the political expendi-
tures made by the organization during the taxable
year exceed the political campaign nontaxable
amount for such organization for such taxable year.’’
(2) Section 4911 of such Code is amended by
redesignating subsections (e) and (f) as subsections
(f) and (g) and by inserting after subsection (d) the
following new subsection:
‘‘(e) DEFINITIONS RELATING
TO POLITICAL EX-
PENDITURES.—For purposes of this section—
‘‘(1) POLITICAL EXPENDITURES.—
‘‘(A) IN GENERAL.—The term ‘political ex-
penditure’ means any amount paid or incurred
by a section 501(c)(3) organization in any par-
ticipation in, or intervention in (including the
publication or distribution of statements), any
political campaign on behalf of (or in opposition
to) any candidate for public office.
‘‘(B) CERTAIN OTHER EXPENDITURES IN-
CLUDED.—In the case of an organization which
is formed primarily for purposes of promoting
the candidacy (or prospective candidacy) of an
individual for public office (or which is effec-
tively controlled by a candidate or prospective
candidate and which is availed of primarily for
such purposes), the term ‘political expenditure’
includes any of the following amounts paid or
incurred by the organization:
‘‘(i) Amounts paid or incurred to such
individual for speeches or other services.
‘‘(ii) Travel expenses of such indi-
vidual.
‘‘(iii) Expenses of conducting polls,
surveys, or other studies, or preparing pa-
pers or other materials, for use by such in-
dividual.
‘‘(iv) Expenses of advertising, pub-
licity, and fundraising for such individual.
‘‘(v) Any other expense which has the
primary effect of promoting public recogni-
tion, or otherwise primarily accruing to the
benefit, of such individual.
‘‘(2) 
POLITICAL
CAMPAIGN
NONTAXABLE
AMOUNT.—
‘‘(A) IN
GENERAL.—The lobbying non-
taxable amount for any organization for any
taxable year is the lesser of (i) $1,000,000 or
(ii) the amount determined under the following
table:
‘‘If the exempt purpose ex-
penditures are—
The 
lobbying 
nontaxable
amount is—
Not over $500,000 ........................
20 percent of the exempt purpose ex-
penditures.
‘‘If the exempt purpose ex-
penditures are—
The 
lobbying 
nontaxable
amount is—
Over 
$500,000 
but 
not 
over
$1,000,000.
$100,000 plus 15 percent of the ex-
cess of the exempt purpose expend-
itures over $500,000.
Over $1,000,000 but not over
$1,500,000.
$175,000 plus 10 percent of the ex-
cess of the exempt purpose expend-
itures over $1,000,000.
Over $1,500,000 ............................
$225,000 plus 5 percent of the excess
of the exempt purpose expenditures
over $1,500,000.
‘‘(B) EXEMPT PURPOSE EXPENDITURES.—
‘‘(i) IN GENERAL.—The term ‘exempt
purpose expenditures’ means, with respect
to any organization for any taxable year,
the total of the amounts paid or incurred
by such organization to accomplish pur-
poses described in section 170(c)(2)(B)
(relating to religious, charitable, edu-
cational, etc., purposes).
‘‘(ii) CERTAIN AMOUNTS INCLUDED.—
The term ‘exempt purpose expenditures’
includes—
‘‘(I) administrative expenses paid
or incurred for purposes described in
section 170(c)(2)(B), and
‘‘(II) political expenditures paid
or incurred (whether or not for pur-
poses 
described 
in 
section
170(c)(2)(B)).
‘‘(iii) 
CERTAIN
AMOUNTS
EX-
CLUDED.—The term ‘exempt purpose ex-
penditures’ does not include amounts paid
or incurred to or for—
‘‘(I) a separate fundraising unit
of such organization, or
‘‘(II) one or more other organiza-
tions, if such amounts are paid or in-
curred primarily for fundraising.’’
(3) Subsection (g) of section 4911 of such
Code, as redesignated by paragraph (2), is amended
by striking ‘‘excess lobbying expenditures’’ each
place it appears and inserting ‘‘excess lobbying and
political expenditures’’.
(4)(A) Section 4912 of such Code is amended—
(i) in the heading by striking ‘‘LOBBYING
EXPENDITURES’’ and inserting ‘‘LOBBYING
AND POLITICAL EXPENDITURES’’, and
(ii) in the text by striking ‘‘lobbying ex-
penditures’’ and inserting ‘‘lobbying and polit-
ical expenditures’’.
(B) Paragraph (2) of section 4912(d) of such
Code is amended to read as follows:
‘‘(2) ORGANIZATION MANAGER.—The term ‘or-
ganization manager’ means—
‘‘(A) any officer, director, or trustee of the
organization (or individual having powers or re-
sponsibilities similar to those of officers, direc-
tors, or trustees of the organization), and
‘‘(B) with respect to any expenditure, any
employee of the organization having authority
or responsibility with respect to such expendi-
ture.’’
(e) OTHER CONFORMING AMENDMENTS.—
(1) Subchapter C of chapter 42 of such Code
is hereby repealed.
(2) Section 4962 of such Code is amended by
striking subsection (c).
(3) Sections 4963 and 7422(g) of such Code
are each amended by striking ‘‘4955,’’ each place it
appears.
(4) Paragraph (10) of section 6033(b) of such
Code is amended by adding ‘‘and’’ at the end of sub-
paragraph (A), by striking ‘‘and’’ at the end of sub-
paragraph (B), and by striking subparagraph (C).
(5) Section 6213(e) of such Code is amended by
striking ‘‘4955 (relating to taxes on political expend-
itures),’’.
(6) The table of subchapters for chapter 42 of
such Code is amended by striking the item relating
to subchapter C.
(7) Section 6852 (relating to termination as-
sessments in case of flagrant political expenditures
of section 501(c)(3) organizations) is hereby re-
pealed.
(8) Clause (v) of section 6091(b)(1)(B) of such
Code is amended by striking ‘‘or 6852(a)’’.
(9) Sections 6211(b)(1) and 6212(c)(1) of such
Code are each amended by striking ‘‘or 6852’’.
(10) Sections 6213(a), 6234(e)(3), 6863, and
7429(g) of such Code are each amended by striking
‘‘, 6852,’’ each place it appears.
(11) Section 7429(a)(1)(A) of such Code is
amended by striking ‘‘6852(a),’’.
(12) Paragraph (3) of section 7611(i) of such
Code is amended by striking ‘‘, section 6852 (relat-
ing to termination assessments in case of flagrant
political expenditures of section 501(c)(3) organiza-
tions),’’.
(13) The table of sections for part I of sub-
chapter A of chapter 70 of such Code is amended by
striking the item relating to section 6852.
(14) Subchapter A of chapter 76 of such Code
is amended by striking section 7409 and by redesig-
nating section 7410 as section 7409.
(15) The table of sections for such subchapter
A is amended by striking the last 2 items and insert-
ing the following new item:
‘‘Sec. 7409. Cross references.’’.
(f) EFFECTIVE DATE.—The amendments made by
this section shall apply to expenditures made after the
date of the enactment of this Act.
Æ