II 
107TH CONGRESS 
2D SESSION 
H. R. 5596
IN THE SENATE OF THE UNITED STATES 
OCTOBER 17, 2002
Received 
AN ACT 
To amend section 527 of the Internal Revenue Code of 
1986 to eliminate notification and return requirements 
for State and local party committees and candidate com-
mittees and avoid duplicate reporting by certain State 
and local political committees of information required 
to be reported and made publicly available under State 
law, and for other purposes.
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Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. EXEMPTION FOR CERTAIN STATE AND LOCAL 
POLITICAL COMMITTEES FROM NOTIFICA-
TION REQUIREMENTS. 
(a) EXEMPTION
FROM
NOTIFICATION
REQUIRE-
MENTS.—Paragraph (5) of section 527(i) of the Internal 
Revenue Code of 1986 (relating to organizations must no-
tify 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: 
‘‘(C) which is a political committee of a 
State or local candidate or which is a State or 
local committee of a political party.’’. 
(b) EFFECTIVE DATE.—The amendments made by 
subsection (a) shall take effect as if included in the 
amendments made by Public Law 106–230. 
SEC. 2. EXEMPTION FOR CERTAIN STATE AND LOCAL PO-
LITICAL COMMITTEES FROM REPORTING RE-
QUIREMENTS. 
(a) IN GENERAL.—Section 527(j)(5) of the Internal 
Revenue Code of 1986 (relating to coordination with other 
requirements) is amended by redesignating subparagraphs 
(C), (D), and (E) as subparagraphs (D), (E), and (F),
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respectively, and by inserting after subparagraph (B) the 
following new subparagraph: 
‘‘(C) to any organization which is a quali-
fied State or local political organization,’’. 
(b) QUALIFIED STATE OR LOCAL POLITICAL ORGA-
NIZATION.—Subsection (e) of section 527 of the Internal 
Revenue Code of 1986 (relating to other definitions) is 
amended by adding at the end the following new para-
graph: 
‘‘(5) QUALIFIED STATE OR LOCAL POLITICAL 
ORGANIZATION.—
‘‘(A) IN
GENERAL.—The term ‘qualified 
State or local political organization’ means a 
political organization—
‘‘(i) all the exempt functions of which 
are solely for the purposes of 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) which is subject to State law that 
requires the organization to report (and it 
so reports)—
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‘‘(I) information regarding each 
separate expenditure from and con-
tribution to such organization, and 
‘‘(II) 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 (I) made pub-
lic by the agency with which such reports 
are filed, and (II) made publicly available 
for inspection by the organization in the 
manner described in section 6104(d). 
‘‘(B) CERTAIN STATE LAW DIFFERENCES 
DISREGARDED.—An organization shall not be 
treated as failing to meet the requirements of 
subparagraph (A)(ii) solely by reason of 1 or 
more of the following: 
‘‘(i) The minimum amount of any ex-
penditure or contribution required to be re-
ported under State law is not more than 
$300 greater than the minimum amount 
required to be reported under subsection 
(j).
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‘‘(ii) The State law does not require 
the organization to identify 1 or more of 
the following: 
‘‘(I) The employer of any person 
who makes contributions to the orga-
nization.
‘‘(II) The occupation of any per-
son who makes contributions to the 
organization. 
‘‘(III) The employer of any per-
son who receives expenditures from 
the organization. 
‘‘(IV) The occupation of any per-
son who receives expenditures from 
the organization. 
‘‘(V) The purpose of any expendi-
ture of the organization. 
‘‘(VI) The date any contribution 
was made to the organization. 
‘‘(VII) The date of any expendi-
ture of the organization. 
‘‘(C) DE MINIMIS ERRORS.—An organiza-
tion shall not fail to be treated as a qualified 
State or local political organization solely be-
cause such organization makes de minimis er-
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rors in complying with the State reporting re-
quirements and the public inspection require-
ments described in subparagraph (A) as long as 
the organization corrects such errors within a 
reasonable period after the organization be-
comes aware of such errors. 
‘‘(D) PARTICIPATION
OF
FEDERAL
CAN-
DIDATE OR OFFICE HOLDER.—The term ‘quali-
fied State or local political organization’ shall 
not include any organization otherwise de-
scribed in subparagraph (A) if a candidate for 
nomination or election to Federal elective public 
office or an individual who holds such office—
‘‘(i) controls or materially participates 
in the direction of the organization, 
‘‘(ii) solicits contributions to the orga-
nization (unless the Secretary determines 
that such solicitations resulted in de mini-
mis contributions and were made without 
the prior knowledge and consent, whether 
explicit or implicit, of the organization or 
its officers, directors, agents, or employ-
ees), or 
‘‘(iii) directs, in whole or in part, dis-
bursements by the organization.’’.
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(c) INFORMATION RETURNS.—Subsection (g) of sec-
tion 6033 of such Code (relating to returns required by 
political organizations) is amended to read as follows: 
‘‘(g) RETURNS REQUIRED BY POLITICAL ORGANIZA-
TIONS.—
‘‘(1) IN GENERAL.—This section shall apply to 
a political organization (as defined by section 
527(e)(1)) which has gross receipts of $25,000 or 
more for the taxable year. In the case of a political 
organization which is a qualified State or local polit-
ical organization (as defined in section 527(e)(5)), 
the preceding sentence shall be applied by sub-
stituting ‘$100,000’ for ‘$25,000’. 
‘‘(2) ANNUAL
RETURNS.—Political organiza-
tions described in paragraph (1) shall file an annual 
return—
‘‘(A) containing the information required, 
and complying with the other requirements, 
under subsection (a)(1) for organizations ex-
empt from taxation under section 501(a), with 
such modifications as the Secretary considers 
appropriate to require only information which is 
necessary for the purposes of carrying out sec-
tion 527, and
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‘‘(B) containing such other information as 
the Secretary deems necessary to carry out the 
provisions of this subsection. 
‘‘(3) MANDATORY EXCEPTIONS FROM FILING.—
Paragraph (2) shall not apply to an organization—
‘‘(A) which is a State or local committee of 
a political party, or political committee of a 
State or local candidate, 
‘‘(B) which is a caucus or association of 
State or local officials, 
‘‘(C) which is an authorized committee (as 
defined in section 301(6) of the Federal Elec-
tion Campaign Act of 1971) of a candidate for 
Federal office, 
‘‘(D) which is a national committee (as de-
fined in section 301(14) of the Federal Election 
Campaign Act of 1971) of a political party, 
‘‘(E) which is a United States House of 
Representatives or United States Senate cam-
paign committee of a political party committee, 
‘‘(F) which is required to report under the 
Federal Election Campaign Act of 1971 as a 
political committee (as defined in section 301(4) 
of such Act), or
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‘‘(G) to which section 527 applies for the 
taxable year solely by reason of subsection 
(f)(1) of such section. 
‘‘(4) DISCRETIONARY
EXCEPTION.—The Sec-
retary may relieve any organization required under 
paragraph (2) to file an information return from fil-
ing such a return if the Secretary determines that 
such filing is not necessary to the efficient adminis-
tration of the internal revenue laws.’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall take effect as if included in the amend-
ments made by Public Law 106–230. 
SEC. 4. NOTIFICATION OF INTERACTION OF REPORTING 
REQUIREMENTS. 
(a) IN GENERAL.—The Secretary of the Treasury, in 
consultation with the Federal Election Commission, shall 
publicize—
(1) the effect of the amendments made by this 
Act, and 
(2) the interaction of requirements to file a no-
tification or report under section 527 of the Internal 
Revenue Code of 1986 and reports under the Fed-
eral Election Campaign Act of 1971. 
(b) INFORMATION.—Information provided under sub-
section (a) shall be included in any appropriate form, in-
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struction, notice, or other guidance issued to the public 
by the Secretary of the Treasury or the Federal Election 
Commission regarding reporting requirements of political 
organizations (as defined in section 527 of the Internal 
Revenue Code of 1986) or reporting requirements under 
the Federal Election Campaign Act of 1971. 
SEC. 5. WAIVER OF FILING AMOUNTS. 
(a) WAIVER OF FILING AMOUNTS.—Section 527 of 
the Internal Revenue Code of 1986 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 comply with the 
requirements of subsection (i), or 
‘‘(2) amount imposed under subsection (j) for a 
failure to comply with the requirements thereof, 
on a showing that such failure was due to reasonable cause 
and not due to willful neglect.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
subsection (a) shall apply to any tax assessed or amount 
imposed after June 30, 2000.
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SEC. 6. MODIFICATIONS TO SECTION 527 ORGANIZATION 
DISCLOSURE PROVISIONS. 
(a) UNSEGREGATED FUNDS NOT TO AVOID TAX.—
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 func-
tion income’ means any amount described in a subpara-
graph of subsection (c)(3), whether or not segregated for 
use for an exempt function.’’. 
(b) PROCEDURES FOR ASSESSMENT AND COLLEC-
TION OF AMOUNTS.—Paragraph (1) of section 527(j) of 
the Internal Revenue Code of 1986 (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 amount imposed by this para-
graph shall be assessed and collected in the same manner 
as penalties imposed by section 6652(c).’’. 
(c) DUPLICATE
WRITTEN
FILINGS
NOT
RE-
QUIRED.—Subparagraph (A) of section 527(i)(1) of the 
Internal Revenue Code of 1986 is amended by striking ‘‘, 
electronically and in writing,’’ and inserting ‘‘electroni-
cally’’. 
(d) APPLICATION
OF FRAUD PENALTY.—Section 
7207 of the Internal Revenue Code of 1986 (relating to 
fraudulent returns, statements, and other documents) is
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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’’. 
(e) CONTENTS AND FILING OF REPORT.—
(1) CONTENTS.—Section 527(j)(3) of the Inter-
nal Revenue Code of 1986 (relating to contents of 
report) is amended—
(A) by inserting ‘‘, date, and purpose’’ 
after ‘‘The amount’’ in subparagraph (A), and 
(B) by inserting ‘‘and date’’ after ‘‘the 
amount’’ in subparagraph (B). 
(2) ELECTRONIC
FILING.—Section 527(j) of 
such Code is amended by adding at the end the fol-
lowing new paragraph: 
‘‘(7) ELECTRONIC
FILING.—Any report re-
quired under paragraph (2) with respect to any cal-
endar year shall be filed in electronic form if the or-
ganization has, or has reason to expect to have, con-
tributions exceeding $50,000 or expenditures exceed-
ing $50,000 in such calendar year.’’. 
(3) ELECTRONIC FILING AND ACCESS OF RE-
QUIRED DISCLOSURES.—Section 527 of such Code, 
as amended by section 5(a), is amended by redesig-
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nating subsection (k) as subsection (l) and by insert-
ing after subsection (j) the following new subsection: 
‘‘(k) PUBLIC AVAILABILITY OF NOTICES AND RE-
PORTS.—
‘‘(1) IN GENERAL.—The Secretary shall make 
any notice described in subsection (i)(1) or report 
described in subsection (j)(7) available for public in-
spection on the Internet not later than 48 hours 
after such notice or report has been filed (in addi-
tion to such public availability as may be made 
under section 6104(d)(7)). 
‘‘(2) ACCESS.—The Secretary shall make the 
entire database of notices and reports which are 
made available to the public under paragraph (1) 
searchable by the following items (to the extent the 
items are required to be included in the notices and 
reports): 
‘‘(A) Names, States, zip codes, custodians 
of records, directors, and general purposes of 
the organizations. 
‘‘(B) Entities related to the organizations. 
‘‘(C) Contributors to the organizations. 
‘‘(D) Employers of such contributors. 
‘‘(E) Recipients of expenditures by the or-
ganizations.
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(2) TIME TO GIVE NOTICE.—Section 527(i)(2) 
of the Internal Revenue Code of 1986 (relating to 
time to give notice) is amended by inserting ‘‘or, in 
the case of any material change in the information 
required under paragraph (3), not later than 30 
days after such material change’’ after ‘‘estab-
lished’’. 
(3) EFFECT OF FAILURE.—Paragraph (4) of 
section 527(i) of the Internal Revenue Code of 1986 
(relating to effect of failure) is amended by inserting 
before the period at the end the following: ‘‘or, in 
the case of a failure relating to a material change, 
by taking into account such income and deductions 
only during the period beginning on the date on 
which the material change occurs and ending on the 
date on which notice is given under this subsection’’. 
(h) EFFECTIVE DATES.—
(1) SUBSECTIONS (a) AND (b).—The amend-
ments made by subsections (a) and (b) shall apply 
to failures occurring on or after the date of the en-
actment of this Act. 
(2) SUBSECTION (c).—The amendments made 
by subsection (c) shall take effect as if included in 
the amendments made by Public Law 106–230.
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(3) SUBSECTION (d).—The amendment made 
by subsection (d) shall apply to reports and notices 
required to be filed on or after the date of the enact-
ment of this Act. 
(4) SUBSECTIONS (e)(1) AND (f).—The amend-
ments made by subsections (e)(1) and (f) shall apply 
to reports and notices required to be filed more than 
30 days after the date of the enactment of this Act. 
(5) SUBSECTIONS
(e)(2) 
AND
(e)(3).—The 
amendments made by subsections (e)(2) and (e)(3) 
shall apply to reports required to be filed on or after 
June 30, 2003. 
(6) SUBSECTION (g).—
(A) IN GENERAL.—The amendments made 
by subsection (g) shall apply to material 
changes on or after the date of the enactment 
of this Act. 
(B) TRANSITION RULE.—In the case of a 
material change occurring during the 30-day 
period beginning on the date of the enactment 
of this Act, a notice under section 527(i) of the 
Internal Revenue Code of 1986 (as amended by 
this Act) shall not be required to be filed under 
such section before the later of—
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(i) 30 days after the date of such ma-
terial change, or 
(ii) 45 days after the date of the en-
actment of this Act. 
SEC. 7. EFFECT OF AMENDMENTS ON EXISTING DISCLO-
SURES. 
Notices, reports, or returns that were required to be 
filed with the Secretary of the Treasury before the date 
of the enactment of the amendments made by this Act 
and that were disclosed by the Secretary of the Treasury 
consistent with the law in effect at the time of disclosure 
shall remain subject on and after such date to the disclo-
sure provisions of section 6104 of the Internal Revenue 
Code of 1986.
Passed the House of Representatives October 16, 
2002. 
Attest: 
JEFF TRANDAHL, 
Clerk.