Page 401

TITLE 26-INTERNAL REVENUE CODE § 526. Shipowners' protection and indemnity associ- ations There shall not be included in gross income the receipts of shipowners' mutual protection and indemnity associations not organized for profit, and no part of the net earnings of which inures to the benefit of any private share- holder; but such corporations shall be subject as other persons to the tax on their taxable income from interest, dividends, and rents. (Aug. 16, 1954, ch. 736, 68A Stat. 178.) PART VI-POLITICAL ORGANIZATIONS Sec. 527. Political organizations. PART RFERRED TO IN OTHER SECTIONS This part is referred to in section 501 of this title. § 527. Political organizations (a) General rule A political organization shall be subject to taxation under this subtitle only to the extent provided in this section. A political organization shall be considered an organization exempt from income taxes for the purpose of any law which refers to organizations exempt from income taxes. (b) Tax imposed (1) In general A tax is hereby imposed for each taxable year on the political organization taxable income of every political organization. Such tax shall consist of a normal tax and surtax computed as provided in section 11 as though the political organization were a corporation and as though the political organization tax- able income were the taxable income referred to in section 11. For purposes of this subsec- tion, the surtax exemption provided by sec- tion 11(d) shall not be allowed. (2) Alternative tax in case of capital gains If for any taxable year any political organi- zation has a net capital gain, then, in lieu of the tax imposed by paragraph (1), there is hereby Imposed a tax (If such a tax Is less than the tax imposed by paragraph (1)) which shall consist of the sum of- (A) a partial tax, computed as provided by paragraph (1), on the political organization taxable income determined by reducing such income by the amount of such gain, and (B) an amount determined as provided in section 1201(a) on such gain. (c) Political organization taxable income defined (1) Taxable income defined For purposes of this section, the political organization taxable income of any organiza- tion for any taxable year is an amount equal to the excess (if any) of- (A) the gross income for the taxable year (excluding any exempt function income), over (B) the deductions allowed by this chap- ter which are directly connected with the production of the gross income (excluding exempt function income), computed with the modifications provided in paragraph (2). (2) Modifications For purposes of this subsection- (A) there shall be allowed a specific de- duction of $100, (B) no net operating loss deduction shall be allowed under section 172, and (C) no deduction shall be allowed under part VIII of subchapter B (relating to spe- cial deductions for corporations). (3) Exempt function Income For purposes of this subsection, the term "exempt function income" means any amount received as- (A) a contribution of money or other property, (B) membership dues, a membership fee or assessment from a member of the politi- cal organization, or (C) proceeds from a political fundraising or entertainment event, or proceeds from the sale of political campaign materials, which are not received in the ordinary course of any trade or business, to the extent such amount is segregated for use only for the exempt function of the po- litical organization. (d) Certain uses not treated as income to candidate For purposes of this title, if any political or- ganization- (1) contributes any amount to or for the use of any political organization which is treated as exempt from tax under subsection (a) of this section, (2) contributes any amount to or for the use of any organization described in paragraph (1) or (2) of section 509(a) which is exempt from tax under section 501(a), or (3) deposits any amount in the general fund of the Treasury or in the general fund of any State or local government, such amount shall be treated as an amount not diverted for the personal use of the candidate or any other person. No deduction shall be al- lowed under this title for the contribution or deposit of any amount described in the preced- Ing sentence. (e) Other definitions For purposes of this section- (1) Political organization The term "political organization" means a party, committee, association, fund, or other organization (whether or not incorporated) organized and operated primarily for the pur- pose of directly or indirectly accepting contri- butions or making expenditures, or both, for an exempt function. (2) Exempt function The term "exempt function" means the function of influencing or attempting to in- fluence the selection, nomination, election, or appointment of any individual to any Federal, State, or local public office or office in a po- litical organization, or the election of Presi- dential or Vice-Presidential electors, whether or not such individual or electors are selected, nominated, elected, or appointed. § 527 Page 401