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TITLE 26-INTERNAL REVENUE CODE (3) Contributions The term "contributions" has the meaning given to such term by section 271(b)(2). (4) Expenditures The term "expenditures" has the meaning given to such term by section 271(b)(3). (f) Exempt organization, which is not political orga- nization, must include certain amounts in gross income (1) In general If an organization described in section 501(c) which is exempt from tax under sec- tion 501(a) expends any amount during the taxable year directly (or through another or- ganization) for an exempt function (within the meaning of subsection (e)(2)), then, not- withstanding any other provision of law, there shall be included in the gross income of such organization for the taxable year, and shall be subject to tax under subsection (b) as if it constituted political organization taxable income, an amount equal to the lesser of- (A) the net investment income of such or- ganization for the taxable year, or (B) the aggregate amount so expended during the taxable year for such an exempt function. (2) Net invw:stment income For purposes of this subsection, the term "net investment income" means the excess of- (A) the gross amount of income from in- terest, dividends, rents, and royalties, plus the excess (if any) of gains from the sale or exchange of assets over the losses from the sale or exchange of assets, over (B) the deductions allowed by this chap- ter which are directly connected with the production of the income referred to in sub- paragraph (A). For purposes of the preceding sentence, there shall not be taken into account items taken into account for purposes of the tax imposed by section 511 (relating to tax on unrelated business income). (3) Certain separate segregated funds For purposes of this subsection and subsec- tion (e)(1), a separate segregated fund (within the meaning of section 610 of title 18) or of any similar State statute, or within the mean- ing of any State statute which permits the segregation of dues moneys for exempt func- tions (within the meaning of subsection (e)(2)) which is maintained by an organiza- tion described in section 501(c) which is exempt from tax under section 501(a) shall be treated as a separate organization. (g) Treatment of newsletter funds (1) In general For purposes of this section, a fund estab- lished and maintained by an individual who holds, has been elected to, or is a candidate (within the meaning of section 41(c)(2)) for nomination or election to, any Federal, State, or local elective public office, for use by such individual exclusively for the preparation and circulation of such individual's newsletter shall, except as provided in paragraph (2), be treated as if such fund constituted a political organization. (2) Additional modifications In the case of any fund described in para- graph (1)- (A) the exempt function shall be only the preparation and circulation of the newslet- ter, and (B) the specific deduction provided by subsection (c)(2)(A) shall not be allowed. (Added Pub. L. 93-625, § 10(a), Jan. 3, 1975, 88 Stat. 2116, and amended Pub. L. 94-455, title XIX, § 1901(b)(33)(C), Oct. 4, 1976, 90 Stat. 1801.) REFERENCES IN TEXT Section 610 of title 18, referred to in subsec. (f)(3). was repealed by Pub. L. 94-283, title II, § 201(a), May 11. 1976, 90 Stat. 496. See, now, section 441b of Title 2, The Congress. AMENDMENTS 1976-Subsec. (b)(2). Pub. L. 94-455 substituted "net capital gain" for "net section 1201 gain" following "or- ganization has a". EFFECTIVE DATE OF 1976 AMENDMENT Amendment of subsec. (b)(2) of this section by sec- tion 1901(b)(33)(C) of Pub. L. 94-455 applicable with respect to taxable years beginning after Dec. 31. 1976, see section 1901(d) of Pub. L. 94-455, set out as an Ef- fective Date of 1976 Amendment note under section 2 of this title. EFFECTIVE DATE Section 10(e) of Pub. L. 93-625 provided that: "The amendments made by subsections (a), (b), (c), and (d) [enacting this section and amending sections 501 and 6012 of this title] shall apply to taxable years begin- ning after December 31, 1974." SECTION REiUumD TO IN OTHER SECTIONS This section is referred to in sections 84, 2501, 6012 of this title. PART VII-CERTAIN HOMEOWNERS ASSOCIATIONS Sec. 528. Certain homeowners associations. AMENDMENTS 1976-Pub. L. 94-455, title XXI, §2101(a), Oct. 4, 1976, 90 Stat. 1897, added the Part heading and analy- sis for Part VII. § 528. Certain homeowners associations (a) General rule A hcriteowners association (as defined in sub- section (c)) shall be subject to taxation under this subtitle only to the extent provided in this section. A homeowners association shall be con- sidered 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 homeowners association taxable income of every homeowners association. Such tax shall consist of a normal tax and surtax computed as provided in section 11 as though the homeowners association were a corporation and as though the homeowners Page 402 § 528