[Congressional Bills 105th Congress]
[From the U.S. Government Publishing Office]
[S. 65 Introduced in Senate (IS)]







105th CONGRESS
  1st Session
                                 S. 65

 To amend the Internal Revenue Code of 1986 to ensure that members of 
tax-exempt organizations are notified of the portion of their dues used 
     for political and lobbying activities, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                            January 21, 1997

   Mr. Hatch introduced the following bill; which was read twice and 
                  referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
 To amend the Internal Revenue Code of 1986 to ensure that members of 
tax-exempt organizations are notified of the portion of their dues used 
     for political and lobbying activities, and for other purposes.

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

SECTION 1. INCREASED DISCLOSURE OF DUES OF TAX-EXEMPT ORGANIZATIONS 
              USED FOR POLITICAL PURPOSES.

    (a) Replacement of Exception Where Dues Are Generally 
Nondeductible.--Section 6033(e)(3) of the Internal Revenue Code of 1986 
(relating to exception where dues are generally nondeductible) is 
amended to read as follows:
            ``(3) Exception where annual dues are small or from other 
        exempt organizations.--
                    ``(A) In general.--Paragraph (1)(A) shall not apply 
                to an organization which establishes to the 
                satisfaction of the Secretary that at least 90 percent 
                of all annual dues or other similar amounts are 
                received from--
                            ``(i) persons who each pay annual dues or 
                        other similar amounts which are $100 or less, 
                        or
                            ``(ii) the following:
                                    ``(I) organizations exempt from 
                                taxation under subtitle A other than 
                                organizations described in paragraph 
                                (1)(B)(i);
                                    ``(II) State and local governments; 
                                and
                                    ``(III) entities the income from 
                                which is exempt from taxation under 
                                section 115.
                Clause (i) shall not apply to an organization described 
                in section 501(c)(6).
                    ``(B) Cost-of-living adjustment.--In the case of 
                taxable years beginning in a calendar year after 1997, 
                the $100 amount under subparagraph (A)(i) shall be 
                increased by an amount equal to the product of $100 and 
                the cost-of-living adjustment for such calendar year 
                under section 1(f)(3), except that subparagraph (B) 
                thereof shall be applied by substituting `1996' for 
                `1992'. If the amount of any such increase is not a 
                multiple of $1, such amount shall be increased to the 
                next highest $1.''.
    (b) Proxy Tax May Not Be Used To Avoid Disclosure to Members.--
            (1) In general.--Section 6033(e)(2)(A) of the Internal 
        Revenue Code of 1986 (relating to tax imposed where 
        organization does not notify) is amended to read as follows:
                    ``(A) Imposition of tax.--
                            ``(i) In general.--If an organization fails 
                        to include in the notices described in 
                        paragraph (1)(A) for any taxable year the 
                        amount allocable to expenditures to which 
                        section 162(e)(1) applies (determined on the 
                        basis of actual amounts rather than the 
                        reasonable estimates under 
paragraph (1)(A)(ii)), then there is hereby imposed on such 
organization for such taxable year a tax in an amount determined under 
clause (iii).
                            ``(ii) Election to pay surrogate tax.--
                                    ``(I) In general.--An organization 
                                providing the notices described in 
                                paragraph (1)(A) for any taxable year 
                                may elect to pay a tax for such taxable 
                                year in the amount determined under 
                                clause (iii).
                                    ``(II) Effect of election on 
                                deductibility.--If an organization pays 
                                a tax under subclause (I) for any 
                                taxable year, paragraph (3) of section 
                                162(e) shall not apply to the portion 
                                of the dues or other similar amounts 
                                paid by a taxpayer to such organization 
                                which are allocable to the expenditures 
                                with respect to which such organization 
                                paid the tax under subclause (I).
                                    ``(III) Incorrect notices.--In the 
                                case of an election under subclause 
                                (I), an additional tax shall be imposed 
                                under clause (i) if the estimates in 
                                the notices are less than the actual 
                                amounts.
                            ``(iii) Amount of tax.--For purposes of 
                        this subparagraph, the amount of tax determined 
                        under this clause is an amount equal to the 
                        product of the highest rate of tax imposed by 
                        section 11 for the taxable year and--
                                    ``(I) in the case of a failure to 
                                which clause (i) applies, the aggregate 
                                amount not included in the notices 
                                described in paragraph (1)(A) by reason 
                                of such failure, or
                                    ``(II) in the case of an election 
                                under clause (ii), the aggregate amount 
                                included in the notices with respect to 
                                which the election was made.''.
            (2) Notice requirement.--Section 6033(e)(1)(A)(ii) of such 
        Code (relating to reporting requirements) is amended to read as 
        follows:
                            ``(ii) except as provided in paragraph (3), 
                        shall, at the time of assessment or payment of 
                        such dues or other similar amounts, provide 
                        notice to each person making such payment which 
                        contains--
                                    ``(I) a reasonable estimate of the 
                                portion of such dues or other similar 
                                amounts to which such expenditures are 
                                so allocable, and
                                    ``(II) whether or not a deduction 
                                is allowable to such person with 
                                respect to such portion.''.
            (3) Penalties for failure to provide notice.--
                    (A) Notice accompanying dues.--Section 6710 of such 
                Code (relating to failure to disclose that 
                contributions are nondeductible) is amended--
                            (i) in subsection (a), by inserting ``or a 
                        failure to meet the requirement of section 
                        6033(e)(1)(A)(ii) by an organization to which 
                        section 6033(e) applies'' after ``section 6113 
                        applies''; and
                            (ii) in subsection (c), by inserting ``or 
                        section 6033(e)(1)(A)(ii)'' after ``section 
                        6013''.
                    (B) Annual notice.--Section 6724(d)(2) of such Code 
                (relating to payee statements), as amended by the Small 
                Business Job Protection Act of 1996 and the Health 
                Insurance Portability and Accountability Act of 1996, 
                is amended by striking ``or'' at the end of the next to 
                last subparagraph, by striking the period at the end of 
                the last subparagraph and inserting ``, or'', and by 
                adding at the end the following new subparagraph:
                    ``(Z) the last sentence of section 
                6033(e)(1)(A).''.
            (4) Conforming amendments.--
                    (A) Section 6033(e)(2)(B) of such Code is amended 
                by striking ``subparagraph (A)(ii)'' and inserting 
                ``subparagraph (A)(i)(I)''.
                    (B)(i) The heading for section 6710 of such Code is 
                amended by inserting ``or that dues are for lobbying 
                activities'' after ``nondeductible''.
                    (ii) The item relating to section 6710 in the table 
                of sections for part I of subchapter B of chapter 68 of 
                such Code is amended by inserting ``or that dues are 
                for lobbying activities'' after ``nondeductible''.
    (c) Organizations To Which Disclosure Rules Apply.--Section 
6033(e)(1)(B)(i) of the Internal Revenue Code of 1986 (relating to 
organizations to which subsection applies) is amended to read as 
follows:
                            ``(i) In general.--This subsection shall 
                        apply to any organization which is described in 
                        paragraph (4), (5), or (6) of section 501(c) 
                        (other than a veterans' organization) and which 
                        is exempt from taxation under section 
                        501(a).''.
    (d) Effective Date.--The amendments made by this section shall 
apply to amounts paid or incurred after December 31, 1996.

SEC. 2. 2-PERCENT FLOOR ON ITEMIZED DEDUCTIONS NOT TO APPLY TO 
              DEDUCTION FOR DUES.

    (a) In General.--Section 67(b) of the Internal Revenue Code of 1986 
(defining miscellaneous itemized deductions) is amended by striking 
``and'' at the end of paragraph (11), by striking the period at the end 
of paragraph (12) and inserting ``, and'', and by adding at the end the 
following new paragraph:
            ``(13) the deduction allowed under section 162 for dues or 
        other similar amounts paid by an individual to an organization 
        described in paragraph (4), (5), or (6) of section 501(c) 
        (other than a veterans' organization) and exempt from taxation 
        under section 501(a).''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1996.
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