[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5596 Engrossed in House (EH)]


  2d Session

                               H. R. 5596

_______________________________________________________________________

                                 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 committees 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.
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
107th CONGRESS
  2d Session
                                H. R. 5596

_______________________________________________________________________

                                 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 committees 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.

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

SECTION 1. EXEMPTION FOR CERTAIN STATE AND LOCAL POLITICAL COMMITTEES 
              FROM NOTIFICATION REQUIREMENTS.

    (a) Exemption From Notification Requirements.--Paragraph (5) of 
section 527(i) of the Internal Revenue Code of 1986 (relating to 
organizations must notify 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 POLITICAL COMMITTEES FROM 
              REPORTING REQUIREMENTS.

    (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), respectively, and by inserting after subparagraph (B) the 
following new subparagraph:
                    ``(C) to any organization which is a qualified 
                State or local political organization,''.
    (b) Qualified State or Local Political Organization.--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 
paragraph:
            ``(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)--
                                    ``(I) information regarding each 
                                separate expenditure from and 
                                contribution 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 public 
                        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 expenditure 
                        or contribution required to be reported under 
                        State law is not more than $300 greater than 
                        the minimum amount required to be reported 
                        under subsection (j).
                            ``(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 
                                organization.
                                    ``(II) The occupation of any person 
                                who makes contributions to the 
                                organization.
                                    ``(III) The employer of any person 
                                who receives expenditures from the 
                                organization.
                                    ``(IV) The occupation of any person 
                                who receives expenditures from the 
                                organization.
                                    ``(V) The purpose of any 
                                expenditure of the organization.
                                    ``(VI) The date any contribution 
                                was made to the organization.
                                    ``(VII) The date of any expenditure 
                                of the organization.
                    ``(C) De minimis errors.--An organization shall not 
                fail to be treated as a qualified State or local 
                political organization solely because such organization 
                makes de minimis errors in complying with the State 
                reporting requirements and the public inspection 
                requirements described in subparagraph (A) as long as 
                the organization corrects such errors within a 
                reasonable period after the organization becomes aware 
                of such errors.
                    ``(D) Participation of federal candidate or office 
                holder.--The term `qualified State or local political 
                organization' shall not include any organization 
                otherwise described 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 
                        organization (unless the Secretary determines 
                        that such solicitations resulted in de minimis 
                        contributions and were made without the prior 
                        knowledge and consent, whether explicit or 
                        implicit, of the organization or its officers, 
                        directors, agents, or employees), or
                            ``(iii) directs, in whole or in part, 
                        disbursements by the organization.''.
    (c) Effective Date.--The amendments made by this section shall take 
effect as if included in the amendments made by Public Law 106-230.

SEC. 3. EXEMPTION FROM ANNUAL RETURN REQUIREMENTS.

    (a) Income Tax Returns Required Only for Political Organization 
Taxable Income.--Paragraph (6) of section 6012(a) of the Internal 
Revenue Code of 1986 (relating to persons required to make returns of 
income) is amended by striking ``or which has'' and all that follows 
through ``section)''.
    (b) Income Tax Returns Not Subject to Disclosure.--
            (1) Disclosure by the secretary.--Subsection (b) of section 
        6104 of such Code (relating to disclosure by the Secretary of 
        annual information returns) is amended by striking 
        ``6012(a)(6),''.
            (2) Public inspection.--Subsection (d) of section 6104 of 
        such Code (relating to public inspection of certain annual 
        returns) is amended--
                    (A) in paragraph (1)(A)(i) by striking ``or section 
                6012(a)(6) (relating to returns by political 
                organizations)'', and
                    (B) in subparagraph (2) by striking ``or section 
                6012(a)(6)''.
    (c) Information Returns.--Subsection (g) of section 6033 of such 
Code (relating to returns required by political organizations) is 
amended to read as follows:
    ``(g) Returns Required by Political Organizations.--
            ``(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 
        political organization (as defined in section 527(e)(5)), the 
        preceding sentence shall be applied by substituting `$100,000' 
        for `$25,000'.
            ``(2) Annual returns.--Political organizations 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 exempt 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 section 527, and
                    ``(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 Election Campaign Act 
                of 1971) of a candidate for Federal office,
                    ``(D) which is a national committee (as defined 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 campaign 
                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
                    ``(G) to which section 527 applies for the taxable 
                year solely by reason of subsection (f)(1) of such 
                section.
            ``(4) Discretionary exception.--The Secretary may relieve 
        any organization required under paragraph (2) to file an 
        information return from filing such a return if the Secretary 
        determines that such filing is not necessary to the efficient 
        administration of the internal revenue laws.''.
    (d) Effective Date.--The amendments made by this section shall take 
effect as if included in the amendments 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 notification 
        or report under section 527 of the Internal Revenue Code of 
        1986 and reports under the Federal Election Campaign Act of 
        1971.
    (b) Information.--Information provided under subsection (a) shall 
be included in any appropriate form, instruction, 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.

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 function 
income' means any amount described in a subparagraph of subsection 
(c)(3), whether or not segregated for use for an exempt function.''.
    (b) Procedures for Assessment and Collection 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 paragraph shall be assessed and 
collected in the same manner as penalties imposed by section 
6652(c).''.
    (c) Duplicate Written Filings Not Required.--Subparagraph (A) of 
section 527(i)(1) of the Internal Revenue Code of 1986 is amended by 
striking ``, electronically and in writing,'' and inserting 
``electronically''.
    (d) Application of Fraud Penalty.--Section 7207 of the Internal 
Revenue Code of 1986 (relating to fraudulent returns, statements, and 
other documents) is 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 Internal 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 following new paragraph:
            ``(7) Electronic filing.--Any report required under 
        paragraph (2) with respect to any calendar year shall be filed 
        in electronic form if the organization has, or has reason to 
        expect to have, contributions exceeding $50,000 or expenditures 
        exceeding $50,000 in such calendar year.''.
            (3) Electronic filing and access of required disclosures.--
        Section 527 of such Code, as amended by section 5(a), is 
        amended by redesignating subsection (k) as subsection (l) and 
        by inserting after subsection (j) the following new subsection:
    ``(k) Public Availability of Notices and Reports.--
            ``(1) In general.--The Secretary shall make any notice 
        described in subsection (i)(1) or report described in 
        subsection (j)(7) available for public inspection on the 
        Internet not later than 48 hours after such notice or report 
        has been filed (in addition 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 
                organizations.
                    ``(F) Ranges of contributions and expenditures.
                    ``(G) Time periods of the notices and reports.
        Such database shall be downloadable.''.
    (f) Contents of Notice.--Section 527(i)(3) of the Internal Revenue 
Code of 1986 (relating to contents of notice) is amended by striking 
``and'' at the end of subparagraph (D), by redesignating subparagraph 
(E) as subparagraph (F), and by inserting after subparagraph (D) the 
following new subparagraph:
                    ``(E) whether the organization intends to claim an 
                exemption from the requirements of subsection (j) or 
                section 6033, and''.
    (g) Timing of Notice in Case of Material Change.--
            (1) In general.--Subparagraph (B) of section 527(i)(1) of 
        the Internal Revenue Code of 1986 (relating to general 
        notification requirement) is amended by inserting ``or, in the 
        case of any material change in the information required under 
        paragraph (3), for the period beginning on the date on which 
        the material change occurs and ending on the date on which such 
        notice is given'' after ``given''.
            (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 ``established''.
            (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 amendments made by 
        subsections (a) and (b) shall apply to failures occurring on or 
        after the date of the enactment 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.
            (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 enactment of this Act.
            (4) Subsections (e)(1) and (f).--The amendments 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--
                            (i) 30 days after the date of such material 
                        change, or
                            (ii) 45 days after the date of the 
                        enactment of this Act.

SEC. 7. EFFECT OF AMENDMENTS ON EXISTING DISCLOSURES.

    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 
disclosure provisions of section 6104 of the Internal Revenue Code of 
1986.

            Passed the House of Representatives October 16, 2002.

            Attest:

                                                                 Clerk.