[House Report 118-649]
[From the U.S. Government Publishing Office]
118th Congress } { Report
HOUSE OF REPRESENTATIVES
2d Session } { 118-649
======================================================================
NO FOREIGN ELECTION INTERFERENCE ACT
_______
September 6, 2024.--Committed to the Committee of the Whole House on
the State of the Union and ordered to be printed
_______
Mr. Smith of Missouri, from the Committee on Ways and Means, submitted
the following
R E P O R T
[To accompany H.R. 8314]
[Including cost estimate of the Congressional Budget Office]
The Committee on Ways and Means, to whom was referred the
bill (H.R. 8314) to amend the Internal Revenue Code of 1986 to
impose penalties with respect to contributions to political
committees from certain tax exempt organizations that receive
contributions from foreign nationals, having considered the
same, reports favorably thereon with an amendment and
recommends that the bill as amended do pass.
CONTENTS
Page
I. SUMMARY AND BACKGROUND...................................... 3
A. Purpose and Summary................................. 3
B. Background and Need for Legislation................. 3
C. Legislative History................................. 4
Background......................................... 4
Committee Hearings................................. 4
Committee Action................................... 5
D. Designated Hearing.................................. 5
II. EXPLANATION OF THE BILL..................................... 5
A. Penalties with Respect to Contributions to Political
Committees from Certain Tax-Exempt Organizations
that Accept Contributions from Foreign Nationals
(sec. 2 of the bill and new secs. 501(s) and 6720D
of the Code)....................................... 5
B. Reasons for Change.................................. 6
C. Explanation of Provisions........................... 6
D. Effective Date...................................... 7
III. VOTES OF THE COMMITTEE...................................... 7
IV. BUDGET EFFECTS OF THE BILL.................................. 8
A. Committee Estimate of Budgetary Effects............. 8
Fiscal Years....................................... 8
B. Statement Regarding New Budget Authority and Tax
Expenditures Budget Authority...................... 8
C. Cost Estimate Prepared by the Congressional Budget
Office............................................. 8
V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE.. 10
A. Committee Oversight Findings and Recommendations.... 10
B. Statement of General Performance Goals and
Objectives......................................... 10
C. Information Relating to Unfunded Mandates........... 10
D. Applicability of House Rule XXI, Clause 5(b)........ 10
E. Tax Complexity Analysis............................. 10
F. Congressional Earmarks, Limited Tax Benefits, and
Limited Tariff Benefits............................ 10
G. Duplication of Federal Programs..................... 11
VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED....... 11
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``No Foreign Election Interference
Act''.
SEC. 2. PENALTIES WITH RESPECT TO CONTRIBUTIONS TO POLITICAL COMMITTEES
FROM CERTAIN TAX EXEMPT ORGANIZATIONS THAT ACCEPT
CONTRIBUTIONS FROM FOREIGN NATIONALS.
(a) In General.--Part I of subchapter B of chapter 68 of the Internal
Revenue Code of 1986 is amended by adding at the end the following new
section:
``SEC. 6720D. CONTRIBUTIONS TO POLITICAL COMMITTEES FROM CERTAIN TAX
EXEMPT ORGANIZATIONS THAT ACCEPT CONTRIBUTIONS FROM
FOREIGN NATIONALS.
``(a) In General.--Any specified tax exempt organization that makes
any disqualified political committee contribution shall pay a penalty
equal to twice the amount of such contribution.
``(b) Disqualified Political Committee Contribution.--For purposes of
this section--
``(1) In general.--The term `disqualified political committee
contribution' means, with respect to any organization described
in section 501(c), any contribution made by such organization
to a political committee (as defined in section 301 of the
Federal Election Campaign Act of 1971 (52 U.S.C. 30101)) if
such organization received, during any testing period, any
contribution or gift (within the meaning of section 6033(b)(5))
from a foreign national (as defined in section 319(b) of the
Federal Election Campaign Act of 1971 (52 U.S.C. 30121(b))).
``(2) Testing period.--The term `testing period' means, with
respect to any contribution by an organization described in
section 501(c), the 8-year period ending on the date of such
contribution, except that such period shall not include any
period before the date of the enactment of this section.
``(c) Specified Tax Exempt Organization.--For purposes of this
section--
``(1) In general.--The term `specified tax exempt
organization' means, with respect to any taxable year, any
organization described in section 501(c) and exempt from tax
under section 501(a) if--
``(A) the gross receipts of such organization for
such taxable year equal or exceed $200,000, or
``(B) the assets of such organization (determined as
of the close of such taxable year) equal or exceed
$500,000.
``(2) Coordination with revocation of tax exempt status by
reason of making disqualified political committee
contributions.--An organization which is not exempt from tax
under section 501(a) solely by reason of section 501(s) shall
be treated for purposes of paragraph (1) of this subsection as
exempt from tax under section 501(a) with respect to the
application of this section to the first 3 disqualified
political committee contributions of such organization.''.
(b) Revocation of Exempt Status Upon Third Disqualified Political
Committee Contribution.--Section 501 of the Internal Revenue Code of
1986 is amended by adding at the end the following new subsection:
``(s) Revocation of Exempt Status of Certain Organizations That
Accept Contributions From Foreign Nationals and Make Contributions to
Political Committees.--Any organization described in subsection (c)
which makes more than 2 disqualified political committee contributions
(as defined in section 6720D(b)) shall not be exempt from taxation
under subsection (a) for any taxable year ending on or after the date
of the third such contribution.''.
(c) Clerical Amendment.--The table of sections for part I of
subchapter B of chapter 68 of such Code is amended by adding at the end
the following new item:
``Sec. 6720D. Contributions to political committees from certain tax
exempt organizations that accept contributions from foreign
nationals.''.
(d) Effective Date.--The amendments made by this section shall apply
with respect to contributions made on or after January 1, 2025, by
organizations described in section 501(c) of the Internal Revenue Code
of 1986.
I. SUMMARY AND BACKGROUND
A. Purpose and Summary
The bill, H.R. 8314, the ``No Foreign Election Interference
Act,'' as ordered reported by the Committee on Ways and Means
on May 15, 2024.
Under section 2 of the bill, a tax-exempt organization
described in section 501(c) of the Internal Revenue Code that
makes a ``disqualified political committee contribution'' must
pay a penalty equal to twice the amount of the contribution
and, upon making the third such contribution, is disqualified
from tax-exempt status. A disqualified political committee
contribution generally is a contribution made by the section
501(c) organization to a political committee (as defined under
the Federal Election Campaign Act) if the section 501(c)
organization received, during the eight-year period ending on
the date of the contribution, any contribution or gift from a
foreign national. The bill does not apply to certain smaller
organizations with gross receipts and assets that fall below
stated threshold levels.
B. Background and Need for Legislation
The Committee on Ways and Means has conducted oversight of
the tax-exempt (TE) sector established under Section 501(c) of
the Internal Revenue Code throughout the 118th Congress. In
August 2023, the Committee published an open letter requesting
information on TE organizations focused on potential violations
of rules regarding political activities, inappropriate use of
charitable funds, and concerns about foreign sources of
funding.\1\ In November 2023, the Committee held a hearing
which examined the history of U.S. TE groups financing terror
abroad.\2\ In December 2023, the Committee's Oversight
Subcommittee held a hearing on the growth of the TE sector and
its impact on the American political system.\3\
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\1\H. Comm. on Ways and Means, Request for Information:
Understanding and Examining the Political Activities of Tax-Exempt
Organizations under Section 501 of the Internal Revenue Code (Aug. 14,
2023), https://gop-waysandmeans.house.gov/wp-content/uploads/2023/09/
UPDATED-RFI-on-501c3-and-c4-Activities-FINAL.docx87.pdf.
\2\H. Comm. On Ways and Means, Hearing: From Ivory Towers to Dark
Corners: Investigating the Nexus Between Antisemitism, Tax-Exempt
Universities, and Terror Financing (Nov. 15, 2023), https://
waysandmeans.house.gov/event/hearing-from-ivory-towers-to-dark-corners-
investigating-the-nexus-between-antisemitism-tax-exempt-universities-
and-terror-financing/.
\3\H. Comm. On Ways and Means, Oversight Subcommittee Hearing: The
Growth of the Tax-Exempt Sector and the Impact on the American
Political Landscape (Dec. 13, 2023), https://waysandmeans.house.gov/
event/oversight-subcommittee-hearing-on-growth-of-the-tax-exempt-
sector-and-the-impact-on-the-american-political-landscape/.
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During the course of that oversight, the Committee became
aware that despite the prohibition on foreign nationals from
donating money to U.S. campaigns in the Federal Election
Campaign Act (FECA),\4\ there are no laws or regulations
preventing foreign nationals from influencing U.S. elections by
directing funds to TE organizations including 501(c)(3)s and
501(c)(4)s. One recent and prominent example of a foreign
national taking advantage of this loophole is billionaire
Hansjorg Wyss--the Swiss national that was the focus of the
Committee's December 2023 hearing.
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\4\Public Law 92-225.
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Wyss has a 501(c)(3) organization and a 501(c)(4)
organization, the Wyss Foundation and the Berger Action Fund,
respectively.\5\ Mr. Wyss's organizations have donated money to
other TE organizations that subsequently sent tens of millions
of dollars to Super PACs.\6\ For example, The New York Times
reported that between 2016 and 2020, Wyss's 501(c)(4)
organization donated to the Sixteen Thirty Fund, which
distributed $63 million to Super PACs that supported Democrats
and is one of the ``leading dark money spenders on the
left.''\7\
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\5\Brian Slodysko, Group steers Swiss billionaire's money to
liberal causes, THE ASSOCIATED PRESS (Apr. 4, 2023), https://
apnews.com/article/dark-money-democrats-wyss-politics-
elections601d40cd01569190559d545418afe396; Wyss Foundation, Form 990-
PF--Return of Private Foundation, available at https://
www.documentcloud.org/documents/20695496-the-wyss-foundations-2019-tax-
filing-shows-assets-of-25-billion (fiscal year ending December 2019);
Berger Action Fund, Form 990--Return of Organization Exempt from Income
Tax, https://www.documentcloud.org/documents/20695495-the-berger-
action-funds-2019-tax-filing-shows-35m-donatedto-the-sixteen-thirty-
fund (fiscal year ending Mar. 2020).
\6\Kenneth P. Vogel, Swiss Billionaire Quietly Becomes Influential
Force Among Democrats, THE NEW YORK TIMES (May 3, 2021), available at
https://www.nytimes.com/2021/05/03/us/politics/hansjorg-wyss-money-
democrats.html.
\7\Id.
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The Committee is aware of Mr. Wyss's efforts largely due to
public reporting and his willingness to be public about his
efforts. Many other similar efforts may be shielded by complex
networks of TE organizations. Given the concerns about foreign
nationals taking advantage of our tax code and funneling money
through TEs to spend in elections, the Committee felt it was
necessary to amend the Internal Revenue Code to impose
penalties for organizations who receive contributions from
foreign nationals and then make contributions to political
committees.
C. Legislative History
Background
H.R. 8314 was introduced on May 8, 2024, and was referred
to the Committee on Ways and Means.
Committee Hearings
The Committee on Ways and Means held the following hearings
concerning the policy in H.R. 8314:
On November 15, 2023, the Committee on Ways and Means held
a hearing titled, ``From Ivory Towers to Dark Corners:
Investigating the Nexus Between Antisemitism, Tax-Exempt
Universities, and Terror Financing'' to examine the role of
tax-exempt organizations in fueling antisemitic activities and
funding terrorism.\8\
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\8\H. Comm. On Ways and Means, Hearing: From Ivory Towers to Dark
Corners: Investigating the Nexus Between Antisemitism, Tax-Exempt
Universities, and Terror Financing (Nov. 15, 2023), https://
waysandmeans.house.gov/event/hearing-from-ivory-towers-to-dark-corners-
investigating-the-nexus-between-antisemitism-tax-exempt-universities-
and-terror-financing/.
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On December 13, 2023, the Committee on Ways and Means held
a hearing titled, ``Growth of the Tax-Exempt Sector and the
Impact on the American Political Landscape'' on the growth of
the tax-exempt sector and its impact on American elections.\9\
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\9\H. Comm. On Ways and Means, Oversight Subcommittee Hearing: The
Growth of the Tax-Exempt Sector and the Impact on the American
Political Landscape (Dec. 13, 2023), https://waysandmeans.house.gov/
event/oversight-subcommittee-hearing-on-growth-of-the-tax-exempt-
sector-and-the-impact-on-the-american-political-landscape/.
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Committee Action
The Committee on Ways and Means marked up H.R. 8314, the No
Foreign Election Interference Act, on May 15, 2024, and
favorably reported the bill, as amended, to the House of
Representatives (with quorum being present).
D. Designated Hearing
Pursuant to clause 3(c)(6) of rule XIII, the following
hearing was used to develop and consider H.R. 8314:
On December 13, 2023, the Committee on Ways and Means held
a hearing titled, ``Growth of the Tax-Exempt Sector and the
Impact on the American Political Landscape'' on the growth of
the tax-exempt sector and its impact on American elections.\10\
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\10\H. Comm. On Ways and Means, Oversight Subcommittee Hearing: The
Growth of the Tax-Exempt Sector and the Impact on the American
Political Landscape (Dec. 13, 2023), https://waysandmeans.house.gov/
event/oversight-subcommittee-hearing-on-growth-of-the-tax-exempt-
sector-and-the-impact-on-the-american-political-landscape/.
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II. EXPLANATION OF THE BILL
A. Penalties With Respect to Contributions to Political Committees From
Certain Tax-Exempt Organizations That Accept Contributions From Foreign
Nationals (Sec. 2 of the Bill and New Secs. 501(s) and 6720D of the
Code)
PRESENT LAW
Section 501(c) tax-exempt organizations
Section 501(c) describes 28 different categories of
organizations that generally are exempt from Federal income
tax.\11\ Different rules apply to political campaign activities
(including political campaign contributions) of such
organizations depending upon the category of section 501(c)
under which an organization is described. The restrictions on
an organization's political campaign activities generally
become more stringent as the Federal tax benefits potentially
available to the organization or to the organization's donors
increase.
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\11\Sec. 501(c)(1) through (19) and (21) through (29). These ``tax-
exempt organizations'' generally are exempt from Federal income tax on
income derived from activities substantially related to their exempt
purposes and on their investment income. Such organizations generally
are subject to tax (unrelated business income tax, or ``UBIT'') on any
income derived from business activities that are regularly carried on
and not substantially related to their exempt purposes. Secs. 511-514.
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Section 501(c)(3) provides tax-exempt status to certain
nonprofit entities organized and operated exclusively for
charitable, religious, educational, or certain other purposes,
provided that no part of the net earnings of the organization
inures to the benefit of any private shareholder or individual.
Organizations described in section 501(c)(3), which generally
are referred to as ``charities,'' are classified as either
public charities or private foundations.\12\ In addition to the
tax-exempt status conferred on organizations described in
section 501(c)(3), charitable contributions to such
organizations are tax-deductible to the donor for Federal
income, estate, and gift tax purposes.\13\ In addition, section
501(c)(3) organizations are eligible for certain tax-exempt
financing benefits.\14\
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\12\Sec. 509(a). Private foundations are defined under section
509(a) as all organizations described in section 501(c)(3) other than
the organizations granted public charity status by reason of: (1) being
a specific type of organization (i.e., churches, educational
institutions, hospitals and certain other medical organizations,
certain organizations providing assistance to colleges and
universities, or a governmental unit); (2) receiving a substantial part
of its support from governmental units or direct or indirect
contributions from the general public; (3) providing support to another
section 501(c)(3) entity that is not a private foundation (i.e., being
a ``supporting organization''); or (4) being organized and operated
exclusively for testing for public safety. In contrast to public
charities, private foundations generally are funded from one or a
limited number of sources (an individual, family, or corporation) and
are subject to restrictions not applicable to public charities. In
general, more generous charitable contribution deduction rules apply to
gifts to public charities.
\13\See secs. 170, 642(c), 2055(a)(2), 2106(a)(2)(A)(ii), and
2522(a)(2). Organizations described in section 501(c)(3) generally are
eligible for reduced postal rates and, depending on the applicable
State and local laws, may also be eligible for State and local income,
property, and sales tax benefits.
\14\See sec. 145.
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Among the other types of organizations described in section
501(c) are social welfare organizations (sec. 501(c)(4)), labor
organizations (sec. 501(c)(5)), and trade associations or civic
leagues (sec. 501(c)(6)). These entities and other tax-exempt
organizations that are not described in section 501(c)(3)
(i.e., non-charities) generally are not eligible to receive
contributions that are deductible as charitable contributions
to the donor for Federal income or estate tax purposes, but
they may receive contributions that are deductible under
section 162 as a business expense.\15\ Additionally, these
entities generally are not eligible to receive contributions
that are deductible as charitable contributions to the donor
for Federal gift tax purposes;\16\ however, the gift tax does
not apply to a transfer to these organizations.\17\
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\15\See secs. 170(c) (listing eligible organizations for purposes
of the income tax deduction), and secs. 2055(a), and 2106(a)(2)(A)(iii)
(listing eligible organizations for purposes of the estate tax
deduction).
\16\See sec. 2522(a) (listing eligible organizations for purposes
of the gift tax charitable deduction).
\17\Sec. 2501(a)(6).
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B. Reasons for Change
The Committee believes that foreign nationals should be
prevented from influencing U.S. elections by directing funds to
tax-exempt organizations, which in turn make contributions to
political committees. Therefore, the Committee believes that
section 501(c) organizations should be prohibited from making
contributions to political committees for an eight-year period
from the date the organization received a contribution or gift
from a foreign national.
C. Explanation of Provisions
Under the provision, a specified tax-exempt organization
that makes a disqualified political committee contribution must
pay a penalty equal to twice the amount of the contribution.
The provision further provides that any organization described
in section 501(c) that makes more than two disqualified
political committee contributions is not exempt from Federal
income tax for any taxable year ending on or after the date of
the third such contribution.
The term ``specified tax-exempt organization'' means, with
respect to a taxable year, any organization described in
section 501(c) that is exempt from Federal income tax under
section 501(a), if (1) the gross receipts of the organization
for such taxable year equal or exceed $200,000, or (2) the
assets of the organization (determined as of the close of such
taxable year) equal or exceed $500,000. However, an
organization that is not exempt from Federal income tax solely
because the organization has made more than two disqualified
political committee contributions is treated as exempt from
Federal income tax for purposes of the definition of
``specified tax-exempt organization'' with respect to the first
three disqualified political committee contributions of the
organization. In effect, this rule provides that an
organization that makes a third disqualified political
committee contribution (1) loses its exemption from Federal
income tax and (2) is subject to a penalty with respect to that
third contribution.
The term ``disqualified political committee contribution''
means, with respect to a section 501(c) organization, any
contribution made by the organization to a political committee
if the organization received, during any testing period, a
``contribution or gift''\18\ from a foreign national.\19\ The
term ``political committee,'' as defined in section 301 of the
Federal Election Campaign Act of 1971,\20\ means (1) any
committee, club, association, or other group of persons which
receives contributions aggregating in excess of $1,000 during a
calendar year or which makes expenditures aggregating in excess
of $1,000 during a calendar year; (2) any separate segregated
fund;\21\ or (3) any local committee of a political party which
receives contributions aggregating in excess of $5,000 during a
calendar year, or makes payments that are not contributions or
expenditures that aggregate in excess of $5,000 during a
calendar year, or makes contributions aggregating in excess of
$1,000 during a calendar year or makes expenditures aggregating
in excess of $1,000 during a calendar year.\22\ The term
``testing period'' means, with respect to any contribution by a
section 501(c) organization, the eight-year period ending on
the date of the organization's contribution, except that the
period does not include any period before the date of
enactment.
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\18\Within the meaning of section 6033(b)(5).
\19\For this purpose, a ``foreign national'' means (1) a foreign
principal, except that the term ``foreign national'' does not include
any individual who is a U.S. citizen, or (2) an individual who is not a
U.S. citizen or a national of the United States, and who is not
lawfully admitted for permanent residence. Sec. 319(b) of the Federal
Election Campaign Act of 1971 (52 U.S.C. sec. 30121(b)).
\20\52 U.S.C. 30101.
\21\As established under 52 U.S.C. sec. 30118(b).
\22\52 U.S.C. sec. 30101.
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D. Effective Date
The provision is effective for contributions made on or
after January 1, 2025, by organizations described in section
501(c).
III. VOTES OF THE COMMITTEE
In compliance with the Rules of the House of
Representatives, the following statement is made concerning the
vote of the Committee on Ways and Means during the markup
consideration of H.R. 8314, the ``No Foreign Election
Interference Act,'' on May 15, 2024.
H.R. 8314 was ordered favorably reported to the House of
Representatives as amended by a roll call vote of 39 yeas to 1
nay (with a quorum being present). The vote was as follows:
----------------------------------------------------------------------------------------------------------------
Representative Yea Nay Present Representative Yea Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Smith (MO)..................... X ...... ......... Mr. Neal............. X ...... .........
Mr. Buchanan....................... X ...... ......... Mr. Doggett.......... ...... ...... .........
Mr. Smith (NE)..................... X ...... ......... Mr. Thompson......... X ...... .........
Mr. Kelly.......................... X ...... ......... Mr. Larson........... X ...... .........
Mr. Schweikert..................... X ...... ......... Mr. Blumenauer....... X ...... .........
Mr. LaHood......................... X ...... ......... Mr. Pascrell......... ...... X .........
Dr. Wenstrup....................... X ...... ......... Mr. Davis............ X ...... .........
Mr. Arrington...................... X ...... ......... Ms. Sanchez.......... X ...... .........
Dr. Ferguson....................... X ...... ......... Ms. Sewell........... X ...... .........
Mr. Estes.......................... X ...... ......... Ms. DelBene.......... X ...... .........
Mr. Smucker........................ X ...... ......... Ms. Chu.............. X ...... .........
Mr. Hern........................... X ...... ......... Ms. Moore............ X ...... .........
Ms. Miller......................... ...... ...... ......... Mr. Kildee........... X ...... .........
Dr. Murphy......................... X ...... ......... Mr. Beyer............ X ...... .........
Mr. Kustoff........................ X ...... ......... Mr. Evans............ ...... ...... .........
Mr. Fitzpatrick.................... X ...... ......... Mr. Schneider........ X ...... .........
Mr. Steube......................... X ...... ......... Mr. Panetta.......... X ...... .........
Ms. Tenney......................... X ...... ......... Mr. Gomez............ X ...... .........
Mrs. Fischbach..................... X ...... .........
Mr. Moore.......................... X ...... .........
Mrs. Steel......................... X ...... .........
Ms. Van Duyne...................... X ...... .........
Mr. Feenstra....................... X ...... .........
Ms. Malliotakis.................... X ...... .........
Mr. Carey.......................... X ...... .........
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IV. BUDGET EFFECTS OF THE BILL
A. Committee Estimate of Budgetary Effects
In compliance with clause 3(d) of rule XIII of the Rules of
the House of Representatives, the following statement is made
concerning the effects on the budget of the bill, H.R. 8314 as
reported. The estimate prepared by the Joint Committee on
Taxation (JCT) is included below.
The bill is estimated to have the following effect on
Federal fiscal year budget receipts:
FISCAL YEARS
[Millions of dollars]
----------------------------------------------------------------------------------------------------------------
2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2024-29 2024-34
----------------------------------------------------------------------------------------------------------------
\1\ \1\ \1\ \1\ \1\ \1\ \1\ \1\ \1\ \1\ \1\ \1\ \1\
----------------------------------------------------------------------------------------------------------------
\1\Gain of less than $500,000.
B. Statement Regarding New Budget Authority and Tax Expenditures Budget
Authority
In compliance with clause 3(c)(2) of rule XIII of the Rules
of the House of Representatives, the Committee states that the
bill involves no new or increased budget authority.
C. Cost Estimate Prepared by the
Congressional Budget Office
In compliance with clause 3(c)(3) of rule XIII of the Rules
of the House of Representatives, requiring a cost estimate
prepared by the CBO, the following statement by CBO is
provided.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
H.R. 8314 would prohibit tax-exempt entities from making
any contribution to a political committee, or any group of
people that receives more than $1,000 in contributions or makes
more than $1,000 in expenditures during a calendar year, for
eight years from the date such entity received a contribution
or gift from a foreign national. The bill also would establish
a penalty equal to twice the amount of such prohibited
contributions and would revoke the tax- exemption for entities
making three such contributions.
The Congressional Budget Act of 1974, as amended,
stipulates that revenue estimates provided by the staff of the
Joint Committee on Taxation (JCT) will be the official
estimates for all tax legislation considered by the Congress.
As such, CBO incorporates those estimates into its cost
estimates of the effects of legislation. All of the estimates
for the revenue provisions of H.R. 8314 were provided by
JCT.\1\
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\1\See Joint Committee on Taxation, Description of the Chairman's
Amendment in the Nature of a Substitute to H.R. 8314, The ``No Foreign
Election Interference Act'', JCX-24-24 (May 14, 2024), https://jct.gov/
publications/2024/jcx-24-24/, and Description of H.R. 8314, The ``No
Foreign Election Interference Act'', JCX-19-24 (May 14, 2024), https://
www.jct.gov/publications/2024/jcx-19-24/.
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For this estimate, CBO and JCT assume that the bill will be
enacted in fiscal year 2024.
JCT estimates that enacting H.R. 8314 would increase
revenues by less than $500,000 over the 2024-2034 period.
CBO estimates that implementing H.R. 8314 would increase
administrative costs for the Internal Revenue Service by less
than $500,000 over the 2024-2029 period; any related spending
would be subject to the availability of appropriated funds.
The CBO staff contact for this estimate is Nathaniel
Frentz. The estimate was reviewed by John McClelland, Director
of Tax Analysis.
Phillip L. Swagel,
Director, Congressional Budget Office.
V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE
A. Committee Oversight Findings and Recommendations
With respect to clause 3(c)(1) of rule XIII of the Rules of
the House of Representatives, the Committee made findings and
recommendations that are reflected in this report.
B. Statement of General Performance Goals and Objectives
With respect to clause 3(c)(4) of rule XIII of the Rules of
the House of Representatives, the Committee advises that the
bill does not authorize funding, so no statement of general
performance goals and objectives is required.
C. Information Relating to Unfunded Mandates
This information is provided in accordance with section 423
of the Unfunded Mandates Reform Act of 1995 (Pub. L. No. 104-
4).
The Committee has determined that the bill does not contain
Federal mandates on the private sector. The Committee has
determined that the bill does not impose a Federal
intergovernmental mandate on State, local, or tribal
governments.
D. Applicability of House Rule XXI, Clause 5(b)
Rule XXI 5(b) of the Rules of the House of Representatives
provides, in part, that ``A bill or joint resolution,
amendment, or conference report carrying a Federal income tax
rate increase may not be considered as passed or agreed to
unless so determined by a vote of not less than three-fifths of
the Members voting, a quorum being present.'' The Committee has
carefully reviewed the bill, and states that the bill does not
provide such a Federal income tax rate increase.
E. Tax Complexity Analysis
Section 4022(b) of the Internal Revenue Service Reform and
Restructuring Act of 1998 (``IRS Reform Act'') requires the
staff of the Joint Committee on Taxation (in consultation with
the Internal Revenue Service and the Treasury Department) to
provide a tax complexity analysis. The complexity analysis is
required for all legislation reported by the Senate Committee
on Finance, the House Committee on Ways and Means, or any
committee of conference if the legislation includes a provision
that directly or indirectly amends the Internal Revenue Code
and has widespread applicability to individuals or small
businesses. The staff of the Joint Committee on Taxation has
determined that there are no provisions that are of widespread
applicability to individuals or small businesses.
F. Congressional Earmarks, Limited Tax Benefits, and Limited Tariff
Benefits
With respect to clause 9 of rule XXI of the Rules of the
House of Representatives, the Committee has carefully reviewed
the provisions of the bill, and states that the provisions of
the bill do not contain any congressional earmarks, limited tax
benefits, or limited tariff benefits within the meaning of the
rule.
G. Duplication of Federal Programs
In compliance with clause 3(c)(5) of rule XIII of the Rules
of the House of Representatives, the Committee states that no
provision of the bill establishes or reauthorizes: (1) a
program of the Federal Government known to be duplicative of
another Federal program; (2) a program included in any report
from the Government Accountability Office to Congress pursuant
to section 21 of Public Law 111-139; or (3) a program related
to a program identified in the most recent Catalog of Federal
Domestic Assistance, published pursuant to the Federal Program
Information Act (Pub. L. No. 95-220, as amended by Pub. L. No.
98-169).
VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (new matter is
printed in italics and existing law in which no change is
proposed is shown in roman):
INTERNAL REVENUE CODE OF 1986
Subtitle A--Income Taxes
* * * * * * *
CHAPTER 1--NORMAL TAXES AND SURTAXES
* * * * * * *
Subchapter F--EXEMPT ORGANIZATIONS
* * * * * * *
PART I--GENERAL RULE
* * * * * * *
SEC. 501. EXEMPTION FROM TAX ON CORPORATIONS, CERTAIN TRUSTS, ETC.
(a) Exemption from taxation.--An organization described in
subsection (c) or (d) or section 401(a) shall be exempt from
taxation under this subtitle unless such exemption is denied
under section 502 or 503.
(b) Tax on unrelated business income and certain other
activities.--An organization exempt from taxation under
subsection (a) shall be subject to tax to the extent provided
in parts II, III, and VI of this subchapter, but
(notwithstanding parts II, III, and VI of this subchapter)
shall be considered an organization exempt from income taxes
for the purpose of any law which refers to organizations exempt
from income taxes.
(c) List of exempt organizations.--The following
organizations are referred to in subsection (a):
(1) Any corporation organized under Act of Congress
which is an instrumentality of the United States but
only if such corporation--
(A) is exempt from Federal income taxes--
(i) under such Act as amended and
supplemented before July 18, 1984, or
(ii) under this title without regard
to any provision of law which is not
contained in this title and which is
not contained in a revenue Act, or
(B) is described in subsection (l).
(2) Corporations organized for the exclusive purpose
of holding title to property, collecting income
therefrom, and turning over the entire amount thereof,
less expenses, to an organization which itself is
exempt under this section. Rules similar to the rules
of subparagraph (G) of paragraph (25) shall apply for
purposes of this paragraph.
(3) Corporations, and any community chest, fund, or
foundation, organized and operated exclusively for
religious, charitable, scientific, testing for public
safety, literary, or educational purposes, or to foster
national or international amateur sports competition
(but only if no part of its activities involve the
provision of athletic facilities or equipment), or for
the prevention of cruelty to children or animals, no
part of the net earnings of which inures to the benefit
of any private shareholder or individual, no
substantial part of the activities of which is carrying
on propaganda, or otherwise attempting, to influence
legislation (except as otherwise provided in subsection
(h)), and which does not participate in, or intervene
in (including the publishing or distributing of
statements), any political campaign on behalf of (or in
opposition to) any candidate for public office.
(4)(A) Civic leagues or organizations not organized
for profit but operated exclusively for the promotion
of social welfare, or local associations of employees,
the membership of which is limited to the employees of
a designated person or persons in a particular
municipality, and the net earnings of which are devoted
exclusively to charitable, educational, or recreational
purposes.
(B) Subparagraph (A) shall not apply to an entity
unless no part of the net earnings of such entity
inures to the benefit of any private shareholder or
individual.
(5) Labor, agricultural, or horticultural
organizations.
(6) Business leagues, chambers of commerce, real-
estate boards, boards of trade, or professional
football leagues (whether or not administering a
pension fund for football players), not organized for
profit and no part of the net earnings of which inures
to the benefit of any private shareholder or
individual.
(7) Clubs organized for pleasure, recreation, and
other nonprofitable purposes, substantially all of the
activities of which are for such purposes and no part
of the net earnings of which inures to the benefit of
any private shareholder.
(8) Fraternal beneficiary societies, orders, or
associations--
(A) operating under the lodge system or for
the exclusive benefit of the members of a
fraternity itself operating under the lodge
system, and
(B) providing for the payment of life, sick,
accident, or other benefits to the members of
such society, order, or association or their
dependents.
(9) Voluntary employees' beneficiary associations
providing for the payment of life, sick, accident, or
other benefits to the members of such association or
their dependents or designated beneficiaries, if no
part of the net earnings of such association inures
(other than through such payments) to the benefit of
any private shareholder or individual. For purposes of
providing for the payment of sick and accident benefits
to members of such an association and their dependents,
the term ``dependent'' shall include any individual who
is a child (as defined in section 152(f)(1)) of a
member who as of the end of the calendar year has not
attained age 27.
(10) Domestic fraternal societies, orders, or
associations, operating under the lodge system--
(A) the net earnings of which are devoted
exclusively to religious, charitable,
scientific, literary, educational, and
fraternal purposes, and
(B) which do not provide for the payment of
life, sick, accident, or other benefits.
(11) Teachers' retirement fund associations of a
purely local character, if--
(A) no part of their net earnings inures
(other than through payment of retirement
benefits) to the benefit of any private
shareholder or individual, and
(B) the income consists solely of amounts
received from public taxation, amounts received
from assessments on the teaching salaries of
members, and income in respect of investments.
(12)(A) Benevolent life insurance associations of a
purely local character, mutual ditch or irrigation
companies, mutual or cooperative telephone companies,
or like organizations; but only if 85 percent or more
of the income consists of amounts collected from
members for the sole purpose of meeting losses and
expenses.
(B) In the case of a mutual or cooperative telephone
company, subparagraph (A) shall be applied without
taking into account any income received or accrued--
(i) from a nonmember telephone company for
the performance of communication services which
involve members of the mutual or cooperative
telephone company,
(ii) from qualified pole rentals,
(iii) from the sale of display listings in a
directory furnished to the members of the
mutual or cooperative telephone company, or
(iv) from the prepayment of a loan under
section 306A, 306B, or 311 of the Rural
Electrification Act of 1936 (as in effect on
January 1, 1987).
(C) In the case of a mutual or cooperative electric
company, subparagraph (A) shall be applied without
taking into account any income received or accrued--
(i) from qualified pole rentals, or
(ii) from any provision or sale of electric
energy transmission services or ancillary
services if such services are provided on a
nondiscriminatory open access basis under an
open access transmission tariff approved or
accepted by FERC or under an independent
transmission provider agreement approved or
accepted by FERC (other than income received or
accrued directly or indirectly from a member),
(iii) from the provision or sale of electric
energy distribution services or ancillary
services if such services are provided on a
nondiscriminatory open access basis to
distribute electric energy not owned by the
mutual or electric cooperative company--
(I) to end-users who are served by
distribution facilities not owned by
such company or any of its members
(other than income received or accrued
directly or indirectly from a member),
or
(II) generated by a generation
facility not owned or leased by such
company or any of its members and which
is directly connected to distribution
facilities owned by such company or any
of its members (other than income
received or accrued directly or
indirectly from a member),
(iv) from any nuclear decommissioning
transaction, or
(v) from any asset exchange or conversion
transaction.
(D) For purposes of this paragraph, the term
``qualified pole rental'' means any rental of a pole
(or other structure used to support wires) if such pole
(or other structure)--
(i) is used by the telephone or electric
company to support one or more wires which are
used by such company in providing telephone or
electric services to its members, and
(ii) is used pursuant to the rental to
support one or more wires (in addition to the
wires described in clause (i)) for use in
connection with the transmission by wire of
electricity or of telephone or other
communications.
For purposes of the preceding sentence, the term ``rental''
includes any sale of the right to use the pole (or other
structure).
(E) For purposes of subparagraph (C)(ii), the term
``FERC'' means--
(i) the Federal Energy Regulatory Commission,
or
(ii) in the case of any utility with respect
to which all of the electricity generated,
transmitted, or distributed by such utility is
generated, transmitted, distributed, and
consumed in the same State, the State agency of
such State with the authority to regulate
electric utilities.
(F) For purposes of subparagraph (C)(iv), the term
``nuclear decommissioning transaction'' means--
(i) any transfer into a trust, fund, or
instrument established to pay any nuclear
decommissioning costs if the transfer is in
connection with the transfer of the mutual or
cooperative electric company's interest in a
nuclear power plant or nuclear power plant
unit,
(ii) any distribution from any trust, fund,
or instrument established to pay any nuclear
decommissioning costs, or
(iii) any earnings from any trust, fund, or
instrument established to pay any nuclear
decommissioning costs.
(G) For purposes of subparagraph (C)(v), the term
``asset exchange or conversion transaction'' means any
voluntary exchange or involuntary conversion of any
property related to generating, transmitting,
distributing, or selling electric energy by a mutual or
cooperative electric company, the gain from which
qualifies for deferred recognition under section 1031
or 1033, but only if the replacement property acquired
by such company pursuant to such section constitutes
property which is used, or to be used, for--
(i) generating, transmitting, distributing,
or selling electric energy, or
(ii) producing, transmitting, distributing,
or selling natural gas.
(H)(i) In the case of a mutual or cooperative
electric company described in this paragraph or an
organization described in section 1381(a)(2)(C), income
received or accrued from a load loss transaction shall
be treated as an amount collected from members for the
sole purpose of meeting losses and expenses.
(ii) For purposes of clause (i), the term ``load loss
transaction'' means any wholesale or retail sale of
electric energy (other than to members) to the extent
that the aggregate sales during the recovery period do
not exceed the load loss mitigation sales limit for
such period.
(iii) For purposes of clause (ii), the load loss
mitigation sales limit for the recovery period is the
sum of the annual load losses for each year of such
period.
(iv) For purposes of clause (iii), a mutual or
cooperative electric company's annual load loss for
each year of the recovery period is the amount (if any)
by which--
(I) the megawatt hours of electric energy
sold during such year to members of such
electric company are less than
(II) the megawatt hours of electric energy
sold during the base year to such members.
(v) For purposes of clause (iv)(II), the term ``base
year'' means--
(I) the calendar year preceding the start-up
year, or
(II) at the election of the mutual or
cooperative electric company, the second or
third calendar years preceding the start-up
year.
(vi) For purposes of this subparagraph, the recovery
period is the 7-year period beginning with the start-up
year.
(vii) For purposes of this subparagraph, the start-up
year is the first year that the mutual or cooperative
electric company offers nondiscriminatory open access
or the calendar year which includes the date of the
enactment of this subparagraph, if later, at the
election of such company.
(viii) A company shall not fail to be treated as a
mutual or cooperative electric company for purposes of
this paragraph or as a corporation operating on a
cooperative basis for purposes of section 1381(a)(2)(C)
by reason of the treatment under clause (i).
(ix) For purposes of subparagraph (A), in the case of
a mutual or cooperative electric company, income
received, or accrued, indirectly from a member shall be
treated as an amount collected from members for the
sole purpose of meeting losses and expenses.
(I) In the case of a mutual or cooperative electric
company described in this paragraph or an organization
described in section 1381(a)(2), income received or
accrued in connection with an election under section
45J(e)(1) shall be treated as an amount collected from
members for the sole purpose of meeting losses and
expenses.
(J) In the case of a mutual or cooperative telephone
or electric company described in this paragraph,
subparagraph (A) shall be applied without taking into
account any income received or accrued from--
(i) any grant, contribution, or assistance
provided pursuant to the Robert T. Stafford
Disaster Relief and Emergency Assistance Act or
any similar grant, contribution, or assistance
by any local, State, or regional governmental
entity for the purpose of relief, recovery, or
restoration from, or preparation for, a
disaster or emergency, or
(ii) any grant or contribution by any
governmental entity (other than a contribution
in aid of construction or any other
contribution as a customer or potential
customer) the purpose of which is substantially
related to providing, constructing, restoring,
or relocating electric, communication,
broadband, internet, or other utility
facilities or services.
(13) Cemetery companies owned and operated
exclusively for the benefit of their members or which
are not operated for profit; and any corporation
chartered solely for the purpose of the disposal of
bodies by burial or cremation which is not permitted by
its charter to engage in any business not necessarily
incident to that purpose and no part of the net
earnings of which inures to the benefit of any private
shareholder or individual.
(14)(A) Credit unions without capital stock organized
and operated for mutual purposes and without profit.
(B) Corporations or associations without capital
stock organized before September 1, 1957, and operated
for mutual purposes and without profit for the purpose
of providing reserve funds for, and insurance of shares
or deposits in--
(i) domestic building and loan associations,
(ii) cooperative banks without capital stock
organized and operated for mutual purposes and
without profit,
(iii) mutual savings banks not having capital
stock represented by shares, or
(iv) mutual savings banks described in
section 591(b).
(C) Corporations or associations organized before
September 1, 1957, and operated for mutual purposes and
without profit for the purpose of providing reserve
funds for associations or banks described in clause
(i), (ii), or (iii) of subparagraph (B); but only if 85
percent or more of the income is attributable to
providing such reserve funds and to investments. This
subparagraph shall not apply to any corporation or
association entitled to exemption under subparagraph
(B).
(15)(A) Insurance companies (as defined in section
816(a)) other than life (including interinsurers and
reciprocal underwriters) if--
(i)(I) the gross receipts for the taxable
year do not exceed $600,000, and
(II) more than 50 percent of such gross
receipts consist of premiums, or
(ii) in the case of a mutual insurance
company--
(I) the gross receipts of which for
the taxable year do not exceed
$150,000, and
(II) more than 35 percent of such
gross receipts consist of premiums.
Clause (ii) shall not apply to a company if any
employee of the company, or a member of the employee's
family (as defined in section 2032A(e)(2)), is an
employee of another company exempt from taxation by
reason of this paragraph (or would be so exempt but for
this sentence).
(B) For purposes of subparagraph (A), in determining
whether any company or association is described in
subparagraph (A), such company or association shall be
treated as receiving during the taxable year amounts
described in subparagraph (A) which are received during
such year by all other companies or associations which
are members of the same controlled group as the
insurance company or association for which the
determination is being made.
(C) For purposes of subparagraph (B), the term
``controlled group'' has the meaning given such term by
section 831(b)(2)(B)(ii), except that in applying
section 831(b)(2)(B)(ii) for purposes of this
subparagraph, subparagraphs (B) and (C) of section
1563(b)(2) shall be disregarded.
(16) Corporations organized by an association subject
to part IV of this subchapter or members thereof, for
the purpose of financing the ordinary crop operations
of such members or other producers, and operated in
conjunction with such association. Exemption shall not
be denied any such corporation because it has capital
stock, if the dividend rate of such stock is fixed at
not to exceed the legal rate of interest in the State
of incorporation or 8 percent per annum, whichever is
greater, on the value of the consideration for which
the stock was issued, and if substantially all such
stock (other than nonvoting preferred stock, the owners
of which are not entitled or permitted to participate,
directly or indirectly, in the profits of the
corporation, on dissolution or otherwise, beyond the
fixed dividends) is owned by such association, or
members thereof; nor shall exemption be denied any such
corporation because there is accumulated and maintained
by it a reserve required by State law or a reasonable
reserve for any necessary purpose.
(17)(A) A trust or trusts forming part of a plan
providing for the payment of supplemental unemployment
compensation benefits, if--
(i) under the plan, it is impossible, at any
time prior to the satisfaction of all
liabilities, with respect to employees under
the plan, for any part of the corpus or income
to be (within the taxable year or thereafter)
used for, or diverted to, any purpose other
than the providing of supplemental unemployment
compensation benefits,
(ii) such benefits are payable to employees
under a classification which is set forth in
the plan and which is found by the Secretary
not to be discriminatory in favor of employees
who are highly compensated employees (within
the meaning of section 414(q)), and
(iii) such benefits do not discriminate in
favor of employees who are highly compensated
employees (within the meaning of section
414(q)). A plan shall not be considered
discriminatory within the meaning of this
clause merely because the benefits received
under the plan bear a uniform relationship to
the total compensation, or the basic or regular
rate of compensation, of the employees covered
by the plan.
(B) In determining whether a plan meets the
requirements of subparagraph (A), any benefits provided
under any other plan shall not be taken into
consideration, except that a plan shall not be
considered discriminatory--
(i) merely because the benefits under the
plan which are first determined in a
nondiscriminatory manner within the meaning of
subparagraph (A) are then reduced by any sick,
accident, or unemployment compensation benefits
received under State or Federal law (or reduced
by a portion of such benefits if determined in
a nondiscriminatory manner), or
(ii) merely because the plan provides only
for employees who are not eligible to receive
sick, accident, or unemployment compensation
benefits under State or Federal law the same
benefits (or a portion of such benefits if
determined in a nondiscriminatory manner) which
such employees would receive under such laws if
such employees were eligible for such benefits,
or
(iii) merely because the plan provides only
for employees who are not eligible under
another plan (which meets the requirements of
subparagraph (A)) of supplemental unemployment
compensation benefits provided wholly by the
employer the same benefits (or a portion of
such benefits if determined in a
nondiscriminatory manner) which such employees
would receive under such other plan if such
employees were eligible under such other plan,
but only if the employees eligible under both
plans would make a classification which would
be nondiscriminatory within the meaning of
subparagraph (A).
(C) A plan shall be considered to meet the
requirements of subparagraph (A) during the whole of
any year of the plan if on one day in each quarter it
satisfies such requirements.
(D) The term ``supplemental unemployment compensation
benefits'' means only--
(i) benefits which are paid to an employee
because of his involuntary separation from the
employment of the employer (whether or not such
separation is temporary) resulting directly
from a reduction in force, the discontinuance
of a plant or operation, or other similar
conditions, and
(ii) sick and accident benefits subordinate
to the benefits described in clause (i).
(E) Exemption shall not be denied under subsection
(a) to any organization entitled to such exemption as
an association described in paragraph (9) of this
subsection merely because such organization provides
for the payment of supplemental unemployment benefits
(as defined in subparagraph (D)(i)).
(18) A trust or trusts created before June 25, 1959,
forming part of a plan providing for the payment of
benefits under a pension plan funded only by
contributions of employees, if--
(A) under the plan, it is impossible, at any
time prior to the satisfaction of all
liabilities with respect to employees under the
plan, for any part of the corpus or income to
be (within the taxable year or thereafter) used
for, or diverted to, any purpose other than the
providing of benefits under the plan,
(B) such benefits are payable to employees
under a classification which is set forth in
the plan and which is found by the Secretary
not to be discriminatory in favor of employees
who are highly compensated employees (within
the meaning of section 414(q)),
(C) such benefits do not discriminate in
favor of employees who are highly compensated
employees (within the meaning of section
414(q)). A plan shall not be considered
discriminatory within the meaning of this
subparagraph merely because the benefits
received under the plan bear a uniform
relationship to the total compensation, or the
basic or regular rate of compensation, of the
employees covered by the plan, and
(D) in the case of a plan under which an
employee may designate certain contributions as
deductible--
(i) such contributions do not exceed
the amount with respect to which a
deduction is allowable under section
219(b)(3),
(ii) requirements similar to the
requirements of section
401(k)(3)(A)(ii) are met with respect
to such elective contributions,
(iii) such contributions are treated
as elective deferrals for purposes of
section 402(g), and
(iv) the requirements of section
401(a)(30) are met.
For purposes of subparagraph (D)(ii), rules similar to
the rules of section 401(k)(8) shall apply. For
purposes of section 4979, any excess contribution under
clause (ii) shall be treated as an excess contribution
under a cash or deferred arrangement.
(19) A post or organization of past or present
members of the Armed Forces of the United States, or an
auxiliary unit or society of, or a trust or foundation
for, any such post or organization--
(A) organized in the United States or any of
its possessions,
(B) at least 75 percent of the members of
which are past or present members of the Armed
Forces of the United States and substantially
all of the other members of which are
individuals who are cadets or are spouses,
widows, widowers, ancestors, or lineal
descendants of past or present members of the
Armed Forces of the United States or of cadets,
and
(C) no part of the net earnings of which
inures to the benefit of any private
shareholder or individual.
(21)(A) A trust or trusts established in writing,
created or organized in the United States, and
contributed to by any person (except an insurance
company) if--
(i) the purpose of such trust or trusts is
exclusively--
(I) to satisfy, in whole or in part,
the liability of such person for, or
with respect to, claims for
compensation for disability or death
due to pneumoconiosis under Black Lung
Acts,
(II) to pay premiums for insurance
exclusively covering such liability,
(III) to pay administrative and other
incidental expenses of such trust in
connection with the operation of the
trust and the processing of claims
against such person under Black Lung
Acts, and
(IV) to pay accident or health
benefits for retired miners and their
spouses and dependents (including
administrative and other incidental
expenses of such trust in connection
therewith) or premiums for insurance
exclusively covering such benefits; and
(ii) no part of the assets of the trust may
be used for, or diverted to, any purpose other
than--
(I) the purposes described in clause
(i),
(II) investment (but only to the
extent that the trustee determines that
a portion of the assets is not
currently needed for the purposes
described in clause (i)) in qualified
investments, or
(III) payment into the Black Lung
Disability Trust Fund established under
section 9501, or into the general fund
of the United States Treasury (other
than in satisfaction of any tax or
other civil or criminal liability of
the person who established or
contributed to the trust).
(B) No deduction shall be allowed under this chapter
for any payment described in subparagraph (A)(i)(IV)
from such trust.
(C) Payments described in subparagraph (A)(i)(IV) may
be made from such trust during a taxable year only to
the extent that the aggregate amount of such payments
during such taxable year does not exceed the excess (if
any), as of the close of the preceding taxable year,
of--
(i) the fair market value of the assets of
the trust, over
(ii) 110 percent of the present value of the
liability described in subparagraph (A)(i)(I)
of such person.
The determinations under the preceding sentence shall be made
by an independent actuary using actuarial methods and
assumptions (not inconsistent with the regulations prescribed
under section 192(c)(1)(A)) each of which is reasonable and
which are reasonable in the aggregate.
(D) For purposes of this paragraph:
(i) The term ``Black Lung Acts'' means part C
of title IV of the Federal Mine Safety and
Health Act of 1977, and any State law providing
compensation for disability or death due to
that pneumoconiosis.
(ii) The term ``qualified investments''
means--
(I) public debt securities of the
United States,
(II) obligations of a State or local
government which are not in default as
to principal or interest, and
(III) time or demand deposits in a
bank (as defined in section 581) or an
insured credit union (within the
meaning of section 101(7) of the
Federal Credit Union Act, 12 U.S.C.
1752(7)) located in the United States.
(iii) The term ``miner'' has the same meaning
as such term has when used in section 402(d) of
the Black Lung Benefits Act (30 U.S.C. 902(d)).
(iv) The term ``incidental expenses''
includes legal, accounting, actuarial, and
trustee expenses.
(22) A trust created or organized in the United
States and established in writing by the plan sponsors
of multiemployer plans if--
(A) the purpose of such trust is
exclusively--
(i) to pay any amount described in
section 4223(c) or (h) of the Employee
Retirement Income Security Act of 1974,
and
(ii) to pay reasonable and necessary
administrative expenses in connection
with the establishment and operation of
the trust and the processing of claims
against the trust,
(B) no part of the assets of the trust may be
used for, or diverted to, any purpose other
than--
(i) the purposes described in
subparagraph (A), or
(ii) the investment in securities,
obligations, or time or demand deposits
described in clause (ii) of paragraph
(21)(D),
(C) such trust meets the requirements of
paragraphs (2), (3), and (4) of section
4223(b), 4223(h), or, if applicable, section
4223(c) of the Employee Retirement Income
Security Act of 1974, and
(D) the trust instrument provides that, on
dissolution of the trust, assets of the trust
may not be paid other than to plans which have
participated in the plan or, in the case of a
trust established under section 4223(h) of such
Act, to plans with respect to which employers
have participated in the fund.
(23) Any association organized before 1880 more than
75 percent of the members of which are present or past
members of the Armed Forces and a principal purpose of
which is to provide insurance and other benefits to
veterans or their dependents.
(24) A trust described in section 4049 of the
Employee Retirement Income Security Act of 1974 (as in
effect on the date of the enactment of the Single-
Employer Pension Plan Amendments Act of 1986).
(25)(A) Any corporation or trust which--
(i) has no more than 35 shareholders or
beneficiaries,
(ii) has only 1 class of stock or beneficial
interest, and
(iii) is organized for the exclusive purposes
of--
(I) acquiring real property and
holding title to, and collecting income
from, such property, and
(II) remitting the entire amount of
income from such property (less
expenses) to 1 or more organizations
described in subparagraph (C) which are
shareholders of such corporation or
beneficiaries of such trust.
For purposes of clause (iii), the term ``real
property'' shall not include any interest as a tenant
in common (or similar interest) and shall not include
any indirect interest.
(B) A corporation or trust shall be described in
subparagraph (A) without regard to whether the
corporation or trust is organized by 1 or more
organizations described in subparagraph (C).
(C) An organization is described in this subparagraph
if such organization is--
(i) a qualified pension, profit sharing, or
stock bonus plan that meets the requirements of
section 401(a),
(ii) a governmental plan (within the meaning
of section 414(d)),
(iii) the United States, any State or
political subdivision thereof, or any agency or
instrumentality of any of the foregoing, or
(iv) any organization described in paragraph
(3).
(D) A corporation or trust shall in no event be
treated as described in subparagraph (A) unless such
corporation or trust permits its shareholders or
beneficiaries--
(i) to dismiss the corporation's or trust's
investment adviser, following reasonable
notice, upon a vote of the shareholders or
beneficiaries holding a majority of interest in
the corporation or trust, and
(ii) to terminate their interest in the
corporation or trust by either, or both, of the
following alternatives, as determined by the
corporation or trust:
(I) by selling or exchanging their
stock in the corporation or interest in
the trust (subject to any Federal or
State securities law) to any
organization described in subparagraph
(C) so long as the sale or exchange
does not increase the number of
shareholders or beneficiaries in such
corporation or trust above 35, or
(II) by having their stock or
interest redeemed by the corporation or
trust after the shareholder or
beneficiary has provided 90 days notice
to such corporation or trust.
(E)(i) For purposes of this title--
(I) a corporation which is a qualified
subsidiary shall not be treated as a separate
corporation, and
(II) all assets, liabilities, and items of
income, deduction, and credit of a qualified
subsidiary shall be treated as assets,
liabilities, and such items (as the case may
be) of the corporation or trust described in
subparagraph (A).
(ii) For purposes of this subparagraph, the term
``qualified subsidiary'' means any corporation if, at
all times during the period such corporation was in
existence, 100 percent of the stock of such corporation
is held by the corporation or trust described in
subparagraph (A).
(iii) For purposes of this subtitle, if any
corporation which was a qualified subsidiary ceases to
meet the requirements of clause (ii), such corporation
shall be treated as a new corporation acquiring all of
its assets (and assuming all of its liabilities)
immediately before such cessation from the corporation
or trust described in subparagraph (A) in exchange for
its stock.
(F) For purposes of subparagraph (A), the term ``real
property'' includes any personal property which is
leased under, or in connection with, a lease of real
property, but only if the rent attributable to such
personal property (determined under the rules of
section 856(d)(1)) for the taxable year does not exceed
15 percent of the total rent for the taxable year
attributable to both the real and personal property
leased under, or in connection with, such lease.
(G)(i) An organization shall not be treated as
failing to be described in this paragraph merely by
reason of the receipt of any otherwise disqualifying
income which is incidentally derived from the holding
of real property.
(ii) Clause (i) shall not apply if the amount of
gross income described in such clause exceeds 10
percent of the organization's gross income for the
taxable year unless the organization establishes to the
satisfaction of the Secretary that the receipt of gross
income described in clause (i) in excess of such
limitation was inadvertent and reasonable steps are
being taken to correct the circumstances giving rise to
such income.
(26) Any membership organization if--
(A) such organization is established by a
State exclusively to provide coverage for
medical care (as defined in section 213(d)) on
a not-for-profit basis to individuals described
in subparagraph (B) through--
(i) insurance issued by the
organization, or
(ii) a health maintenance
organization under an arrangement with
the organization,
(B) the only individuals receiving such
coverage through the organization are
individuals--
(i) who are residents of such State,
and
(ii) who, by reason of the existence
or history of a medical condition--
(I) are unable to acquire
medical care coverage for such
condition through insurance or
from a health maintenance
organization, or
(II) are able to acquire such
coverage only at a rate which
is substantially in excess of
the rate for such coverage
through the membership
organization,
(C) the composition of the membership in such
organization is specified by such State, and
(D) no part of the net earnings of the
organization inures to the benefit of any
private shareholder or individual.
A spouse and any qualifying child (as defined in
section 24(c)) of an individual described in
subparagraph (B) (without regard to this sentence)
shall be treated as described in subparagraph (B).
(27)(A) Any membership organization if--
(i) such organization is established before
June 1, 1996, by a State exclusively to
reimburse its members for losses arising under
workmen's compensation acts,
(ii) such State requires that the membership
of such organization consist of--
(I) all persons who issue insurance
covering workmen's compensation losses
in such State, and
(II) all persons and governmental
entities who self-insure against such
losses, and
(iii) such organization operates as a non-
profit organization by--
(I) returning surplus income to its
members or workmen's compensation
policyholders on a periodic basis, and
(II) reducing initial premiums in
anticipation of investment income.
(B) Any organization (including a mutual insurance
company) if--
(i) such organization is created by State law
and is organized and operated under State law
exclusively to--
(I) provide workmen's compensation
insurance which is required by State
law or with respect to which State law
provides significant disincentives if
such insurance is not purchased by an
employer, and
(II) provide related coverage which
is incidental to workmen's compensation
insurance,
(ii) such organization must provide workmen's
compensation insurance to any employer in the
State (for employees in the State or
temporarily assigned out-of-State) which seeks
such insurance and meets other reasonable
requirements relating thereto,
(iii)(I) the State makes a financial
commitment with respect to such organization
either by extending the full faith and credit
of the State to the initial debt of such
organization or by providing the initial
operating capital of such organization, and
(II) in the case of periods after the date of
enactment of this subparagraph, the assets of
such organization revert to the State upon
dissolution or State law does not permit the
dissolution of such organization, and
(iv) the majority of the board of directors
or oversight body of such organization are
appointed by the chief executive officer or
other executive branch official of the State,
by the State legislature, or by both.
(28) The National Railroad Retirement Investment
Trust established under section 15(j) of the Railroad
Retirement Act of 1974.
(29) CO-OP health insurance issuers.--
(A) In general.--A qualified nonprofit health
insurance issuer (within the meaning of section
1322 of the Patient Protection and Affordable
Care Act) which has received a loan or grant
under the CO-OP program under such section, but
only with respect to periods for which the
issuer is in compliance with the requirements
of such section and any agreement with respect
to the loan or grant.
(B) Conditions for exemption.--Subparagraph
(A) shall apply to an organization only if--
(i) the organization has given notice
to the Secretary, in such manner as the
Secretary may by regulations prescribe,
that it is applying for recognition of
its status under this paragraph,
(ii) except as provided in section
1322(c)(4) of the Patient Protection
and Affordable Care Act, no part of the
net earnings of which inures to the
benefit of any private shareholder or
individual,
(iii) no substantial part of the
activities of which is carrying on
propaganda, or otherwise attempting, to
influence legislation, and
(iv) the organization does not
participate in, or intervene in
(including the publishing or
distributing of statements), any
political campaign on behalf of (or in
opposition to) any candidate for public
office.
(d) Religious and apostolic organizations.--The following
organizations are referred to in subsection (a): Religious or
apostolic associations or corporations, if such associations or
corporations have a common treasury or community treasury, even
if such associations or corporations engage in business for the
common benefit of the members, but only if the members thereof
include (at the time of filing their returns) in their gross
income their entire pro rata shares, whether distributed or
not, of the taxable income of the association or corporation
for such year. Any amount so included in the gross income of a
member shall be treated as a dividend received.
(e) Cooperative hospital service organizations.--For purposes
of this title, an organization shall be treated as an
organization organized and operated exclusively for charitable
purposes, if--
(1) such organization is organized and operated
solely--
(A) to perform, on a centralized basis, one
or more of the following services which, if
performed on its own behalf by a hospital which
is an organization described in subsection
(c)(3) and exempt from taxation under
subsection (a), would constitute activities in
exercising or performing the purpose or
function constituting the basis for its
exemption: data processing, purchasing
(including the purchasing of insurance on a
group basis), warehousing, billing and
collection (including the purchase of patron
accounts receivable on a recourse basis), food,
clinical, industrial engineering, laboratory,
printing, communications, record center, and
personnel (including selection, testing,
training, and education of personnel) services;
and
(B) to perform such services solely for two
or more hospitals each of which is--
(i) an organization described in
subsection (c)(3) which is exempt from
taxation under subsection (a),
(ii) a constituent part of an
organization described in subsection
(c)(3) which is exempt from taxation
under subsection (a) and which, if
organized and operated as a separate
entity, would constitute an
organization described in subsection
(c)(3), or
(iii) owned and operated by the
United States, a State, the District of
Columbia, or a possession of the United
States, or a political subdivision or
an agency or instrumentality of any of
the foregoing;
(2) such organization is organized and operated on a
cooperative basis and allocates or pays, within 81/2
months after the close of its taxable year, all net
earnings to patrons on the basis of services performed
for them; and
(3) if such organization has capital stock, all of
such stock outstanding is owned by its patrons.
For purposes of this title, any organization which, by reason
of the preceding sentence, is an organization described in
subsection (c)(3) and exempt from taxation under subsection
(a), shall be treated as a hospital and as an organization
referred to in section 170(b)(1)(A)(iii).
(f) Cooperative service organizations of operating
educational organizations.--For purposes of this title, if an
organization is--
(1) organized and operated solely to hold, commingle,
and collectively invest and reinvest (including
arranging for and supervising the performance by
independent contractors of investment services related
thereto) in stocks and securities, the moneys
contributed thereto by each of the members of such
organization, and to collect income therefrom and turn
over the entire amount thereof, less expenses, to such
members,
(2) organized and controlled by one or more such
members, and
(3) comprised solely of members that are
organizations described in clause (ii) or (iv) of
section 170(b)(1)(A)--
(A) which are exempt from taxation under
subsection (a), or
(B) the income of which is excluded from
taxation under section 115,
then such organization shall be treated as an
organization organized and operated exclusively for
charitable purposes.
(g) Definition of agricultural.--For purposes of subsection
(c)(5), the term ``agricultural'' includes the art or science
of cultivating land, harvesting crops or aquatic resources, or
raising livestock.
(h) Expenditures by public charities to influence
legislation.--
(1) General rule.--In the case of an organization to
which this subsection applies, exemption from taxation
under subsection (a) shall be denied because a
substantial part of the activities of such organization
consists of carrying on propaganda, or otherwise
attempting, to influence legislation, but only if such
organization normally--
(A) makes lobbying expenditures in excess of
the lobbying ceiling amount for such
organization for each taxable year, or
(B) makes grass roots expenditures in excess
of the grass roots ceiling amount for such
organization for each taxable year.
(2) Definitions.--For purposes of this subsection--
(A) Lobbying expenditures.--The term
``lobbying expenditures'' means expenditures
for the purpose of influencing legislation (as
defined in section 4911(d)).
(B) Lobbying ceiling amount.--The lobbying
ceiling amount for any organization for any
taxable year is 150 percent of the lobbying
nontaxable amount for such organization for
such taxable year, determined under section
4911.
(C) Grass roots expenditures.--The term
``grass roots expenditures'' means expenditures
for the purpose of influencing legislation (as
defined in section 4911(d) without regard to
paragraph (1)(B) thereof).
(D) Grass roots ceiling amount.--The grass
roots ceiling amount for any organization for
any taxable year is 150 percent of the grass
roots nontaxable amount for such organization
for such taxable year, determined under section
4911.
(3) Organizations to which this subsection applies.--
This subsection shall apply to any organization which
has elected (in such manner and at such time as the
Secretary may prescribe) to have the provisions of this
subsection apply to such organization and which, for
the taxable year which includes the date the election
is made, is described in subsection (c)(3) and--
(A) is described in paragraph (4), and
(B) is not a disqualified organization under
paragraph (5).
(4) Organizations permitted to elect to have this
subsection apply.--An organization is described in this
paragraph if it is described in--
(A) section 170(b)(1)(A)(ii) (relating to
educational institutions),
(B) section 170(b)(1)(A)(iii) (relating to
hospitals and medical research organizations),
(C) section 170(b)(1)(A)(iv) (relating to
organizations supporting government schools),
(D) section 170(b)(1)(A)(vi) (relating to
organizations publicly supported by charitable
contributions),
(E) section 170(b)(1)(A)(ix) (relating to
agricultural research organizations),
(F) section 509(a)(2) (relating to
organizations publicly supported by admissions,
sales, etc.), or
(G) section 509(a)(3) (relating to
organizations supporting certain types of
public charities) except that for purposes of
this subparagraph, section 509(a)(3) shall be
applied without regard to the last sentence of
section 509(a).
(5) Disqualified organizations.--For purposes of
paragraph (3) an organization is a disqualified
organization if it is--
(A) described in section 170(b)(1)(A)(i)
(relating to churches),
(B) an integrated auxiliary of a church or of
a convention or association of churches, or
(C) a member of an affiliated group of
organizations (within the meaning of section
4911(f)(2)) if one or more members of such
group is described in subparagraph (A) or (B).
(6) Years for which election is effective.--An
election by an organization under this subsection shall
be effective for all taxable years of such organization
which--
(A) end after the date the election is made,
and
(B) begin before the date the election is
revoked by such organization (under regulations
prescribed by the Secretary).
(7) No effect on certain organizations.--With respect
to any organization for a taxable year for which--
(A) such organization is a disqualified
organization (within the meaning of paragraph
(5)), or
(B) an election under this subsection is not
in effect for such organization,
nothing in this subsection or in section 4911 shall be
construed to affect the interpretation of the phrase,
``no substantial part of the activities of which is
carrying on propaganda, or otherwise attempting, to
influence legislation,'' under subsection (c)(3).
(8) Affiliated organizations.--For rules regarding
affiliated organizations, see section 4911(f).
(i) Prohibition of discrimination by certain social clubs.--
Notwithstanding subsection (a), an organization which is
described in subsection (c)(7) shall not be exempt from
taxation under subsection (a) for any taxable year if, at any
time during such taxable year, the charter, bylaws, or other
governing instrument, of such organization or any written
policy statement of such organization contains a provision
which provides for discrimination against any person on the
basis of race, color, or religion. The preceding sentence to
the extent it relates to discrimination on the basis of
religion shall not apply to--
(1) an auxiliary of a fraternal beneficiary society
if such society--
(A) is described in subsection (c)(8) and
exempt from tax under subsection (a), and
(B) limits its membership to the members of a
particular religion, or
(2) a club which in good faith limits its membership
to the members of a particular religion in order to
further the teachings or principles of that religion,
and not to exclude individuals of a particular race or
color.
(j) Special rules for certain amateur sports organizations.--
(1) In general.--In the case of a qualified amateur
sports organization--
(A) the requirement of subsection (c)(3) that
no part of its activities involve the provision
of athletic facilities or equipment shall not
apply, and
(B) such organization shall not fail to meet
the requirements of subsection (c)(3) merely
because its membership is local or regional in
nature.
(2) Qualified amateur sports organization defined.--
For purposes of this subsection, the term ``qualified
amateur sports organization'' means any organization
organized and operated exclusively to foster national
or international amateur sports competition if such
organization is also organized and operated primarily
to conduct national or international competition in
sports or to support and develop amateur athletes for
national or international competition in sports.
(k) Treatment of certain organizations providing child
care.--For purposes of subsection (c)(3) of this section and
sections 170(c)(2), 2055(a)(2), and 2522(a)(2), the term
``educational purposes'' includes the providing of care of
children away from their homes if--
(1) substantially all of the care provided by the
organization is for purposes of enabling individuals to
be gainfully employed, and
(2) the services provided by the organization are
available to the general public.
(l) Government corporations exempt under subsection (c)(1).--
For purposes of subsection (c)(1), the following organizations
are described in this subsection:
(1) The Central Liquidity Facility established under
title III of the Federal Credit Union Act (12 U.S.C.
1795 et seq.).
(2) The Resolution Trust Corporation established
under section 21A 1 of the Federal Home Loan
Bank Act.
(3) The Resolution Funding Corporation established
under section 21B of the Federal Home Loan Bank Act.
(4) The Patient-Centered Outcomes Research Institute
established under section 1181(b) of the Social
Security Act.
(m) Certain organizations providing commercial-type insurance
not exempt from tax.--
(1) Denial of tax exemption where providing
commercial-type insurance is substantial part of
activities.--An organization described in paragraph (3)
or (4) of subsection (c) shall be exempt from tax under
subsection (a) only if no substantial part of its
activities consists of providing commercial-type
insurance.
(2) Other organizations taxed as insurance companies
on insurance business.--In the case of an organization
described in paragraph (3) or (4) of subsection (c)
which is exempt from tax under subsection (a) after the
application of paragraph (1) of this subsection--
(A) the activity of providing commercial-type
insurance shall be treated as an unrelated
trade or business (as defined in section 513),
and
(B) in lieu of the tax imposed by section 511
with respect to such activity, such
organization shall be treated as an insurance
company for purposes of applying subchapter L
with respect to such activity.
(3) Commercial-type insurance.--For purposes of this
subsection, the term ``commercial-type insurance''
shall not include--
(A) insurance provided at substantially below
cost to a class of charitable recipients,
(B) incidental health insurance provided by a
health maintenance organization of a kind
customarily provided by such organizations,
(C) property or casualty insurance provided
(directly or through an organization described
in section 414(e)(3)(B)(ii)) by a church or
convention or association of churches for such
church or convention or association of
churches,
(D) providing retirement or welfare benefits
(or both) by a church or a convention or
association of churches (directly or through an
organization described in section 414(e)(3)(A)
or 414(e)(3)(B)(ii)) for the employees
(including employees described in section
414(e)(3)(B)) of such church or convention or
association of churches or the beneficiaries of
such employees, and
(E) charitable gift annuities.
(4) Insurance includes annuities.--For purposes of
this subsection, the issuance of annuity contracts
shall be treated as providing insurance.
(5) Charitable gift annuity.--For purposes of
paragraph (3)(E), the term ``charitable gift annuity''
means an annuity if--
(A) a portion of the amount paid in
connection with the issuance of the annuity is
allowable as a deduction under section 170 or
2055, and
(B) the annuity is described in section
514(c)(5) (determined as if any amount paid in
cash in connection with such issuance were
property).
(n) Charitable risk pools.--
(1) In general.--For purposes of this title--
(A) a qualified charitable risk pool shall be
treated as an organization organized and
operated exclusively for charitable purposes,
and
(B) subsection (m) shall not apply to a
qualified charitable risk pool.
(2) Qualified charitable risk pool.--For purposes of
this subsection, the term ``qualified charitable risk
pool'' means any organization--
(A) which is organized and operated solely to
pool insurable risks of its members (other than
risks related to medical malpractice) and to
provide information to its members with respect
to loss control and risk management,
(B) which is comprised solely of members that
are organizations described in subsection
(c)(3) and exempt from tax under subsection
(a), and
(C) which meets the organizational
requirements of paragraph (3).
(3) Organizational requirements.--An organization
(hereinafter in this subsection referred to as the
``risk pool'') meets the organizational requirements of
this paragraph if--
(A) such risk pool is organized as a
nonprofit organization under State law
provisions authorizing risk pooling
arrangements for charitable organizations,
(B) such risk pool is exempt from any income
tax imposed by the State (or will be so exempt
after such pool qualifies as an organization
exempt from tax under this title),
(C) such risk pool has obtained at least
$1,000,000 in startup capital from nonmember
charitable organizations,
(D) such risk pool is controlled by a board
of directors elected by its members, and
(E) the organizational documents of such risk
pool require that--
(i) each member of such pool shall at
all times be an organization described
in subsection (c)(3) and exempt from
tax under subsection (a),
(ii) any member which receives a
final determination that it no longer
qualifies as an organization described
in subsection (c)(3) shall immediately
notify the pool of such determination
and the effective date of such
determination, and
(iii) each policy of insurance issued
by the risk pool shall provide that
such policy will not cover the insured
with respect to events occurring after
the date such final determination was
issued to the insured.
An organization shall not cease to qualify as a
qualified charitable risk pool solely by reason of the
failure of any of its members to continue to be an
organization described in subsection (c)(3) if, within
a reasonable period of time after such pool is notified
as required under subparagraph (E)(ii), such pool takes
such action as may be reasonably necessary to remove
such member from such pool.
(4) Other definitions.--For purposes of this
subsection--
(A) Startup capital.--The term ``startup
capital'' means any capital contributed to, and
any program-related investments (within the
meaning of section 4944(c)) made in, the risk
pool before such pool commences operations.
(B) Nonmember charitable organization.--The
term ``nonmember charitable organization''
means any organization which is described in
subsection (c)(3) and exempt from tax under
subsection (a) and which is not a member of the
risk pool and does not benefit (directly or
indirectly) from the insurance coverage
provided by the pool to its members.
(o) Treatment of hospitals participating in provider-
sponsored organizations.--An organization shall not fail to be
treated as organized and operated exclusively for a charitable
purpose for purposes of subsection (c)(3) solely because a
hospital which is owned and operated by such organization
participates in a provider-sponsored organization (as defined
in section 1855(d) of the Social Security Act), whether or not
the provider-sponsored organization is exempt from tax. For
purposes of subsection (c)(3), any person with a material
financial interest in such a provider-sponsored organization
shall be treated as a private shareholder or individual with
respect to the hospital.
(p) Suspension of tax-exempt status of terrorist
organizations.--
(1) In general.--The exemption from tax under
subsection (a) with respect to any organization
described in paragraph (2), and the eligibility of any
organization described in paragraph (2) to apply for
recognition of exemption under subsection (a), shall be
suspended during the period described in paragraph (3).
(2) Terrorist organizations.--An organization is
described in this paragraph if such organization is
designated or otherwise individually identified--
(A) under section 212(a)(3)(B)(vi)(II) or 219
of the Immigration and Nationality Act as a
terrorist organization or foreign terrorist
organization,
(B) in or pursuant to an Executive order
which is related to terrorism and issued under
the authority of the International Emergency
Economic Powers Act or section 5 of the United
Nations Participation Act of 1945 for the
purpose of imposing on such organization an
economic or other sanction, or
(C) in or pursuant to an Executive order
issued under the authority of any Federal law
if--
(i) the organization is designated or
otherwise individually identified in or
pursuant to such Executive order as
supporting or engaging in terrorist
activity (as defined in section
212(a)(3)(B) of the Immigration and
Nationality Act) or supporting
terrorism (as defined in section
140(d)(2) of the Foreign Relations
Authorization Act, Fiscal Years 1988
and 1989); and
(ii) such Executive order refers to
this subsection.
(3) Period of suspension.--With respect to any
organization described in paragraph (2), the period of
suspension--
(A) begins on the later of--
(i) the date of the first publication
of a designation or identification
described in paragraph (2) with respect
to such organization, or
(ii) the date of the enactment of
this subsection, and
(B) ends on the first date that all
designations and identifications described in
paragraph (2) with respect to such organization
are rescinded pursuant to the law or Executive
order under which such designation or
identification was made.
(4) Denial of deduction.--No deduction shall be
allowed under any provision of this title, including
sections 170, 545(b)(2), 642(c), 2055, 2106(a)(2), and
2522, with respect to any contribution to an
organization described in paragraph (2) during the
period described in paragraph (3).
(5) Denial of administrative or judicial challenge of
suspension or denial of deduction.--Notwithstanding
section 7428 or any other provision of law, no
organization or other person may challenge a suspension
under paragraph (1), a designation or identification
described in paragraph (2), the period of suspension
described in paragraph (3), or a denial of a deduction
under paragraph (4) in any administrative or judicial
proceeding relating to the Federal tax liability of
such organization or other person.
(6) Erroneous designation.--
(A) In general.--If--
(i) the tax exemption of any
organization described in paragraph (2)
is suspended under paragraph (1),
(ii) each designation and
identification described in paragraph
(2) which has been made with respect to
such organization is determined to be
erroneous pursuant to the law or
Executive order under which such
designation or identification was made,
and
(iii) the erroneous designations and
identifications result in an
overpayment of income tax for any
taxable year by such organization,
credit or refund (with interest) with respect
to such overpayment shall be made.
(B) Waiver of limitations.--If the credit or
refund of any overpayment of tax described in
subparagraph (A)(iii) is prevented at any time
by the operation of any law or rule of law
(including res judicata), such credit or refund
may nevertheless be allowed or made if the
claim therefor is filed before the close of the
1-year period beginning on the date of the last
determination described in subparagraph
(A)(ii).
(7) Notice of suspensions.--If the tax exemption of
any organization is suspended under this subsection,
the Internal Revenue Service shall update the listings
of tax-exempt organizations and shall publish
appropriate notice to taxpayers of such suspension and
of the fact that contributions to such organization are
not deductible during the period of such suspension.
(q) Special rules for credit counseling organizations.--
(1) In general.--An organization with respect to
which the provision of credit counseling services is a
substantial purpose shall not be exempt from tax under
subsection (a) unless such organization is described in
paragraph (3) or (4) of subsection (c) and such
organization is organized and operated in accordance
with the following requirements:
(A) The organization--
(i) provides credit counseling
services tailored to the specific needs
and circumstances of consumers,
(ii) makes no loans to debtors (other
than loans with no fees or interest)
and does not negotiate the making of
loans on behalf of debtors,
(iii) provides services for the
purpose of improving a consumer's
credit record, credit history, or
credit rating only to the extent that
such services are incidental to
providing credit counseling services,
and
(iv) does not charge any separately
stated fee for services for the purpose
of improving any consumer's credit
record, credit history, or credit
rating.
(B) The organization does not refuse to
provide credit counseling services to a
consumer due to the inability of the consumer
to pay, the ineligibility of the consumer for
debt management plan enrollment, or the
unwillingness of the consumer to enroll in a
debt management plan.
(C) The organization establishes and
implements a fee policy which--
(i) requires that any fees charged to
a consumer for services are reasonable,
(ii) allows for the waiver of fees if
the consumer is unable to pay, and
(iii) except to the extent allowed by
State law, prohibits charging any fee
based in whole or in part on a
percentage of the consumer's debt, the
consumer's payments to be made pursuant
to a debt management plan, or the
projected or actual savings to the
consumer resulting from enrolling in a
debt management plan.
(D) At all times the organization has a board
of directors or other governing body--
(i) which is controlled by persons
who represent the broad interests of
the public, such as public officials
acting in their capacities as such,
persons having special knowledge or
expertise in credit or financial
education, and community leaders,
(ii) not more than 20 percent of the
voting power of which is vested in
persons who are employed by the
organization or who will benefit
financially, directly or indirectly,
from the organization's activities
(other than through the receipt of
reasonable directors' fees or the
repayment of consumer debt to creditors
other than the credit counseling
organization or its affiliates), and
(iii) not more than 49 percent of the
voting power of which is vested in
persons who are employed by the
organization or who will benefit
financially, directly or indirectly,
from the organization's activities
(other than through the receipt of
reasonable directors' fees).
(E) The organization does not own more than
35 percent of--
(i) the total combined voting power
of any corporation (other than a
corporation which is an organization
described in subsection (c)(3) and
exempt from tax under subsection (a))
which is in the trade or business of
lending money, repairing credit, or
providing debt management plan
services, payment processing, or
similar services,
(ii) the profits interest of any
partnership (other than a partnership
which is an organization described in
subsection (c)(3) and exempt from tax
under subsection (a)) which is in the
trade or business of lending money,
repairing credit, or providing debt
management plan services, payment
processing, or similar services, and
(iii) the beneficial interest of any
trust or estate (other than a trust
which is an organization described in
subsection (c)(3) and exempt from tax
under subsection (a)) which is in the
trade or business of lending money,
repairing credit, or providing debt
management plan services, payment
processing, or similar services.
(F) The organization receives no amount for
providing referrals to others for debt
management plan services, and pays no amount to
others for obtaining referrals of consumers.
(2) Additional requirements for organizations
described in subsection (c)(3).--
(A) In general.--In addition to the
requirements under paragraph (1), an
organization with respect to which the
provision of credit counseling services is a
substantial purpose and which is described in
paragraph (3) of subsection (c) shall not be
exempt from tax under subsection (a) unless
such organization is organized and operated in
accordance with the following requirements:
(i) The organization does not solicit
contributions from consumers during the
initial counseling process or while the
consumer is receiving services from the
organization.
(ii) The aggregate revenues of the
organization which are from payments of
creditors of consumers of the
organization and which are attributable
to debt management plan services do not
exceed the applicable percentage of the
total revenues of the organization.
(B) Applicable percentage.--
(i) In general.--For purposes of
subparagraph (A)(ii), the applicable
percentage is 50 percent.
(ii) Transition rule.--
Notwithstanding clause (i), in the case
of an organization with respect to
which the provision of credit
counseling services is a substantial
purpose and which is described in
paragraph (3) of subsection (c) and
exempt from tax under subsection (a) on
the date of the enactment of this
subsection, the applicable percentage
is--
(I) 80 percent for the first
taxable year of such
organization beginning after
the date which is 1 year after
the date of the enactment of
this subsection, and
(II) 70 percent for the
second such taxable year
beginning after such date, and
(III) 60 percent for the
third such taxable year
beginning after such date.
(3) Additional requirement for organizations
described in subsection (c)(4).--In addition to the
requirements under paragraph (1), an organization with
respect to which the provision of credit counseling
services is a substantial purpose and which is
described in paragraph (4) of subsection (c) shall not
be exempt from tax under subsection (a) unless such
organization notifies the Secretary, in such manner as
the Secretary may by regulations prescribe, that it is
applying for recognition as a credit counseling
organization.
(4) Credit counseling services; debt management plan
services.--For purposes of this subsection--
(A) Credit counseling services.--The term
``credit counseling services'' means--
(i) the providing of educational
information to the general public on
budgeting, personal finance, financial
literacy, saving and spending
practices, and the sound use of
consumer credit,
(ii) the assisting of individuals and
families with financial problems by
providing them with counseling, or
(iii) a combination of the activities
described in clauses (i) and (ii).
(B) Debt management plan services.--The term
``debt management plan services'' means
services related to the repayment,
consolidation, or restructuring of a consumer's
debt, and includes the negotiation with
creditors of lower interest rates, the waiver
or reduction of fees, and the marketing and
processing of debt management plans.
(r) Additional requirements for certain hospitals.--
(1) In general.--A hospital organization to which
this subsection applies shall not be treated as
described in subsection (c)(3) unless the
organization--
(A) meets the community health needs
assessment requirements described in paragraph
(3),
(B) meets the financial assistance policy
requirements described in paragraph (4),
(C) meets the requirements on charges
described in paragraph (5), and
(D) meets the billing and collection
requirement described in paragraph (6).
(2) Hospital organizations to which subsection
applies.--
(A) In general.--This subsection shall apply
to--
(i) an organization which operates a
facility which is required by a State
to be licensed, registered, or
similarly recognized as a hospital, and
(ii) any other organization which the
Secretary determines has the provision
of hospital care as its principal
function or purpose constituting the
basis for its exemption under
subsection (c)(3) (determined without
regard to this subsection).
(B) Organizations with more than 1 hospital
facility.--If a hospital organization operates
more than 1 hospital facility--
(i) the organization shall meet the
requirements of this subsection
separately with respect to each such
facility, and
(ii) the organization shall not be
treated as described in subsection
(c)(3) with respect to any such
facility for which such requirements
are not separately met.
(3) Community health needs assessments.--
(A) In general.--An organization meets the
requirements of this paragraph with respect to
any taxable year only if the organization--
(i) has conducted a community health
needs assessment which meets the
requirements of subparagraph (B) in
such taxable year or in either of the 2
taxable years immediately preceding
such taxable year, and
(ii) has adopted an implementation
strategy to meet the community health
needs identified through such
assessment.
(B) Community health needs assessment.--A
community health needs assessment meets the
requirements of this paragraph if such
community health needs assessment--
(i) takes into account input from
persons who represent the broad
interests of the community served by
the hospital facility, including those
with special knowledge of or expertise
in public health, and
(ii) is made widely available to the
public.
(4) Financial assistance policy.--An organization
meets the requirements of this paragraph if the
organization establishes the following policies:
(A) Financial assistance policy.--A written
financial assistance policy which includes--
(i) eligibility criteria for
financial assistance, and whether such
assistance includes free or discounted
care,
(ii) the basis for calculating
amounts charged to patients,
(iii) the method for applying for
financial assistance,
(iv) in the case of an organization
which does not have a separate billing
and collections policy, the actions the
organization may take in the event of
non-payment, including collections
action and reporting to credit
agencies, and
(v) measures to widely publicize the
policy within the community to be
served by the organization.
(B) Policy relating to emergency medical
care.--A written policy requiring the
organization to provide, without
discrimination, care for emergency medical
conditions (within the meaning of section 1867
of the Social Security Act (42 U.S.C. 1395dd))
to individuals regardless of their eligibility
under the financial assistance policy described
in subparagraph (A).
(5) Limitation on charges.--An organization meets the
requirements of this paragraph if the organization--
(A) limits amounts charged for emergency or
other medically necessary care provided to
individuals eligible for assistance under the
financial assistance policy described in
paragraph (4)(A) to not more than the amounts
generally billed to individuals who have
insurance covering such care, and
(B) prohibits the use of gross charges.
(6) Billing and collection requirements.--An
organization meets the requirement of this paragraph
only if the organization does not engage in
extraordinary collection actions before the
organization has made reasonable efforts to determine
whether the individual is eligible for assistance under
the financial assistance policy described in paragraph
(4)(A).
(7) Regulatory authority.--The Secretary shall issue
such regulations and guidance as may be necessary to
carry out the provisions of this subsection, including
guidance relating to what constitutes reasonable
efforts to determine the eligibility of a patient under
a financial assistance policy for purposes of paragraph
(6).
(s) Revocation of Exempt Status of Certain Organizations That
Accept Contributions From Foreign Nationals and Make
Contributions to Political Committees.--Any organization
described in subsection (c) which makes more than 2
disqualified political committee contributions (as defined in
section 6720D(b)) shall not be exempt from taxation under
subsection (a) for any taxable year ending on or after the date
of the third such contribution.
* * * * * * *
Subtitle F--Procedure and Administration
* * * * * * *
CHAPTER 68--ADDITIONS TO THE TAX, ADDITIONAL AMOUNTS, AND ASSESSABLE
PENALTIES
* * * * * * *
Subchapter B--ASSESSABLE PENALTIES
* * * * * * *
PART I--GENERAL PROVISIONS
* * * * * * *
Sec. 6720D. Contributions to political committees from certain tax
exempt organizations that accept contributions from foreign
nationals.
* * * * * * *
SEC. 6720D. CONTRIBUTIONS TO POLITICAL COMMITTEES FROM CERTAIN TAX
EXEMPT ORGANIZATIONS THAT ACCEPT CONTRIBUTIONS FROM
FOREIGN NATIONALS.
(a) In General.--Any specified tax exempt organization that
makes any disqualified political committee contribution shall
pay a penalty equal to twice the amount of such contribution.
(b) Disqualified Political Committee Contribution.--For
purposes of this section--
(1) In general.--The term ``disqualified political
committee contribution'' means, with respect to any
organization described in section 501(c), any
contribution made by such organization to a political
committee (as defined in section 301 of the Federal
Election Campaign Act of 1971 (52 U.S.C. 30101)) if
such organization received, during any testing period,
any contribution or gift (within the meaning of section
6033(b)(5)) from a foreign national (as defined in
section 319(b) of the Federal Election Campaign Act of
1971 (52 U.S.C. 30121(b))).
(2) Testing period.--The term ``testing period''
means, with respect to any contribution by an
organization described in section 501(c), the 8-year
period ending on the date of such contribution, except
that such period shall not include any period before
the date of the enactment of this section.
(c) Specified Tax Exempt Organization.--For purposes of this
section--
(1) In general.--The term ``specified tax exempt
organization'' means, with respect to any taxable year,
any organization described in section 501(c) and exempt
from tax under section 501(a) if--
(A) the gross receipts of such organization
for such taxable year equal or exceed $200,000,
or
(B) the assets of such organization
(determined as of the close of such taxable
year) equal or exceed $500,000.
(2) Coordination with revocation of tax exempt status
by reason of making disqualified political committee
contributions.--An organization which is not exempt
from tax under section 501(a) solely by reason of
section 501(s) shall be treated for purposes of
paragraph (1) of this subsection as exempt from tax
under section 501(a) with respect to the application of
this section to the first 3 disqualified political
committee contributions of such organization.
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