[Federal Register Volume 60, Number 233 (Tuesday, December 5, 1995)]
[Rules and Regulations]
[Pages 62209-62213]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-29094]



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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Parts 1, 53 and 301

[TD 8628]
RIN 1545-A077


Political Expenditures by Section 501(c)(3) Organizations

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final regulations.

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SUMMARY: This document contains final regulations regarding excise 
taxes, accelerated tax assessments, and injunctions imposed for certain 
political expenditures made by organizations that (without regard to 
any political expenditure) would be described in section 501(c)(3) and 
exempt from taxation under section 501(a). These regulations reflect 
changes to the law that were enacted as part of the Revenue Act of 
1987.

EFFECTIVE DATE: These regulations are effective December 5, 1995.

FOR FURTHER INFORMATION CONTACT: Cynthia Morton or Paul Accettura, 
(202) 622-6070 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

    On December 14, 1994, proposed regulations Secs. 53.4955-1, 
301.6852-1, and 301.7409-1 under sections 4955, 6852 and 7409 were 
published in the Federal Register (59 FR 64359). In addition, 
amendments were made to regulations under other sections in order to 
reflect the effects of sections 4955, 6852, and 7409. Proposed 
regulation amendments in Secs. 1.6091-2, 53.4963-1, 53.6011-1, 53.6071- 
1, 53.6091-1, 301.6211-1, 301.6212-1, 301.6213-1, 301.6861-1, 301.6863-
1, 301.6863-2, 301.7422-1, and 301.7611-1 were also published in the 
Federal Register (59 FR 64359). No public hearing was requested or 
held. The IRS received two comments on the proposed regulations, only 
one of which offered substantive suggestions. The IRS and the Treasury 
Department have considered the public comments on the proposed 
regulations, and the regulations are adopted as revised by this 
Treasury decision.

Explanation of Provisions

    The regulations provide guidance with respect to sections 4955, 
6852 and 7409. The sanctions in these sections apply to all 
organizations described in section 501(c)(3). Before sections 4955, 
6852 and 7409 were enacted in 1987, revocation of recognition of 
exemption was the sole sanction available against political 
intervention by public charities. Section 4955 was modeled on the 
section 4945 excise tax on political expenditures (taxable 
expenditures) by private foundations, while sections 6852 and 7409 
provide new sanctions against flagrant political expenditures and 
flagrant political intervention, respectively.
    One comment on the proposed regulations requested that the 
regulations define in additional detail the term political expenditure 
and provide specific examples of activities that constitute 
intervention or participation in a political campaign for or against a 
candidate. Section 53.4955-1(c)(1) of the proposed regulations provides 
that any expenditure that would cause an organization that makes the 
expenditure to be classified as an action organization in accordance 
with Sec. 1.501(c)(3)-1(c)(3)(iii) is a political expenditure within 
the meaning of section 4955(d)(1). By referring to the long standing 
action organization regulations, Sec. 53.4955-1(c)(1) of the proposed 
regulations ties the definition of political expenditure in section 
4955 to existing IRS and judicial interpretations of when an 
organization participates or intervenes in a political campaign on 
behalf of or in opposition to any candidate for public office in 
violation of the requirements of section 501(c)(3). The IRS and the 
Treasury Department believe this direct connection between section 4955 
and section 501(c)(3) correctly implements the intent of Congress as 
expressed in the statute and the legislative history. To the extent 
that further guidance is needed on the interpretation of the terms 
political expenditure under section 4955 and intervening in political 
campaigns under section 501(c)(3), the IRS and the Treasury Department 
believe such guidance should be given in connection with the 
requirements for tax exemption under section 501(c)(3). Therefore, the 
final regulations have not revised Sec. 53.4955-1(c)(1).
    Another comment suggested that the regulations specify whether 
there were circumstances under which conduct would result in the 
imposition of a tax under section 4955 but not in revocation of 
exemption under section 501(c)(3). According to the statutory language 
and the legislative history of section 4955, the addition of that 
section to the Internal Revenue Code did not affect the substantive 
standards for tax exemption under section 501(c)(3). To be exempt from 
income tax as an organization described in section 501(c)(3), an 
organization may not intervene in any political campaign on behalf of 
any candidate for public office. Consistent with this requirement, 
section 4955 does not permit a de minimis amount of political 
intervention. Therefore, the final regulations have not been revised. 
However, there may be individual cases where, based on the facts and 
circumstances such as the nature of the political intervention and the 
measures that have been taken by the organization to prevent a 
recurrence, the IRS may exercise its discretion to impose a tax under 
section 4955 but not to seek revocation of the organization's tax-
exempt status.
    One comment raised questions about the interpretation of section 
4955(d)(2), which relates to organizations formed primarily to promote 
the candidacy of a particular individual. The comment requested 
clarification of the standard for determining whether an organization 
``is formed primarily for purposes of promoting the candidacy (or 
prospective candidacy) of an individual for public office'' under 
section 4955(d)(2). The comment also requested clarification of the 
meaning of the phrase ``availed of'' in the section 4955(d)(2) 
reference to organizations availed of primarily to promote an 
individual's candidacy for public office. The comment further requested 
examples of expenses which have the primary effect of promoting public 
recognition or otherwise primarily accruing to the benefit of a 
candidate or a prospective candidate.
    The legislative history of section 4955 provides that the 
determination of whether an organization's primary purpose is the 
promotion of the candidacy or prospective candidacy of an individual 
for public office is based on all relevant facts and circumstances. The 
proposed regulations follow the legislative history. The IRS and the 
Treasury Department believe that, if more detailed guidance is 
necessary, it would be more appropriate to provide it in a form that 
allows for the consideration of a fuller range of facts and 
circumstances. Therefore, the final regulations have not been revised.
    The comment also asked whether section 4955(d)(2) adds anything to 
the 

[[Page 62210]]
range of activities that would already be deemed political expenditures 
under section 4955(d)(1). The plain language of the statute makes it 
clear that the expenditures described in section 4955(d)(2) are 
included within the general category of political expenditures that is 
described in section 4955(d)(1). Furthermore, the legislative history 
states that section 4955(d)(2) ``enumerates certain expenditures as 
political expenditures for purposes of the excise tax * * *.'' The IRS 
and the Treasury Department believe that organizations described in 
section 4955(d)(2) are subject to the same restrictions on political 
expenditures as all other section 501(c)(3) organizations. Therefore, 
the final regulations have not been revised.
    One comment concluded that Sec. 53.4955-1(b) of the proposed 
regulations, affecting organization managers under section 4955, 
imposed tax on a larger group of employees and officers than are 
subject to tax under chapter 42 because the section did not include 
language contained in Sec. 53.4946-1(f)(1)(ii) and in Sec. 53.4946-
1(f)(2). The IRS and the Treasury Department agree that the definition 
of foundation manager under section 4946(b) should be incorporated into 
the definition of organization manager when applying section 
4955(f)(2). Therefore, we have clarified the final regulations to make 
them consistent with the interpretation in Sec. 53.4946-1(f)(1)(ii) and 
in Sec. 53.4946-1(f)(2) by adding a sentence at the end of 
Sec. 53.4955-1(b)(2)(ii)(B) and at the end of Sec. 53.4955-
1(b)(2)(iii).
    One comment noted that Sec. 53.4955-1(b)(7) of the proposed 
regulations provides that, in certain circumstances, if an organization 
manager relies on a reasoned legal opinion from legal counsel, the act 
of the organization manager will not be considered knowing or willful 
and will be considered due to reasonable cause for purposes of section 
4955(a)(2). The commentator requested consideration of whether the same 
reasoned legal opinion would protect the organization from tax under 
section 4955(a)(1). Section 53.4955-1(b)(7) interprets whether an act 
is not willful and is due to reasonable cause for purposes of section 
4955(a)(2). Unlike section 4955(a)(2), section 4955(a)(1) taxes an 
organization without regard to whether its act of making a political 
expenditure was willful or due to reasonable cause. Therefore, the 
final regulations have not been revised. A reasoned legal opinion from 
legal counsel received by the organization prior to making a political 
expenditure may be a factor that the IRS takes into account in 
determining what action to take in an individual case. Section 53.4955-
1 (d) and (e) of the final regulations are also relevant where an 
organization has corrected a political expenditure that was not willful 
and flagrant.
    One comment requested that the regulations provide more detail on 
the type of behavior that would be considered flagrant under sections 
6852 and 7409. Since a determination of when a specific act or acts by 
an organization is flagrant depends on the facts and circumstances in 
individual cases, the IRS and the Treasury Department believe that, to 
the extent guidance is necessary on this issue, it is better rendered 
in a form other than through regulations. Therefore, the final 
regulations do not expand on the definition of flagrant.
    One comment suggested that Sec. 301.7409-1 of the proposed 
regulations should be modified to allow the IRS, where appropriate, to 
provide an organization with less than the 10 days notice required 
under the proposed regulations before the Commissioner would recommend 
that a petition for injunctive relief be filed. In light of the 
important considerations involved when contemplating an injunction of 
this sort, the IRS and the Treasury Department believe that an 
organization should be allowed a reasonable amount of time to respond 
before the IRS takes action. Therefore, the final regulations retain 
the 10 day notice period.

Special Analysis

    It has been determined that this Treasury Decision is not a 
significant regulatory action as defined in EO 12866. Therefore, a 
regulatory assessment is not required. It has also been determined that 
section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) 
and the Regulatory Flexibility Act (5 U.S.C. chapter 6) do not apply to 
these regulations, and, therefore, a Regulatory Flexibility Analysis is 
not required. Pursuant to section 7805(f) of the Internal Revenue Code, 
the notice of proposed rulemaking preceding these regulations was 
submitted to the Chief Counsel for Advocacy of the Small Business 
Administration for comment on its impact on small business.

Drafting Information

    The principal author of these regulations is Cynthia D. Morton, 
Office of Associate Chief Counsel (Employee Benefits and Exempt 
Organizations). However, other personnel from the IRS and Treasury 
Department participated in their development.

List of Subjects

26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

26 CFR Part 53

    Excise taxes, Foundations, Investments, Lobbying, Reporting and 
recordkeeping requirements.

26 CFR Part 301

    Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income 
taxes, Penalties, Reporting and recordkeeping requirements.

Amendments to the Regulations

    Accordingly, 26 CFR parts 1, 53, and 301 are amended as follows:

PART 1--INCOME TAXES

    Paragraph 1. The authority citation for part 1 continues to read in 
part as follows:

    Authority: 26 U.S.C. 7805 * * *

    Par. 2. In Sec. 1.6091-2, paragraph (g) is added to read as 
follows:


Sec. 1.6091-2  Place for filing income tax returns.

* * * * *
    (g) Returns of persons subject to a termination assessment. 
Notwithstanding paragraph (c) of this section, income tax returns of 
persons with respect to whom an income tax assessment was made under 
section 6852(a) with respect to the taxable year must be filed with the 
district director as provided in paragraphs (a) and (b) of this 
section.

PART 53--FOUNDATION AND SIMILAR EXCISE TAXES

    Par. 3. The authority citation for part 53 continues to read as 
follows:

    Authority: 26 U.S.C. 7805.

    Par. 4. Section 53.4955-1 is added to Subpart K to read as follows:


Sec. 53.4955-1  Tax on political expenditures.

    (a) Relationship between section 4955 excise taxes and substantive 
standards for exemption under section 501(c)(3). The excise taxes 
imposed by section 4955 do not affect the substantive standards for tax 
exemption under section 501(c)(3), under which an organization is 
described in section 501(c)(3) only if it does not participate or 
intervene in any political campaign on behalf of any candidate for 
public office.
    (b) Imposition of initial taxes on organization managers--(1) In 
general. The excise tax under section 4955(a)(2) 

[[Page 62211]]
on the agreement of any organization manager to the making of a 
political expenditure by a section 501(c)(3) organization is imposed 
only in cases where--
    (i) A tax is imposed by section 4955(a)(1);
    (ii) The organization manager knows that the expenditure to which 
the manager agrees is a political expenditure; and
    (iii) The agreement is willful and is not due to reasonable cause.
    (2) Type of organization managers covered--(i) In general. The tax 
under section 4955(a)(2) is imposed only on those organization managers 
who are authorized to approve, or to exercise discretion in 
recommending approval of, the making of the expenditure by the 
organization and on those organization managers who are members of a 
group (such as the organization's board of directors or trustees) which 
is so authorized.
    (ii) Officer. For purposes of section 4955(f)(2)(A), a person is an 
officer of an organization if--
    (A) That person is specifically so designated under the certificate 
of incorporation, bylaws, or other constitutive documents of the 
foundation; or
    (B) That person regularly exercises general authority to make 
administrative or policy decisions on behalf of the organization. 
Independent contractors, acting in a capacity as attorneys, 
accountants, and investment managers and advisors, are not officers. 
With respect to any expenditure, any person described in this paragraph 
(b)(2)(ii)(B) who has authority merely to recommend particular 
administrative or policy decisions, but not to implement them without 
approval of a superior, is not an officer.
    (iii) Employee. For purposes of section 4955(f)(2)(B), an 
individual rendering services to an organization is an employee of the 
organization only if that individual is an employee within the meaning 
of section 3121(d)(2). With respect to any expenditure, an employee 
(other than an officer, director, or trustee of the organization) is 
described in section 4955(f)(2)(B) only if he or she has final 
authority or responsibility (either officially or effectively) with 
respect to such expenditure.
    (3) Type of agreement required. An organization manager agrees to 
the making of a political expenditure if the manager manifests approval 
of the expenditure which is sufficient to constitute an exercise of the 
organization manager's authority to approve, or to exercise discretion 
in recommending approval of, the making of the expenditure by the 
organization. The manifestation of approval need not be the final or 
decisive approval on behalf of the organization.
    (4) Knowing--(i) General rule. For purposes of section 4955, an 
organization manager is considered to have agreed to an expenditure 
knowing that it is a political expenditure only if--
    (A) The manager has actual knowledge of sufficient facts so that, 
based solely upon these facts, the expenditure would be a political 
expenditure;
    (B) The manager is aware that such an expenditure under these 
circumstances may violate the provisions of federal tax law governing 
political expenditures; and
    (C) The manager negligently fails to make reasonable attempts to 
ascertain whether the expenditure is a political expenditure, or the 
manager is aware that it is a political expenditure.
    (ii) Amplification of general rule. For purposes of section 4955, 
knowing does not mean having reason to know. However, evidence tending 
to show that an organization manager has reason to know of a particular 
fact or particular rule is relevant in determining whether the manager 
had actual knowledge of the fact or rule. Thus, for example, evidence 
tending to show that an organization manager has reason to know of 
sufficient facts so that, based solely upon those facts, an expenditure 
would be a political expenditure is relevant in determining whether the 
manager has actual knowledge of the facts.
    (5) Willful. An organization manager's agreement to a political 
expenditure is willful if it is voluntary, conscious, and intentional. 
No motive to avoid the restrictions of the law or the incurrence of any 
tax is necessary to make an agreement willful. However, an organization 
manager's agreement to a political expenditure is not willful if the 
manager does not know that it is a political expenditure.
    (6) Due to reasonable cause. An organization manager's actions are 
due to reasonable cause if the manager has exercised his or her 
responsibility on behalf of the organization with ordinary business 
care and prudence.
    (7) Advice of counsel. An organization manager's agreement to an 
expenditure is ordinarily not considered knowing or willful and is 
ordinarily considered due to reasonable cause if the manager, after 
full disclosure of the factual situation to legal counsel (including 
house counsel), relies on the advice of counsel expressed in a reasoned 
written legal opinion that an expenditure is not a political 
expenditure under section 4955 (or that expenditures conforming to 
certain guidelines are not political expenditures). For this purpose, a 
written legal opinion is considered reasoned even if it reaches a 
conclusion which is subsequently determined to be incorrect, so long as 
the opinion addresses itself to the facts and applicable law. A written 
legal opinion is not considered reasoned if it does nothing more than 
recite the facts and express a conclusion. However, the absence of 
advice of counsel with respect to an expenditure does not, by itself, 
give rise to any inference that an organization manager agreed to the 
making of the expenditure knowingly, willfully, or without reasonable 
cause.
    (8) Cross reference. For provisions relating to the burden of proof 
in cases involving the issue of whether an organization manager has 
knowingly agreed to the making of a political expenditure, see section 
7454(b).
    (c) Amplification of political expenditure definition--(1) General 
rule. Any expenditure that would cause an organization that makes the 
expenditure to be classified as an action organization by reason of 
Sec. 1.501(c)(3)-1(c)(3)(iii) of this chapter is a political 
expenditure within the meaning of section 4955(d)(1).
    (2) Other political expenditures--(i) For purposes of section 
4955(d)(2), an organization is effectively controlled by a candidate or 
prospective candidate only if the individual has a continuing, 
substantial involvement in the day-to-day operations or management of 
the organization. An organization is not effectively controlled by a 
candidate or a prospective candidate merely because it is affiliated 
with the candidate, or merely because the candidate knows the 
directors, officers, or employees of the organization. The effectively 
controlled test is not met merely because the organization carries on 
its research, study, or other educational activities with respect to 
subject matter or issues in which the individual is interested or with 
which the individual is associated.
    (ii) For purposes of section 4955(d)(2), a determination of whether 
the primary purpose of an organization is promoting the candidacy or 
prospective candidacy of an individual for public office is made on the 
basis of all the facts and circumstances. The factors to be considered 
include whether the surveys, studies, materials, etc. prepared by the 
organization are made available only to the candidate or are made 
available to the general public; and whether the organization pays for 
speeches and travel expenses for only one individual, or for speeches 
or travel expenses of 

[[Page 62212]]
several persons. The fact that a candidate or prospective candidate 
utilizes studies, papers, materials, etc., prepared by the organization 
(such as in a speech by the candidate) is not to be considered as a 
factor indicating that the organization has a purpose of promoting the 
candidacy or prospective candidacy of that individual where such 
studies, papers, materials, etc. are not made available only to that 
individual.
    (iii) Expenditures for voter registration, voter turnout, or voter 
education constitute other expenses, treated as political expenditures 
by reason of section 4955(d)(2)(E), only if the expenditures violate 
the prohibition on political activity provided in section 501(c)(3).
    (d) Abatement, refund, or no assessment of initial tax. No initial 
(first-tier) tax will be imposed under section 4955(a), or the initial 
tax will be abated or refunded, if the organization or an organization 
manager establishes to the satisfaction of the IRS that--
    (1) The political expenditure was not willful and flagrant; and
    (2) The political expenditure was corrected.
    (e) Correction--(1) Recovery of Expenditure. For purposes of 
section 4955(f)(3) and this section, correction of a political 
expenditure is accomplished by recovering part or all of the 
expenditure to the extent recovery is possible, and, where full 
recovery cannot be accomplished, by any additional corrective action 
which the Commissioner may prescribe. The organization making the 
political expenditure is not under any obligation to attempt to recover 
the expenditure by legal action if the action would in all probability 
not result in the satisfaction of execution on a judgment.
    (2) Establishing safeguards. Correction of a political expenditure 
must also involve the establishment of sufficient safeguards to prevent 
future political expenditures by the organization. The determination of 
whether safeguards are sufficient to prevent future political 
expenditures by the organization is made by the District Director.
    (f) Effective date. This section is effective December 5, 1995.


Sec. 53.4963-1  [Amended]

    Par. 5. In Sec. 53.4963-1, paragraphs (a), (b), and (c) are amended 
by adding the reference ``4955,'' immediately after the reference 
``4952,'' in each place it appears.


Sec. 53.6011-1  [Amended]

    Par. 6. In Sec. 53.6011-1, paragraph (b) is amended as follows:
    1. In the first sentence, the language ``or 4945(a),'' is removed 
and ``, 4945(a) or 4955(a),'' is added in its place.
    2. In the last sentence, the language ``or 4955(a)'' is added 
immediately following the language ``section 4945(a)''.
    Par. 7. In Sec. 53.6071-1, paragraph (e) is added to read as 
follows:


Sec. 53.6071-1  Time for filing returns.

* * * * *
    (e) Taxes related to political expenditures of organizations 
described in section 501(c)(3) of the Internal Revenue Code. A Form 
4720 required to be filed by Sec. 53.6011-1(b) for an organization 
liable for tax imposed by section 4955(a) must be filed by the 
unextended due date for filing its annual information return under 
section 6033 or, if the organization is exempt from filing, the date 
the organization would be required to file an annual information return 
if it was not exempt from filing. The Form 4720 of a person whose 
taxable year ends on a date other than that on which the taxable year 
of the organization described in section 501(c)(3) ends must be filed 
on or before the 15th day of the fifth month following the close of the 
person's taxable year.
    Par. 8. In Sec. 53.6091-1, the section heading is revised and 
paragraph (d) is added to read as follows:


Sec. 53.6091-1  Place for filing chapter 42 tax returns.

* * * * *
    (d) Returns of persons subject to a termination assessment.
    Notwithstanding paragraph (c) of this section, income tax returns 
of persons with respect to whom a chapter 42 tax assessment was made 
under section 6852(a) with respect to the taxable year must be filed 
with the district director as provided in paragraphs (a) and (b) of 
this section.

PART 301--PROCEDURE AND ADMINISTRATION

    Par. 9. The authority citation for part 301 continues to read in 
part as follows:

    Authority: 26 U.S.C. 7805 * * *


Sec. 301.6211-1  [Amended]

    Par. 10. In Sec. 301.6211-1, the last sentence of paragraph (b) is 
amended by adding ``or 6852'' immediately after ``section 6851''.


Sec. 301.6212-1  [Amended]

    Par. 11. In Sec. 301.6212-1, the second sentence of paragraph (c) 
is amended by adding ``termination assessments in section 6851 or 
6852,'' immediately after ``section 6213(b)(1),''.


Sec. 301.6213-1  [Amended]

    Par. 12. Section 301.6213-1 is amended as follows:
    1. Paragraph (a)(2), first sentence, is amended by adding ``, 
6852,'' immediately after ``section 6851''.
    2. Paragraph (e), first sentence, is amended by adding ``4955,'' 
immediately after ``4952,''.
    Par. 13. Section 301.6852-1 is added to read as follows:


Sec. 301.6852-1  Termination assessments of tax in the case of flagrant 
political expenditures of section 501(c)(3) organizations.

    (a) Authority for making. Any assessment under section 6852 as a 
result of a flagrant violation by a section 501(c)(3) organization of 
the prohibition against making political expenditures must be 
authorized by the District Director.
    (b) Determination of income tax. An organization shall be subject 
to an assessment of income tax under section 6852 only if the flagrant 
violation of the prohibition against making political expenditures 
results in revocation of the organization's tax exemption under section 
501(a) because it is not described in section 501(c)(3). An 
organization subject to such an assessment is not liable for income 
taxes for any period prior to the effective date of the revocation of 
the organization's tax exemption.
    (c) Payment. Where a District Director has made a determination of 
income tax under paragraph (b) of this section or of section 4955 
excise tax, notwithstanding any other provision of law, any tax will 
become immediately due and payable. The taxpayer is required to pay the 
amount of the assessment within 10 days after the District Director 
sends the notice and demand for immediate payment regardless of the 
filing of an administrative appeal or of a court petition. Regardless 
of filing an administrative appeal or of petitioning a court, enforced 
collection action may proceed after the 10-day payment period unless 
the taxpayer posts the bond described in section 6863. For purposes of 
collection procedures such as section 6331 (regarding levy), 
assessments under the authority of paragraph (a) of this section do not 
constitute situations in which the collection of such tax is in 
jeopardy and, therefore, do not suspend normal collection procedures.
    (d) Effective date. This section is effective December 5, 1995.


Sec. 301.6861-1  [Amended]

    Par. 14. In Sec. 301.6861-1, paragraph (g) is amended by:
    1. Adding the language ``4955(a),'' immediately after ``4952(a),''. 


[[Page 62213]]

    2. Adding the language ``4955(b),'' immediately after ``4952(b),''.


Sec. 301.6863-1  [Amended]

    Par. 15. Section 301.6863-1 is amended as follows:
    1. Paragraph (a)(1) is amended by adding the language ``, or under 
section 6852 (referred to as a political assessment for purposes of 
this section)'' immediately after ``for purposes of this section)''.
    2. Paragraphs (a)(3) first sentence, (a)(4) last sentence, and (b) 
first sentence are amended by adding the language ``or political 
assessment'' immediately after ``jeopardy assessment'' in each place it 
appears.
    3. Paragraph (b) is amended by adding the language ``(or political 
assessment)'' immediately after ``jeopardy'' in the last sentence.


Sec. 301.6863-2  [Amended]

    Par. 16. In Sec. 301.6863-2, paragraph (a) introductory text, the 
first sentence is amended by adding the language ``6852,'' immediately 
after ``section 6851,''.
    Par. 17. Section 301.7409-1 is added under the undesignated 
centerheading ``Civil Actions by the United States'' to read as 
follows:


Sec. 301.7409-1  Action to enjoin flagrant political expenditures of 
section 501(c)(3) organizations.

    (a) Letter to organization. When the Assistant Commissioner 
(Employee Plans and Exempt Organizations) concludes that a section 
501(c)(3) organization has engaged in flagrant political intervention 
and is likely to continue to engage in political intervention that 
involves political expenditures, the Assistant Commissioner (Employee 
Plans and Exempt Organizations) shall send a letter to the organization 
providing it with the facts based on which the Service believes that 
the organization has been engaging in flagrant political intervention 
and is likely to continue to engage in political intervention that 
involves political expenditures. The organization will have 10 calendar 
days after the letter is sent to respond by establishing that it will 
immediately cease engaging in political intervention, or by providing 
the Service with sufficient information to refute the Service's 
evidence that it has been engaged in flagrant political intervention. 
The Internal Revenue Service will not proceed to seek an injunction 
under section 7409 until after the close of this 10-day response 
period.
    (b) Determination by Commissioner. If the organization does not 
respond within 10 calendar days to the letter under paragraph (a) of 
this section in a manner sufficient to dissuade the Assistant 
Commissioner (Employee Plans and Exempt Organizations) of the need for 
an injunction, the file will be forwarded to the Commissioner of 
Internal Revenue. The Commissioner of Internal Revenue will personally 
determine whether to forward to the Department of Justice a 
recommendation that it immediately bring an action to enjoin the 
organization from making further political expenditures. The 
Commissioner may also recommend that the court action include any other 
action that is appropriate in ensuring that the assets of the section 
501(c)(3) organization are preserved for section 501(c)(3) purposes. 
The authority of the Commissioner to make the determinations described 
in this paragraph may not be delegated to any other persons.
    (c) Flagrant political intervention. For purposes of this section, 
flagrant political intervention is defined as participation in, or 
intervention in (including the publication and distribution of 
statements), any political campaign by a section 501(c)(3) organization 
on behalf of (or in opposition to) any candidate for public office in 
violation of the prohibition on such participation or intervention in 
section 501(c)(3) and the regulations thereunder if the participation 
or intervention is flagrant.
    (d) Effective date. This section is effective December 5, 1995.


Sec. 301.7422-1  [Amended]

    Par. 18. In Sec. 301.7422-1, paragraphs (a) introductory text, (c) 
introductory text and (d) are amended by adding the language ``4955,'' 
immediately after ``4952,''.


Sec. 301.7611-1  [Amended]

    Par. 19. In Sec. 301.7611-1, A-6, the first sentence is amended by 
adding the language ``or 6852,'' immediately after ``section 6851''.
Margaret Milner Richardson,
Commissioner of Internal Revenue.

    Approved: October 26, 1995.
Leslie Samuels,
Assistant Secretary of the Treasury.
[FR Doc. 95-29094 Filed 12-4-95; 8:45 am]
BILLING CODE 4830-01-U