Just what do we know about most political action committees, or
You know, those political organizations that run TV commercials
telling us that Senator So-and-So stands for such-and-such or is
The answer often is "not much."
But the times, they are a'changing. Fresh off the presidential
campaign trail, Sen. John McCain, R-Ariz., convinced the Senate to
pass a bill that would require PACs to disclose their operating
expenses and make public the names of their donors.
On Wednesday, the House of Representatives passed a revised
version of that bill by an overwhelming 385-39 vote. Moving at
lightning speed, the Senate on Thursday voted 92-6 to approve the
House-passed bill. And President Clinton has indicated that he will
Perhaps even more amazing, the legislation would give the
enforcement authority to the Internal Revenue Service -- you know,
that feisty little agency that the Republican majorities usually say
they want to abolish.
But turning to the IRS is not as strange as it seems. You see,
political organizations rely on a tax exemption for their existence.
Internal Revenue Code section 527 was enacted in the 1970s to
clarify the tax treatment of campaign committees and political party
The provision protects candidates from having to treat campaign
contributions as income, and it exempts political organizations from
tax as long as they spend the contributions to influence elections.
In short, like section 501(c)(3) charities, political
organizations are exempt from tax on the contributions that they
Of course, there are a number of important differences between
charities and political organizations. In particular, donations to
charities (like the University of Oklahoma, for example) are
deductible, but donations to political organizations are not. And
while charities can't engage in political activity or significant
amounts of lobbying, section 527 political organizations are
supposed to be organized and operated primarily for the purpose of
accepting contributions and making expenditures to influence
For no apparent reason, however, the Tax Code imposes more
stringent filing and reporting requirements on section 501(c)(3)
charities than on section 527 political organizations. For example,
unlike most charities, political organizations do not have to apply
for recognition of their tax-exempt status.
And unlike most charities, political organizations do not have to
file annual information returns with the IRS (Form 990, Return of
Organization Exempt from Income Tax).
Current law also requires 501(c)(3) organizations to make a copy
of their application for recognition of tax-exempt status and their
annual returns available for inspection by the public, but no such
disclosures are required of section 527 political organizations.
Campaign finance reformers latched on to these filing and
disclosure differences as a justification for imposing greater IRS
filing and disclosure requirements on political organizations.
As passed by Congress, the new legislation (H. …