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

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]

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