Washington (Dec. 29, 2003) -- On the eve of an election year, the Internal Revenue Service reminds tax-exempt organizations that their public advocacy activity must adhere to tax rules as well as campaign-finance laws.

Under the Internal Revenue Code, social welfare organizations, unions and trade associations may engage in only limited political campaign activity. Revenue Ruling 2004-6, just issued, clarifies the tax implications of advocacy that meets the definition of political campaign activity.

The guidance also serves as a reminder that the Bipartisan Reform Act of 2002 (McCain-Feingold) does not replace the tax rules on public advocacy by tax-exempt organizations. Tax exempt organizations, such as those described in sections 501(c) (4), (c)(5), and (c)(6) of the Internal Revenue Code, must adhere to both McCain-Feingold and the Internal Revenue Code.

The IRS remains committed to ensuring that assets of tax-exempt organizations are used for exempt purposes and requests comments on situations or factors that the public believes should be covered in future guidance.

-- WebCPA staff

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