Guidance on Deductability of Dues Paid to Organizations That Lobby

 [4830-01-u]

 ACTION: Temporary regulations.

 SUMMARY: This document contains temporary regulations revising the rules governing the deductibility of dues or other similar amounts paid to certain tax-exempt organizations that participate in political campaigns, or engage in lobbying or similar activities. Changes to the tax law were made by section 13222 of the Omnibus Budget Reconciliation Act of 1993. The text of these temporary regulations also serves as the text of the proposed regulations set forth in the notice of proposed rulemaking on this subject in the Proposed Rules section of this issue of the Federal Register.

 DATES: These regulations are effective December 27, 1993.

 For the date of applicability of these regulations, see section 1.162-20T(d).

 FOR FURTHER INFORMATION CONTACT: James M. Guiry, 202-622-1585 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

BACKGROUND

This document sets forth temporary amendments to the Income Tax Regulations (26 CFR part 1) under section 162 of the Internal Revenue Code (Code) as amended by section 13222 of the Omnibus Budget Reconciliation Act of 1993 (OBRA 1993) (107 Stat. 477). These rules relate to the deductibility of dues or other similar amounts that are allocable to lobbying and political expenses paid or incurred by certain tax-exempt organizations after December 31, 1993.

EXPLANATION OF PROVISIONS

 Section 13222 of OBRA 1993 amended section 162(e) of the Code, relating to the denial of deductions for certain lobbying and political expenditures, and section 6033 of the Code, relating to returns by exempt organizations. As amended, section 162(e) denies a deduction for certain lobbying and political expenditures described in section 162(e)(1). Section 162(e)(2) provides, however, that certain lobbying and political expenditures related to local legislation are not subject to section 162(e)(1). Section 162(e)(3) denies a deduction for dues (or other similar amounts) paid to certain tax-exempt organizations to the extent a person paying those dues is notified under section 6033(e)(1)(A)(ii) that the dues are allocable to expenditures to which section 162(e)(1) applies. Section 162(e)(3) does not, however, apply to dues paid to tax-exempt organizations described in section 501(c)(3).

 The amendments under section 13222 of OBRA 1993 apply to amounts paid or incurred after December 31, 1993.

 The temporary regulations provide that, in accordance with section 162(e)(3), a taxpayer to whom an organization provides a notice described in section 6033(e)(1)(A)(ii) may not deduct that portion of the dues estimated in the notice to be allocable to nondeductible lobbying and political expenditures, whether or not the dues are paid on or before December 31, 1993.

 If dues paid before January 1, 1994, are allocable to expenses paid or incurred by an organization before that date and, therefore, the taxpayer does not receive a notice under section 6033(e), the deductibility of such dues will be subject to prior law; that is, those dues will be subject to section 1.162-20(c)(3) of the regulations rather than section 1.162-20T(d).

SPECIAL ANALYSES

 It has been determined that this Treasury decision is not a significant regulatory action as defined in Executive Order 12866. 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, a copy of these temporary regulations will be submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on their impact on small business.

DRAFTING INFORMATION

 The principal author of these regulations is James M. Guiry, Office of Assistant Chief Counsel (Income Tax and Accounting), IRS. However, other personnel from the IRS and Treasury Department participated in their development.

LIST OF SUBJECTS IN 26 CFR PART 1

 Income taxes, Reporting and recordkeeping requirements.

ADOPTION OF AMENDMENTS TO THE REGULATIONS

Accordingly, 26 CFR part 1 is amended as follows:

PART 1 -- INCOME TAXES

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

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

Par. 2. Section 1.162-20T is added to read as follows:

SECTION 1.162-20T EXPENDITURES ATTRIBUTABLE TO LOBBYING, POLITICAL CAMPAIGNS, ATTEMPTS TO INFLUENCE LEGISLATION, ETC. AND CERTAIN ADVERTISING (TEMPORARY).

(a) through (c) [Reserved]

(d) DUES ALLOCABLE TO EXPENDITURES AFTER 1993. No deduction is allowed under section 162(a) for the portion of dues or other similar amounts paid by the taxpayer to an organization exempt from tax (other than an organization described in section 501(c)(3)) which the organization notifies the taxpayer under section 6033(e)(1)(A)(ii) is allocable to expenditures to which section 162(e)(1) applies. The preceding sentence applies to dues or other similar amounts whether or not paid on or before December 31, 1993. Section 1.162-20(c)(3) is superseded to the extent inconsistent with this paragraph (d).