Exempt Organizations Advisory - IRS Issues Section 527 Safe Harbor Provisions

On March 14, the IRS issued Revenue Procedure 2007-27, which provides a safe harbor for establishing that a Section 527 organization’s failure to report certain contributor information on Form 8872, Political Organization Report of Contributions and Expenditures, is due to reasonable cause.

Information required by Form 8872 includes the names and addresses of contributors and, in the case of individuals, their occupations and employers. Failure to include such information results in imposition of a tax at the highest corporate rate (currently 35%) on the contribution or expenditure unless the failure was due to reasonable cause and not to willful neglect. Under the safe harbor, failure to report the address of a contributor and, in the case of an individual, the occupation and employer of the contributor will be considered due to reasonable cause if the organization meets six detailed requirements that are described in the Revenue Procedure 2007-27. (Read the full text of the Revenue Procedure.)

The Internal Revenue Service is requesting public comment as to the need for additional guidance and the circumstances in which a Section 527 political organization’s failure to file required forms in the time and manner prescribed should be deemed to be due to reasonable cause. Details for filing comments are provided in the Revenue Procedure.