A few special types of corporations are subject to somewhat different rules. Non-profit corporations, which are typically organized as tax exempt organizations under section 501(c) of the Internal Revenue Code, are subject to the same general rules as for-profit corporations: they may not use general treasury funds for contributions, expenditures, or electioneering communications, but they may set up a connected PAC to raise money for these purposes. Tax law, however, does not allow 501(c) organizations to have the influencing of elections as their primary purpose.

Exemption for Certain Ideological Corporations

Certain non-profit corporations are commonly called ideological non-profit corporations because their purpose is to educate the public about policy issues or advocate particular issues or political ideals. These non-profits may spend their general treasury funds on independent expenditures or electioneering communications without limit so long as such spending does not become their principal purpose. The non-profit must report any such expenditures over $250 to the FEC. A non-profit corporation qualifies for this exemption only if it:

• has the promotion of political ideals as its only express purpose;
• does not engage in any business activity;
• does not accept money from business corporations;
• does not have any shareholders or others who receive benefits that would discourage them from disaffiliating from the corporation because of its political positions; and
• qualifies as exempt under section 501(c)(4) of the tax code.

Like other corporations, ideological non-profits may not make any contributions to federal candidates or political committees.

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Section 527 refers to the provision of the Internal Revenue Code that governs the tax treatment of political organizations. These are defined by the IRS as entities "organized and operated primarily" for the purpose of influencing the selection of candidates to elected or appointed office. Virtually all political committees—whether candidate committees, party committees, or PACs—are registered with the IRS under section 527. This section of the tax code provides that the contributions received and expenditures made by these committees will not be taxed.

While all political committees are section 527 organizations, not all 527 groups are political committees subject to federal campaign finance laws. Organizations that engage only in activities to influence appointments—such as judicial nominations—or that influence only state and local elections are not considered federal political committees.

There is, however, ongoing controversy as to whether section 527 groups that only sponsor independent ads that promote or attack federal candidates, or engage in partisan voter drives, meet the definition of a federal political committee and therefore must register with the FEC and be subject to the contribution limits and source prohibitions that apply to such committees.

The sponsors of BCRA and reform groups have taken the position that any 527s whose major purpose is influencing specific federal elections, and which spend more than $1,000 doing so, must register as political committees with the FEC and use only federal funds for their election activities. Legal complaints have been filed against these groups, which may be pursued in court depending on how they are resolved by the FEC.

On August 19, 2004 , the FEC rejected new regulations that would have resolved the definition of "major purpose" of a political committee. Its chairman, Brad Smith, stated that the Commission will not address the matter again in a formal rulemaking any time soon. Until the FEC or the courts issue a definitive ruling on the question, or Congress intervenes legislatively, some section 527 groups will likely continue to raise and spend money on ads promoting or attacking federal candidates without registering as political committees and without complying with the federal campaign finance rules that apply to political committees.

All section 527 groups seeking to be exempt from tax, however, are subject to a provision in the tax law that requires them to report contributions of over $200 per year and disbursements of over $500 to the Internal Revenue Service (unless the group is already required to disclose to the FEC or to a state disclosure agency), which makes that data available to the public. The disclosure reports filed with the IRS by section 527 organizations can be accessed via the IRS website.

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