Overview
Title
To amend the Internal Revenue Code of 1986 to impose penalties with respect to contributions to political committees from certain tax exempt organizations that receive contributions from foreign nationals.
ELI5 AI
The "No Foreign Election Interference Act" is a rule that says some big, special groups can't take money from people in other countries and then give it to people running for office in the U.S. If they do, they have to pay a big fine, and if they keep doing it, they might lose their special tax advantages.
Summary AI
H.R. 2265, also known as the "No Foreign Election Interference Act," proposes changes to the Internal Revenue Code of 1986 to penalize tax-exempt organizations that contribute to political committees and receive contributions from foreign nationals. The bill mandates a penalty twice the amount of the contribution for such organizations making what are termed "disqualified political committee contributions." If an organization is found to have made more than two of these disqualified contributions, its tax-exempt status may be revoked. The changes are set to apply to contributions made on or after January 1, 2026.
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AnalysisAI
General Summary of the Bill
The proposed legislation, known as the "No Foreign Election Interference Act," aims to modify the Internal Revenue Code of 1986. This bill focuses on penalizing certain tax-exempt organizations that receive contributions from foreign nationals and subsequently contribute to political committees. The primary mechanism involves imposing penalties and potentially revoking tax-exempt status for organizations that violate these provisions. The law targets organizations with substantial financial resources and applies the new rules to contributions made from January 1, 2026.
Significant Issues
One of the most notable issues with this bill is the complexity and technical nature of its language. The use of highly specialized legal and tax terminology can make the bill difficult to understand for those without a legal or financial background. This could obstruct public comprehension and transparency, making it challenging for the general public to engage with or form opinions on these legislative changes.
The second major issue pertains to the enforcement mechanisms. While the bill includes penalties for organizations that contravene its provisions, it does not clearly outline the procedural steps or offer an appeals process for organizations that might lose their tax-exempt status. This lack of clarity could lead to enforcement ambiguities and compliance challenges.
Furthermore, the bill allows organizations to make up to three disqualified political contributions before losing their tax-exempt status. This leniency might enable some organizations to strategize their contributions and potentially mitigate any immediate consequences.
Lastly, the bill specifies high financial thresholds for what constitutes a "specified tax-exempt organization," which could exclude smaller organizations. This exclusion might allow such entities to navigate the system unchecked, even when receiving foreign contributions.
Impact on the Public
The intent of this bill is to curb foreign influence in U.S. political campaigns by penalizing organizations that channel foreign funds into political committees. Broadly, this could enhance the integrity of electoral processes by limiting foreign interference. However, its effectiveness may be undermined by the ambiguities mentioned earlier, particularly in how organizations are monitored and penalized.
For the general public, the bill heightens awareness of foreign involvement in domestic politics. While some may find reassurance in the legislative effort to safeguard elections, others might be concerned about the transparency and fairness in the enforcement processes due to the billâs complex language and provisions.
Impact on Specific Stakeholders
For tax-exempt organizations, especially larger ones, this bill introduces significant compliance obligations. They must ensure strict adherence to the new requirements to avoid penalties and possible loss of tax-exempt status. Smaller organizations might not feel as directly impacted due to the financial thresholds defining which entities fall under this bill's scope. However, concerns could arise for any organization lacking the resources to navigate such legal complexities.
Politicians and political committees might benefit from reduced foreign influence, ensuring that campaign finances are dominated more by domestic contributions. However, smaller political committees might be worried about the implications for donor disclosure and unintended consequences that could arise from new enforcement actions.
In conclusion, while the "No Foreign Election Interference Act" has the potential to address critical issues concerning foreign contributions in U.S. elections, its effectiveness will substantially depend on how the identified issues are resolved during the legislative process.
Financial Assessment
In reviewing H.R. 2265, also known as the "No Foreign Election Interference Act," several financial aspects are embedded within the proposed amendments to the Internal Revenue Code of 1986. This bill specifically addresses contributions to political committees from tax-exempt organizations that receive foreign donations.
Financial Penalties
A significant monetary element in the bill is the imposition of penalties. Specifically, any tax-exempt organization that is found to make a "disqualified political committee contribution," where such organizations have received contributions from foreign nationals, faces a penalty. This penalty amounts to twice the contribution made. Such a measure seeks to deter tax-exempt organizations from channeling foreign influence into U.S. political entities by making the financial consequence particularly severe.
Definition and Thresholds
The bill introduces the concept of a "specified tax exempt organization," with financial thresholds linked to their definition. To qualify, an organization must have gross receipts of $200,000 or more or assets amounting to $500,000 or more. These thresholds delineate which organizations are subject to the penalty, potentially excluding smaller entities. This provision ensures that the bill targets organizations with substantial financial activities, aiming to focus enforcement on those that have the means to significantly impact political committees with their contributions.
Revocation of Tax-Exempt Status
Another critical financial repercussion involves the possible revocation of an organization's tax-exempt status. The bill stipulates that if an organization makes more than two disqualified contributions, its tax-exempt status will be revoked. This provision introduces a severe financial disincentive for continued non-compliance, as losing tax-exempt status could drastically affect an organization's financial health by subjecting them to standard taxation.
Issues Related to Financial Provisions
Several concerns arise from these financial provisions:
Potential Leniency: The bill allows for up to three disqualified contributions before a tax status revocation occurs. This grace period may be perceived as lenient and could enable strategic financial maneuvering by organizations that choose to risk penalties for early contributions.
Financial Threshold Exclusions: The set thresholds for gross receipts and assets could potentially allow smaller organizations to operate outside the scope of the penalties, even if they similarly engage in undesirable financial exchanges with foreign nationals. This might permit smaller but strategically significant influences on political contributions.
Pre-enactment Contributions: The exclusion of previous contributions from the "testing period" could create loopholes. Organizations could have accepted significant foreign contributions before the effective date without penalty, potentially influencing subsequent political actions.
In summary, while H.R. 2265 introduces financial penalties and restrictions designed to prevent foreign influence in U.S. politics via tax-exempt organizations, various financial definitions and thresholds embedded in the bill not only aim to target significant players but also present potential gaps and leniencies that might be exploited.
Issues
The bill's use of highly technical legal and tax terminology, particularly in Section 2, might be difficult for individuals without a legal or tax background to understand. This could hinder public comprehension and transparency of the legislation.
The penalties and revocation provisions in Section 2 do not clearly define procedural steps or an appeals process for organizations that have their tax-exempt status revoked, leading to potential ambiguity in enforcement and compliance.
The allowance of up to three disqualified political committee contributions before affecting tax-exempt status, as outlined in Section 2(c)(2), could be perceived as lenient, potentially enabling organizations to strategically make contributions without immediate consequence.
The definition of 'specified tax exempt organization' in Section 6720D(a) imposes high thresholds for gross receipts ($200,000) and assets ($500,000), potentially excluding many smaller organizations, thus allowing them to contribute without penalty despite receiving foreign funds.
The exclusion of the 'testing period' before the enactment of this section in Section 6720D(b)(2) may create loopholes where past contributions from foreign nationals could influence future political contributions without penalty.
The brevity and lack of detail in Section 1 regarding the 'No Foreign Election Interference Act' do not provide sufficient context or enforcement mechanisms, which might leave its implications unclear.
Sections
Sections are presented as they are annotated in the original legislative text. Any missing headers, numbers, or non-consecutive order is due to the original text.
1. Short title Read Opens in new tab
Summary AI
The first section of this Act provides its short title, which is the âNo Foreign Election Interference Actâ.
2. Penalties with respect to contributions to political committees from certain tax exempt organizations that accept contributions from foreign nationals Read Opens in new tab
Summary AI
The section introduces penalties for certain tax-exempt organizations that give money to political committees after receiving contributions from foreign nationals. If such an organization makes a contribution, it must pay a penalty of twice the amount given, and if it happens more than twice, the organization may lose its tax-exempt status. These rules take effect for contributions made on or after January 1, 2026.
Money References
- â(c) Specified tax exempt organization.âFor purposes of this sectionâ â(1) IN GENERAL.âThe term âspecified tax exempt organizationâ means, with respect to any taxable year, any organization described in section 501(c) and exempt from tax under section 501(a) ifâ â(A) the gross receipts of such organization for such taxable year equal or exceed $200,000, or â(B) the assets of such organization (determined as of the close of such taxable year) equal or exceed $500,000.
6720D. Contributions to political committees from certain tax exempt organizations that accept contributions from foreign nationals Read Opens in new tab
Summary AI
In this section, certain tax-exempt organizations that receive contributions from foreign nationals and then donate to political committees must pay a penalty of double the amount contributed. It applies to organizations with significant assets or revenue and considers contributions made over the last eight years.
Money References
- (c) Specified tax exempt organization.âFor purposes of this sectionâ (1) IN GENERAL.âThe term âspecified tax exempt organizationâ means, with respect to any taxable year, any organization described in section 501(c) and exempt from tax under section 501(a) ifâ (A) the gross receipts of such organization for such taxable year equal or exceed $200,000, or (B) the assets of such organization (determined as of the close of such taxable year) equal or exceed $500,000.