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 bill wants to stop foreign money from affecting U.S. elections by punishing certain organizations if they get money from people in other countries and then give it to political groups in the U.S., even saying that after three times, they might lose their special tax status.

Summary AI

The bill H.R. 8314, titled the “No Foreign Election Interference Act,” proposes changes to the Internal Revenue Code to discourage foreign influence in U.S. elections. It aims to impose penalties on certain tax-exempt organizations that receive contributions from foreign nationals and then make contributions to political committees. Specifically, these organizations would face fines equal to twice the amount of any such political contribution. Additionally, if an organization engages in this behavior more than twice, it would lose its tax-exempt status under section 501(a) after the third offense. The proposed changes would take effect starting January 1, 2025.

Published

2024-09-06
Congress: 118
Session: 2
Chamber: HOUSE
Status: Reported in House
Date: 2024-09-06
Package ID: BILLS-118hr8314rh

Bill Statistics

Size

Sections:
3
Words:
1,010
Pages:
8
Sentences:
17

Language

Nouns: 302
Verbs: 75
Adjectives: 85
Adverbs: 2
Numbers: 63
Entities: 56

Complexity

Average Token Length:
4.53
Average Sentence Length:
59.41
Token Entropy:
4.97
Readability (ARI):
33.18

AnalysisAI

The proposed legislation, identified as "H.R. 8314," seeks to amend the Internal Revenue Code of 1986 by imposing penalties on certain tax-exempt organizations that contribute to political committees after receiving donations from foreign nationals. This bill is titled the "No Foreign Election Interference Act." Introduced in the House of Representatives, its primary aim is to curb potential foreign influence in U.S. elections by penalizing organizations that channel foreign funds to political entities.

General Summary of the Bill

The bill introduces a new section to the tax code, applying penalties to tax-exempt organizations that are found to violate specified conditions. These organizations must pay a fine equal to twice the amount of any disqualified political committee contribution. Furthermore, if they make more than two such contributions, they lose their tax-exempt status starting from the tax year in which the third contribution is made. This legislation specifically targets organizations with gross receipts of $200,000 or more or assets of at least $500,000. The penalties aim to discourage these organizations from using foreign funds in a way that could influence political outcomes in the United States.

Summary of Significant Issues

The bill presents several issues that could affect its enforcement and effectiveness:

  1. Enforcement Challenges: The legislation lacks a clear mechanism for determining compliance and enforcing penalties. This vagueness may lead to difficulties in implementation and may necessitate further regulatory development or judicial interpretation.

  2. Definition Limitations: The "testing period" for examining contributions only covers the eight-year period prior to any donation, excluding any period before the law's enactment. This restriction might encourage organizations to strategically plan their contributions around these timeframes to avoid penalties.

  3. Leniency in Revocation: The bill allows organizations to make up to two disqualified contributions before their tax-exempt status is revoked. This leniency might not serve as a strong deterrent against engaging in such activities.

  4. Scope of Targeted Organizations: Criteria defining "specified tax-exempt organizations" might create loopholes, as smaller organizations or those slightly below the financial thresholds might also be capable of making influential contributions.

  5. Reliance on External Definitions: The bill relies on existing definitions, particularly from the Federal Election Campaign Act of 1971, which could pose challenges if those definitions are outdated or altered in the future.

  6. Severity of Penalties: The penalty of doubling the contribution amount could be perceived as excessively punitive, especially in instances where organizations may not have malicious intent.

Impact on the Public and Stakeholders

Broad Public Impact:

If effectively implemented, the bill could enhance the integrity of U.S. elections by reducing the risk of foreign influence. This would likely resonate positively with a public concerned about the sanctity and independence of national electoral processes. On the other hand, entities wary of governmental overreach might perceive this as an extension of regulatory powers with potential over-punitive measures.

Impact on Specific Stakeholders:

  • Tax-Exempt Organizations: These entities are directly impacted, particularly those engaged in political activities. They will need to be diligent in assessing the origin of funds to avoid penalties and maintain their tax-exempt status.

  • Political Committees: Committees that receive donations will also be affected, as they must ensure compliance with the new rules. This could increase administrative burdens and necessitate more robust financial audits to verify the source of contributions.

  • Regulatory Bodies: Agencies responsible for overseeing tax compliance and election integrity may face increased demands in enforcing these provisions and addressing any legislative ambiguities.

Overall, the legislation seeks to curb foreign interference but must be carefully implemented to avoid unintended consequences while ensuring fairness and clarity in enforcement.

Financial Assessment

The bill, H.R. 8314, titled the “No Foreign Election Interference Act,” introduces financial penalties aimed at reducing foreign influence in U.S. elections by imposing fines on certain tax-exempt organizations.

Financial Penalties and Allocations

The bill stipulates that any tax-exempt organization receiving contributions from foreign nationals and subsequently making contributions to political committees will face a penalty. This penalty is set at twice the amount of the contribution made to the political committee. This means if an organization contributes $10,000 under such conditions, it would incur a penalty of $20,000. This substantial financial penalty is intended to deter organizations from participating in unwanted foreign influence.

Furthermore, the bill outlines that if a tax-exempt organization engages in this behavior more than twice, it will result in the loss of its tax-exempt status after the third offense. Revocation of tax-exempt status could have significant financial implications for the organization, as it would no longer benefit from tax exemptions, potentially leading to increased financial liabilities.

Issues Related to Financial References

  1. Enforcement Challenges: One issue with the financial penalty is the lack of clear enforcement mechanisms. Without a well-defined process for identifying non-compliance, organizations may bypass these financial penalties with little consequence. A mechanism for determining when and how organizations violate these rules is crucial for effective enforcement.

  2. Potential Loopholes: The bill defines a “testing period” during which contributions from foreign nationals are evaluated. However, contributions made before the enactment of this section are not considered, possibly allowing organizations to strategize around the effective date to avoid fines. This loophole might result in organizations avoiding financial repercussions altogether.

  3. Leniency in Tax-Exempt Status Revocation: The revocation is only triggered after a third violation. By allowing organizations two instances to make disqualified contributions without losing their tax-exempt status, this may be perceived as lenient. In financial terms, an organization could factor these penalties as a tolerable expense before significant repercussions occur, potentially undermining the bill's deterrent effect.

  4. Impact on Smaller Organizations: The bill's criteria for a "specified tax-exempt organization" focus on entities with gross receipts of $200,000 or more, or assets of $500,000 or more. This threshold means smaller entities are exempt from these financial penalties. However, smaller organizations could still contribute to political committees with foreign influence, presenting a potential loophole in the legislation’s financial framework.

  5. Excessiveness of the Penalty: Doubling the penalty amount relative to the contribution could be seen as excessive, especially if contributions are made without malicious intent. While the severe penalty aims to deter inappropriate contributions, it could be criticized as overly punitive, particularly without a clear inquiry into the motive behind the original contribution.

In summary, H.R. 8314 proposes firm financial penalties to tackle foreign involvement in elections via tax-exempt organizations. However, the issues surrounding enforcement, potential loopholes, and the punitive nature of the penalties suggest that further refinement might be necessary to ensure the bill effectively deters financial activities intended to manipulate U.S. election outcomes.

Issues

  • The bill imposes penalties on tax-exempt organizations that make contributions to political committees if they receive contributions from foreign nationals, but lacks clear enforcement mechanisms or a process for determining non-compliance (Section 2). This vagueness may lead to implementation challenges and legal ambiguities.

  • The definition of 'testing period' in Section 6720D excludes any period before the enactment of the section, potentially allowing organizations to delay contributions until after enactment to avoid penalties. This could enable organizations to circumvent the intended restrictions of the bill.

  • The condition for revocation of tax-exempt status upon the third disqualified political committee contribution in Section 501(c)(s) may be considered lenient, allowing organizations to repeatedly engage in questionable actions before facing significant consequences, which may not sufficiently deter or address unlawful activities.

  • The criteria defining a 'specified tax-exempt organization' in Section 6720D(c), which targets organizations with gross receipts of $200,000 or more, or assets of $500,000 or more, might inadvertently exempt smaller organizations that could also be involved in concerning contributions, potentially creating loopholes.

  • The reliance on existing definitions from the Federal Election Campaign Act of 1971, particularly for 'foreign national', may lead to difficulties if there are changes or discrepancies with that statute (Section 6720D(b)). This could complicate enforcement and compliance in a contemporary context.

  • The penalty for making a disqualified political committee contribution is set at twice the amount of the contribution (Section 6720D(a)), which may be viewed as excessive and punitive without clear consideration of the intent behind the contribution.

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

This section provides the short title of the Act, which is the “No Foreign Election Interference Act”.

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

This section adds a new penalty for certain tax-exempt organizations under the Internal Revenue Code that donate to political committees after receiving contributions from foreign nationals. The organization must pay double the contribution amount, and if they make more than two such contributions, they lose their tax-exempt status for that tax year. These rules apply to contributions made on or after January 1, 2025.

Money References

  • “(2) TESTING PERIOD.—The term ‘testing period’ means, with respect to any contribution by an organization described in section 501(c), the 8-year period ending on the date of such contribution, except that such period shall not include any period before the date of the enactment of this section. “(c) Specified tax exempt organization.—For purposes of this section— “(1) IN GENERAL.—The term ‘specified tax exempt organization’ means, with respect to any taxable year, any organization described in section 501(c) and exempt from tax under section 501(a) if— “(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. “(2) COORDINATION WITH REVOCATION OF TAX EXEMPT STATUS BY REASON OF MAKING DISQUALIFIED POLITICAL COMMITTEE CONTRIBUTIONS.—An organization which is not exempt from tax under section 501(a) solely by reason of section 501(s) shall be treated for purposes of paragraph (1) of this subsection as exempt from tax under section 501(a) with respect to the application of this section to the first 3 disqualified political committee contributions of such organization.”. (b) Revocation of exempt status upon third disqualified political committee contribution.—Section 501 of the Internal Revenue Code of 1986 is amended by adding at the end the following new subsection: “(s) Revocation of exempt status of certain organizations that accept contributions from foreign nationals and make contributions to political committees.—Any organization described in subsection (c) which makes more than 2 disqualified political committee contributions (as defined in section 6720D(b)) shall not be exempt from taxation under subsection (a) for any taxable year ending on or after the date of the third such contribution.”. (c) Clerical amendment.—The table of sections for part I of subchapter B of chapter 68 of such Code is amended by adding at the end the following new item: “Sec. 6720D. Contributions to political committees from certain tax exempt organizations that accept contributions from foreign nationals.”. (d) Effective date.—The amendments made by this section shall apply with respect to contributions made on or after January 1, 2025, by organizations described in section 501(c) of the Internal Revenue Code of 1986. ---

6720D. Contributions to political committees from certain tax exempt organizations that accept contributions from foreign nationals Read Opens in new tab

Summary AI

Any tax-exempt organization that receives contributions from foreign nationals and then donates to a political committee must pay a penalty equal to twice the amount of their donation. The rule applies to organizations with gross receipts of at least $200,000 or assets of $500,000 or more, and it considers donations made in the last eight years.

Money References

  • (c) Specified tax exempt organization.—For purposes of this section— (1) IN GENERAL.—The term “specified tax exempt organization” means, with respect to any taxable year, any organization described in section 501(c) and exempt from tax under section 501(a) if— (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.