Exempt Organizations – Guide for Political Organizations
Qualified political organizations, under California Revenue and Taxation Code (R&TC) Section 23701r, are considered exempt from income taxes and are not required to file California Form 3500, Exemption Application.
Take the following steps to determine:
- Step 1 - Type of Qualifying Political Organization
- Step 2 - Filing Requirements
- Step 3 - Exempt Determination Letter Requirements
Step 1: Type of Qualifying Political Organization
The law defines “political organization” as a:
- Association, fund (whether or not incorporated), or other organization.
- Individual candidate’s trust or other organization (whether or not incorporated) organized and operated primarily for the purpose of directly or indirectly accepting contributions, making expenditures, or both, for an exempt function as defined in the section.
- Newsletter Fund – A fund maintained by an individual for the purpose of preparing and circulating the individual’s political newsletter is determined to be a political organization. The individual must be an incumbent or candidate for nomination or election to public office.
A qualified political organization does not include organizations formed primarily to support or oppose ballot measures, propositions, legislation, electors, etc., whether or not such individual or electors are selected, nominated, elected, or appointed.
Exempt Function – Influencing or attempting to influence the selection, nomination, election, or appointment of any individual to any federal, state, or local public office or office in a political organization; or the election of presidential or vice-presidential electors, whether or not such individual or electors are selected, nominated, elected, or appointed.
Step 2: Filing Requirements
Exempt Function Income – Exempt function income is not subject to tax.
Exempt function income includes any amount received as:
- A contribution of money or property.
- Membership dues, fees, or assessments.
- Proceeds from political fundraising or entertainment events.
- Proceeds from the sale of political campaign materials, under the condition that the organization did not receive such proceeds in the ordinary course of any trade or business and are segregated and used solely for the exempt function.
Nonexempt Function Income
The first $100 of nonexempt function income is not subject to tax. Receipts in excess of $100 are subject to tax and must be reported by filing California Form 100, California Corporation Franchise or Income Tax Return. In the case of a Newsletter Fund, the specific $100 deduction is not allowed.
Nonexempt function income includes, but is not limited to:
- Gains on property sales (whether or not received as a contribution).
- Income from any trade or business.
Nonexempt Function Income/Individually Controlled Funds
|Income||California Form Required|
|Form 199||Form 100|
|$100 or less||No||No|
|$100 or more||No||Yes|
You must file California Form 100 on or before the 15th day of the 4th month after the close of your organization’s taxable year. For example: If its taxable year ends on December 31, the due date is April 15. If the due date falls on a weekend or state holiday, file by the next regular business day.
Use the general corporate tax rate to compute the tax. Tax-exempt organizations are not subject to the minimum tax.
Extension of Time to File
The extension allows you more time to file the tax return, not an extension of time to pay any taxes that may be due.
We will grant an automatic six-month extension to file a return if both of the following conditions exist:
- Your organization is not suspended on the original due date.
- You file your organization’s return on or before the extended due date.
- Estimate Tax Penalty—Political organizations are not required to make estimate payments and are not subject to the Estimate Tax Penalty.
- Delinquent Return Penalty—If you do not file your entity’s income tax return by the extended due date, we impose a penalty of 5 percent of the tax due, after applying any payments and credits made on or before the original return due date, for each month or part of a month the return is late. The maximum penalty is 25 percent. We impose the penalty from the original due date of the return (R&TC Section 19131).
- Underpayment and Monthly Penalty—We impose a penalty if you do not pay the total amount due shown on your entity’s return by the original due date. The penalty is 5 percent of the unpaid tax, plus 0.5 percent of the unpaid tax for each month or part of a month it remains unpaid. The maximum penalty is 25 percent of the unpaid tax (R&TC Section 19132).
Step 3: Exempt Determination Letter Requirements
|Incorporated||Refer to Contact Us for our mailing address.||Mail us:
|Unincorporated/Fund controlled by an individual||California Form 100 required||Attach a brief description of the organization’s activities to the form.|
|No California Form 100 required||No Exempt Determination Letter required.|
- (916) 845-4171 7 AM to 4:30 PM weekdays, except state holidays
- 711 or (800) 735-2929 for persons with hearing or speech impairments
- STATE OF CALIFORNIA EXEMPT ORGANIZATIONS UNIT MS F-120
FRANCHISE TAX BOARD
PO BOX 1286
RANCHO CORDOVA CA 95741-1286