The Tax Treatment of Political Contributions and Lobbying Expenses

The Tax Treatment of Political Contributions and Lobbying Expenses

As the next presidential election quickly approaches, more and more individuals and businesses are contributing to political candidates, political campaigns, or associated political organizations. As a result, it’s a good time to review the tax treatment of these political contributions and politics-related lobbying expenses, even if you do not make direct political contributions or pay direct lobbying expenses yourself. This is because you may be making indirect political contributions or paying indirect lobbying expenses without even realizing it. These indirect contributions are treated much the same way as direct contributions and expenses, as you’ll see.

The tax treatment of direct political contributions is very simple. The IRS’s Publication 529 states very clearly that you “can't deduct contributions made to a political candidate, a campaign committee, or a newsletter fund. Advertisements in convention bulletins and admissions to dinners or programs that benefit a political party or political candidate aren't deductible.” In other words, regardless of your candidate of choice, these contributions are nondeductible.

Moreover, politics-related contributions, such as lobbying expenses, are, in most cases, similarly nondeductible. Publication 529 notes that you “generally can't deduct amounts paid or incurred for lobbying expenses.” There are a few exceptions to this rule – most notably, lobbying expenses at the local government level are generally deductible. Moreover, the exact definition of “lobbying expenses” is complex. Ultimately, however, the general rule barring deduction applies to most lobbying expenses.

Of course, most taxpayers don’t directly make or pay any sort of political contributions or lobbying expenses. However, many unions, chambers of commerce, and other professional organizations do make and pay those amounts, and these organizations must in turn track these costs and report them to dues-paying members. As a result, Publication 529 notes that If ”a tax-exempt organization notifies you that part of the dues or other amounts you pay to the organization are used to pay nondeductible lobbying expenses, you can't deduct that part.”

Despite the general nondeductibility of these politics-related expenses, the formal tax rules governing their treatment are rather complex. As a result, if you have specific questions about your own contributions and expenses, you should contact an Atlanta tax accountant, such as Fusion CPA.

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