Part V. Administrative, Procedural, and Miscellaneous Matters

ment of Politin.cerning Tay Policy

Part V. Administrative, Procedural, and Miscellaneous Matters Internal Revenue Service Policy 3. The gross income of political ment of the legal rules. Most imStatement Concerning Tax Treat parties or committees shall include in- portantly we must determine whether ment of Political Committees and terest and dividends from investments, those rules should be retroactively Parties and Contributions of income from any ancillary commercial applied. Appreciated Property activities and gains from sales by the

Both the Democratic and RepubliAnnouncement 73-84 committees or parties of appreciated

can national committees argued in property. Donations received by such

their legal submissions that the rules On October 19, 1972, the Internal committees or parties shall not be con

should be applied prospectively only. Revenue Service published in the sidered as income, and expenditures

It appears from published reports that Federal Register a notice of its con- for political purposes shall not be con

both major parties engaged in the cern about the tax treatment of polit. sidered as deductions. Deductions shall

practice of encouraging contributions ical committees and parties and about be allowed, however, to the extent at

of appreciated property. Thus, if the transactions involving donations of ap- tributable to income of the political

rules regarding gains on sales of appreciated property to political com- parties or committees, in accordance

preciated property are to be retroacmittees or parties and sales of such with regular rules of the Service in

tively applied to 1972 and prior years, property by such organizations. The analogous situations.

it appears probable that unforeseen Service invited public comments upon 4. Gains on the sale of appreciated

and substantial tax liabilities may exist these and related issues. Twenty-seven property, net of any losses, shall be

for the national and other commitsubmissions were received by the Sery. included in income of political parties

tees of both parties. ice in response to this public invita or committees to the extent provided tion, and a public hearing was held in the Internal Revenue Code.

If such rules were retroactively apMarch 1, 1973.

plied, the hardships of an aggressive Implications of Legal Conclusions and evenhanded collection policy Conclusions with respect to the status

The legal conclusions above set forth might fall as heavily on those entities of the law

are consistent with positions taken in which have no funds as upon those

a number of rulings which were issued which do. Comprehensive collection Based upon its consideration of the

privately over several decades, but enforcement might, for example, resubmissions received from the public

never made public by the Service. quire placing entities with insufficient and its further study of the issues, the

They are also consistent with Rev. funds in bankruptcy, asserting liens on Service proposes to adopt the follow. Proc. 68-19, 1968-1 C.B. 810, which funds raised in the future by such ening course:

dealt primarily with candidates' com- tities and their successors, and assert1. Although it has been the long- mittees (as distinguished from parties ing transferee liabilities. standing practice of the Internal or party committees) and stated that Revenue Service not to require polit. interest received on unexpended funds

The Service agrees with the Demoical parties and committees to file tax of such committees “may” be reported

cratic and Republican national comreturns, the Service does not find any by the committee on Form 1041.

mittees that the retroactive enforcespecific provision in the Internal Reve- On the other hand, both the legal

ment of rules regarding gains on the nue Code to such effect. Therefore, conclusions and the above rulings are

sale of appreciated property, now pubunless the Internal Revenue Code is inconsistent with the historical prac

licly announced for the first time, changed to relieve political parties and tice of the Service not to require the

would create major inequities, and has committees from the duty of filing tax filing of returns by political parties

concluded that it will not seek to apply returns, the Service will require such and organizations. That policy of not

such rules to sales prior to the Seryentities to file appropriate tax returns. requiring returns was communicated

ice's statement of its concern with the 2. Unincorporated political parties to the field offices of the Service more

problem on October 3, 1972. Also, the or committees may be treated for tax than 25 years ago, but it, too, was

Service will not require political compurposes as associations taxable as cor- never made public.

mittees and parties to file tax returns porations or as trusts (or possibly part. These past policies of the Service

for years prior to 1972. Subject to nerships) depending upon the applica. are logically inconsistent, but they are

these limitations upon retroactivity, tion to the specific facts and circum- a historical fact.

the above legal conclusions are applistances of the standards developed for We are now faced with the question cable, but the Service will not seek to the classification of unincorporated of determining the fairest way in enforce them until it appears that organizations.

which to commence general enforce. Congress has had an opportunity to

pendine facts developers

(1).

and

consider the problem specifically. Con. gress has already taken a first step, as the Ways and Means Committee January notice of tax reform hearings listed the tax status of political organizations as a major subject to be considered. In his testimony before the Ways and Means Committee on April 30, 1973, the Secretary of the Treasury called for Congressional action in this difficult area.

The Service is beginning investigations to determine the potential liabilities of political parties and committees, and will develop promptly the standards and guidelines for the application and enforcement of its new rules if Congress should determine to leave them in place. It intends to take such steps as may be required to see that major funds under the control of such entities will not be dissipated without regard to potential tax liabil. ities, and hopes that such result may be achieved through voluntary arrangements with the organizations in volved without the necessity of resorting to jeopardy assessments. Other Tax Aspects of Political Activities

In the meantime, the Service proposes to act in the area where its rules and practices have been clear. Those who deducted from income political contributions (beyond the limited Internal Revenue Code allowances to individuals) should find such deductions disallowed. Those who excluded from income political funds diverted to personal use should find the diverted funds treated as income, and this rule shall be applicable to any political parties or committees which may have diverted funds, contributed for polit. ical purposes, to purposes determined judicially to have been illegal. Those who rendered services to political parties and committees in return for compensation must be taxed on such compensation. Gift tax liabilities will be enforced in accordance with Rev. Rul. 72-355, 1972-2 C.B. 532.

Delegation Order No. 34

Delegation Order No. 53 (Revocation Notice)

(Revocation Notice) (Effective November 26, 1973) (Effective November 5, 1973) Acceptance or Rejection of Offers in Authority of District Directors to Can

Compromise of Certain Liabilities cel Registration Certificates, Form under Chapter 51, Internal Reve 637, Issued Pursuant to Regulations nue Code of 1954

44 and 46. 1. Commissioner's Delegation Or Delegation Order No. 53 authorized der No. 34 (1956-2 C.B. 1375), issued District Directors to cancel registraJuly 27, 1956, delegated the authority tion certificates, Form 637, under cer. to accept or reject offers in compro- tain circumstances. That authority has mise of

now been delegated to the District a. tax liabilities arising from:

Directors by Regulations 148.1-3(j) (i) the illegal production of untax

Delegation Order No. 53, issued paid distilled spirits, wines, or beer,

October 10, 1957 (1957-2 C.B. 1090],

is hereby revoked.
(ii) the failure to file returns of, or
to pay, occupational taxes with respect

JOHN F. HANLON, to distilled spirits, wines, or beer, and

Assistant Commissioner b. criminal liabilities of retail deal

(Compliance). ers in liquor arising from violations of (Filed by the Office of the Federal Register the Internal Revenue laws relating to

on November 12, 1973, 8:45 a.m., and liquor, including the reuse of liquor

published in the issue of the Federal

Register for November 13, 1973, 38 F.R. bottles

31317)
to each Regional Commissioner and to
each Assistant Regional Commissioner

her Delegation Order No. 67 (Rev. 11) (Alcohol and Tobacco Tax).

(Effective May 29, 1973)
2. Treasury Department Order No.
221 [1972-1 C.B. 777), establishing the

Signing the Commissioner's Name or
Bureau of Alcohol, Tobacco and Fire-

on His Behalf
arms, transferred the functions, powers
arms, transferred the functions, powers

Effe

Effective 11:30 A.M. EDT, May and duties of the Internal Revenue 29, 1973, all outstanding authorizaService arising under laws relating to tions to sign the name of, or on behalf alcohol, tobacco, firearms, and explo- of, Raymond F. Harless, Acting Comsives (including the Alcohol, Tobacco missioner of Internal Revenue, are and Firearms Division of the Internal hereby amended to authorize the signRevenue Service) to the Bureau of ing of the name of, or on behalf of, Alcohol, Tobacco and Firearms. Since Donald C. Alexander, Commissioner this authority is no longer vested in of Internal Revenue. the Commissioner of Internal Rev

This Order supersedes Delegation enue, Delegation Order No. 34, issued

Order No. 67 (Rev. 10) issued May 1, July 27, 1956, is revoked.

1973 (1973-1 C.B. 744). Donald C. ALEXANDER,

Donald C. ALEXANDER, Commissioner.

Delegation Order No. 97 (Rev. 11) sioners (Audit); District Directors; (Technical) may redelegate the au(Effective October 19, 1973) Director of International Operations; thority contained in paragraph 1 to Closing Agreements Concerning In

Chiefs, Associate Chiefs, Assistant the Deputy Assistant Commissioner

Chiefs, and Conferee-Special Assist (Technical) and to the Technical Adternal Revenue Tax Liability

ants, Appellate Branch Offices, are visors on the Staff of the Assistant Pursuant to authority granted to hereby authorized in cases under their Commissioner (Technical) for cases the Commissioner of Internal Reve jurisdiction (but excluding cases that do not involve precedent issues nue by 26 CFR 301.7121-1(a); Treas- docketed before the United States and the Assistant Commissioner ury Department Order No. 150-32, Tax Court) to enter into and approve (Compliance) may redelegate the audated November 18, 1953; Treasury a written agreement with any person thority contained in paragraph 2 of Department Order No. 150-36, dated relating to the internal revenue tax this Order to the Deputy Assistant August 17, 1954 (1954-2 C.B. 733); liability of such person (or of the per Commissioner (Compliance). and Treasury Department Order No. son or estate for whom he acts) for a 8. Delegation Order No. 97 (Rev. 150-83, dated August 21, 1973, page taxable period or periods ended prior 10) issued July 14, 1971, 1972-1 C.B. 508, this Bulletin, subject to the trans to the date of agreement and related 692, is hereby superseded. fer of authority covered in Treasury specific items affecting other taxable Department Order No. 221, dated periods.

Donald C. ALEXANDER, June 6, 1972, 1972-2 C.B. 899.

Commissioner. 4. Regional Commissioners; Assist1. The Assistant Commissioner ant Regional Commissioners (Appel- (Filed by the Office of the Federal Regis(Technical) is hereby authorized to late); Chiefs, Associate Chiefs, Assist

ter on October 26, 1973, 8:45 a.m., and

published in the issue of the Federal enter into and approve a written ant Chiefs, and Conferee-Special As

Register for October 29, 1973, 38 F.R. agreement with any person relating to sistants, Appellate Branch Offices, are 29830) the internal revenue tax liability of hereby authorized in cases under their such person (or of the person or jurisdiction docketed in the United

Delegation Order No. 127 (Rev. 1) estate for whom he acts) in respect of States Tax Court to enter into and

(Effective September 4, 1973) any prospective transactions or com approve a written agreement with any pleted transactions affecting returns person relating to the internal revenue

person relating to the internal revenue Extension of Time for Making Certo be filed.

tax liability of such person (or of the tain Elections with Respect to 2. The Assistant Commissioner

person or estate for whom he acts)
person or estate for whom ne

Casualty Losses (Compliance) is hereby authorized to but only in respect to related specific

1. By virtue of the authority granted enter into and approve a written items affecting other taxable periods.

to the Commissioner of Internal Revagreement with any person relating to 5. The Director of International

enue under 26 C.F.R. 1.9100, with the internal revenue tax liability of Operations is hereby authorized to

respect to granting extensions of time such person (or of the person or estate enter into and approve a written

for making certain elections, there is for whom he acts) for a taxable pe- agreement with any person relating to

hereby delegated to each Regional riod or periods ended prior to the date the internal revenue tax liability of

Commissioner, District Director and of agreement and related specific such person (or of the person or

Service Center Director, the authority items affecting other taxable periods. estate for whom he acts) to provide

to grant reasonable extensions of time The Assistant Commissioner (Com. for the mitigation of economic double

(not to exceed a total of 240 days) pliance) is also authorized to enter taxation under section 3 of Rev. Proc.

for changing an election made under into and approve a written agreement 64-54, 1964-2 C.B. 1008, under Rev.

section 165(h) of the Internal Reve

sectie with any person relating to the in- Proc. 72-22, 1972-2 C.B. 747, and un

nue Code of 1954 and 26 C.F.R. ternal revenue tax liability of such der Rev. Proc. 69-13, 1969-1 C.B.

roc. 69-13, 1969-1 C.B. 1.165-11(e) beyond the date that such person (or of the person or estate for 402, and to enter into and approve a

election becomes or became irrevowhom he acts) with respect to the written agreement providing the

cable. This date is the later of (1) 90 performance of his functions as the treatment available under Rev. Proc.

days after the date on which the

dave after the dati competent authority in the adminis- 65-17, 1965-1 C.B. 833.

election was made, or (2) March 6, tration of the operating provisions of 6. The authority delegated herein 1973, which is 90 days after the date the tax conventions of the United does not include the authority to set the final regulations under section States. aside any closing agreement.

165(h) were published. 3. Regional Commissioners; Assist- 7. Authority delegated in this Or- 2. When appropriate, each Regionant Regional Commissioners (Appel. der may not be redelegated, except al Commissioner or District Director late); Assistant Regional Commis- that the Assistant Commissioner may exercise this authority by granting