Internal Revenue Service
Revenue Ruling
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smRev. Rul. 76-29
1976-1 C.B. 85
Section 276
IRS Headnote
Advertising; political convention program. There is no conflict between former section 276(c) of the Code and section 610 of title 18 U.S.C. and expenses that meet the requirements of former section 276(c) incurred by corporations in advertising in the 1972 Democratic and Republican National Convention programs are deductible.
Full Text
Rev. Rul. 76-29
The Internal Revenue Service has been asked whether there is a conflict between section 610 of title 18 U.S.C. (1970) (based on section 251 of title 2 U.S.C. (1940), which codified the Federal Corrupt Practices Act, 1925, section 313, 43 Stat. 1070) and former section 276(c) of the Internal Revenue Code of 1954 that would prevent any deduction under former section 276 for expenses incurred by corporations for advertisements in the 1972 Democratic and Republican Convention programs.
Section 276(a) of the Code specifically disallows any deductions for expenses incurred for advertising in political programs or publications or for admission to political fund-raising functions or similar events.
In considering the tax treatment of political contributions, Congress noted that since direct political contributions were not deductible by individuals not engaged in business, it is undesirable to permit a business to take a trade or business expense deduction with respect to any amounts that in practice usually represent ways of making indirect political contributions or paying for costs of participating in political activities. For that reason, section 276 was added to the Code to insure that no deduction will be allowed for advertising in a convention program of a political party or in any other publication if any part of the net proceeds of the publication directly or indirectly inures to the use of a political party or a political candidate. See S. Rep. No. 1010, 89th Cong., 2d Sess. 34 (1966), 1966-1 C.B. 476, 504.
Former section 276(c) of the Code, which became effective for amounts paid after 1967, but was repealed for taxable years beginning after December 31, 1974, provided a specific exception to the application of section 276(a). Former section 276(c) provided, in part, that subsection 276(a) will not be applied to an amount paid or incurred for advertising in a convention program provided: (1) the convention was held for the purpose of nominating candidates for the Offices of President and Vice President of the United States, (2) the proceeds from the program are to be used solely to defray the cost of the convention, and (3) the amount paid or incurred is reasonable in light of the business the taxpayer may expect to receive "directly" as a result of such advertising, or as a result of the convention being held in an area in which the taxpayer has a principal place of business. In general, former section 276(c) of the Code allows a deduction for amounts paid or incurred in advertising in political convention programs when the amounts meet certain restrictive requirements that are designed to assure that the amounts are in the nature of section 162 trade or business expenses rather than political contributions. For purposes of former section 276(c), an amount paid or incurred for advertising will not be considered as "reasonable" if such amount is greater than the amount that would be paid for comparable advertising in a comparable convention program of a nonpolitical organization. The use of the word "directly" in former section 276(c) did not permit the deduction of amounts paid or incurred for institutional advertising; for example, it did not permit a deduction for amounts paid or incurred for advertising of a type not designed to sell specific goods or services to persons attending the convention. Also, former section 276(c) did not permit the deduction of any amount described therein that was not otherwise allowable as a deduction under section 162, relating to trade or business expenses, nor did it permit the deduction of any amount to which section 276(a) applies other than an amount that satisfied the requirements of the former section 276(c). H. Rep. No. 1533, 90th Cong. 2d Sess. 42 (1968), 1968-2 C.B. 801, 813 (Conference Report). See section 1.276-1(b)(2) of the Income Tax Regulations.
Section 610 of title 18 provides, in part:
It is unlawful for any national bank or any corporation organized by authority of any law of Congress, to make a contribution or expenditure in connection with any election to any political office, or in connection with any primary election or political convention or caucus held to select candidates for any political office, or for any corporation whatever, or any labor organization to make a contribution or expenditure in connection with any election at which Presidential and Vice Presidential electors or a Senator or Representative in or a Delegate or Resident Commissioner to Congress are to be voted for, or in connection with any primary election or political convention or caucus held to select candidates for any of the foregoing offices, or for any candidate, political committee, or other person to accept or receive any contribution prohibited by this section.
For purposes of section 610 of title 18, "expenditure" and "contribution" are defined in section 201 of the Federal Election Campaign Act of 1971 enacted as section 591 of title 18 of the United States Code, 18 U.S.C.A. 591 (Supp. 1975).
Expenditure means a purchase, payment, distribution, loan, advance, deposit, or gift of money, or anything of value made for the purpose of influencing the nomination for election, or election, of any person to Federal office or for the purpose of influencing the results of a primary held for the selection of delegates to a national nominating convention of a political party or for the expression of a preference for the nomination of persons for election to the office of President of the United States. The word expenditure also includes a contract, promise, or agreement to make an expenditure whether or not legally enforceable. Contribution means a gift, subscription, loan, advance, or deposit of money or anything of value made for the same purpose as an expenditure, as described above.
Advertising expenses allowed as a deduction under former section 276(c) of the Code were incurred in expectation of a direct increase in business resulting from such advertising expenses. Further, under former section 276(c) the political parties were restricted to using the advertising proceeds only to defray the costs of conducting the national conventions. Former section 276(c), while containing substantial restrictions, allowed taxpayers to deduct advertising expenses that were in the nature of section 162 trade or business expenses, provided such amounts were not used for any political purposes.
In contrast, section 610 of title 18 is intended specifically to apply to situations where there is an attempt to influence any nomination or election of an individual for certain political offices.
Accordingly, there is no conflict between former section 276(c) of the Code and section 610 of title 18, and expenses incurred by corporations in advertising in the 1972 Democratic and Republican National Convention programs that meet the requirements of former section 276(c) are deductible for Federal income tax purposes.