Tax Deductions for Grassroots Lobbying

The Internal Revenue Code prohibits taxpayers from taking deductions from amounts paid or incurred on behalf of political candidates or legislative matters, elections, or referenda. A report on the Federal Power Commission's audits of political advertising by utilities recommended development of better methods for classifying advertising costs and separating political advertising and improvement of audit procedures. The Internal Revenue Service (IRS) has not provided sufficient guidance to help examiners make judgments about the political nature of corporate advertising. Proposed actions by IRS to improve regulations and auditing techniques should provide better guidance. Tax returns do not provide sufficient information concerning grassroots lobbying by tax-exempt organizations or corporations. IRS should make regulations for taxpayers as clear as possible, require taxpayers to file sufficient information for adequate enforcement of the code, and assess what changes in reporting requirements will facilitate proper compliance.