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InfoSight Highlight: Using IRS Form 1120-POL
Friday, March 3, 2017 6:35 AM

Section 527 of the Internal Revenue Code provides for the exemption from federal income tax of organizations established primarily to accept contributions and make expenditures intended to influence, or attempting to influence, the election process of any federal, state, or local office-holder (exempt function). Any political organization with taxable income (e.g., investment income, income from trade or business) in excess of $100 is required to file an annual income tax return on Form 1120-POL (U.S. Income Tax Return for Certain Political Organizations), by the 15th day of the third month following the close of the organization's tax year (March 15 for calendar-year taxpayers).

What credit unions are impacted by Form 1120-POL?
Aside from credit union trade organizations that make political contributions, state-chartered credit unions in certain states can make corporate contributions to their state credit union league's state political action committee (PAC) or directly to a candidate for state or local office. If the amount contributed is in excess of $100, the credit union is required to file Form 1120-POL. Federal credit unions are exempted from filing Form 1120-POL.

While most contributions to political organizations can generally incur liability, state-chartered credit unions are not absolutely liable under Section 527 for amounts transferred to an individual, organization, or PAC provided they take reasonable steps to ensure that the individual or organization does not use such amounts for an exempt function. State-chartered credit unions should consult with their own counsel to determine whether they must file the 1120-POL return and the extent of any tax liability.

What is the due date for Form 1120-POL?
Credit unions should generally file by the 15th day of the 3rd month after the end of the tax year. For most credit unions, this will be March 15. If the due date falls on a Saturday, Sunday, or legal holiday, the credit union may file on the next business day.

Source:  InfoSight Compliance.

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