CUNA Comment Letter

Proposed Revenue Ruling Regarding Reporting and Disclosure Provisions for 527 Organizations

September 25, 2000

Ms. Judith E. Kindell
Internal Revenue Service
T:EO:RA:T:P, Room 6033
1111 Constitution Ave., N.W.
Washington, D.C. 20224

RE: Announcement 2000-72: Proposed Revenue Ruling Regarding Reporting and Disclosure Provisions for 527 Organizations

The Credit Union National Association, Inc. (CUNA) appreciates the opportunity to comment on the Internal Revenue Service (IRS) Announcement 2000-72, Proposed Revenue Ruling regarding the reporting and disclosure requirements for Section 527 political organizations. As a national trade association, CUNA represents over 90 percent of the nation's more than 10,500 state and federal credit unions.

CUNA has several concerns regarding the proposed revenue ruling. CUNA’s comments are limited to the provisions of the proposed revenue ruling applicable to the notification and reporting provisions for state political organizations that anticipate receipts in excess of $25,000 per year.

About CUNA:

CUNA’s membership consists not only of credit unions but also of credit union leagues organized on a state-by-state basis. Fifty-one of CUNA’s members are leagues representing the fifty states and the District of Columbia. Members of the state leagues are state chartered or federally chartered credit unions. The Credit Union Legislative Action Committee (CULAC) is the federal PAC established and administered by CUNA pursuant to 11 CFR 114.5(b). Thirteen of the state leagues have federal PACs. Most state leagues have also established state PACs. The state PACs established by the state leagues qualify as "political organizations" under §527 of the IRS Code. Moreover, these state PACs are also already registered with and report to state agencies.

Specific concerns:

Filing burden:
CUNA is concerned that Announcement 2000-72, as it relates to state and local political committees, does not take into account the fact that these entities are already highly regulated by their local jurisdictions. Specifically, the answer to Question 5 in the proposed ruling states that "Section 527 does not except political organizations that file reports with state or local election agencies from the notice of status requirement."

The proposal (Answer to Question 21) goes on to provide, however, that "political committees of a state or local candidate" and "state and local committees of political parties" are exempt from the filing of periodic reports. The proposal further provides that this is true even though "all other political organizations, including other state and local political organizations, are subject to the reporting requirements of §527(j), even if they file reports with state or local election agencies."

Most state league PACs are already required to file reports of their activity with state boards of elections or other entities. Increasingly, state PACS are required to file these reports electronically, allowing for quicker and more accessible public disclosure via the Internet. In addition, state PACs are designed to conduct activities that influence state elections. While their actions may also have a tangential affect on federal campaigns, they should be regulated on the level of their primary purpose. That means regulation from the state, not the federal level. Answer to Question 27 acknowledges that "an election for purposes of these reporting dates does not include elections that are purely state or local elections," thus emphasizing that a state and local political committee will not have information targeted by the statute in connection with federal election activity.

CUNA is concerned about the burden such duplicative reporting puts on state credit union league PACs. Specifically, the reporting periods found in §527 have no relevance to state PACs since they do not engage in federal election activity. CUNA believes that the IRS can ease these burdens without jeopardizing its statutory mandate. Specifically, the IRS could simply require state PACs that report to the appropriate state and local agency to file a copy of their state registrations and reports in lieu of form 8872. This would greatly reduce the reporting redundancy for these PACs.

Timing of filing requirements
The timing of the filings in election years also creates an additional filing burden for state PACs. Under the proposed ruling, a state PAC could be required to make arduous pre- and post-election filings at times when there is very little activity. Although there may be federal elections taking place there may not be any state elections taking place yet state PACs would still be required to file a Form 8872 under these circumstances.

Proliferation of federal PACs
The legislation may encourage an unintended proliferation of federal PACs. In the instance of CUNA, most state leagues have state PACs and raise federal PAC money as collecting agents for CULAC (see Federal Election Commission [FEC] Advisory Opinion 1998-19). All federal receipts and expenses are under the auspices of CULAC, the federal PAC. Those leagues that do maintain federal PACs are required to aggregate their receipts and expenditures with CULAC. As the filing requirements proposed in the regulations so closely mirror those of the FEC filings, it may seem easier for state associations to simply form their own federal PACs, and disburse funds independently.

Despite best efforts, in the instance of having 50 federal PACs that aggregate, there would inevitably be numerous instances of exceeded limits on both the income and expenditure sides of the PAC. This would presumably be the situation with any organization with a similar structure. This begs the question of whether or not the FEC has the ability to handle a proliferation of federal PACs of this magnitude and if they do not, or can not acquire the resources, does this create another campaign finance "loophole" due to lack of enforcement.


In conclusion, CUNA urges the IRS to explore alternative means of accomplishing the statutory mandate without dramatically and unnecessarily increasing the reporting requirements of state and local political committees. CUNA believes that the IRS can certainly accomplish this by having state and local political committees file a copy of their state reports in lieu of or appended to Form 8872.

CUNA thanks the IRS for taking these remarks into consideration.


Christiane G. Hyland
Regulatory Staff Attorney

cc: CULAC Trustees