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REALTOR® Affiliation Proxy Tax Requirement

This can be a reminder about REALTOR® Affiliation’s proxy tax obligations beneath the Inside Income Code. The proxy tax is a tax assessed to all 501c6 tax-exempt organizations that interact in lobbying exercise if the group chooses to not (or forgets to) notify its members of the estimated portion of the member dues that fund lobbying exercise. Which means nationwide, state and native REALTORS® associations. Such a discover should inform members that they can not deduct the lobbying portion of their dues from their tax legal responsibility. For instance a REALTOR® affiliation that has calculated that 15% of the affiliation’s dues are used for native, state and federal lobbying exercise, and that wish to keep away from paying the proxy tax should present members an announcement much like the next on their dues assertion:

For revenue tax functions, member dues paid are deductible as a enterprise expense. Nevertheless, XYZ REALTOR® Affiliation estimates that 15% of all dues paid to XYZ Affiliation go towards non-deductible lobbying expenditures. All members are suggested that this share of dues paid in tax yr 2020 is non-deductible for revenue tax functions.

Lobbying bills beneath the Inside Income Code (IRC Sec. 162(e)) embrace expenditures paid or incurred in reference to:

  1. Influencing laws;
  2. Collaborating or intervening in any political marketing campaign on behalf of (or in opposition to) any candidate for public workplace;
  3. Making an attempt to affect most people with respect to election, legislative issues, or referendums; and
  4. Any direct communication with a coated govt department official in an try to affect the individual’s official actions or positions.

View the IRS proxy tax webpage.

What Counts as Lobbying Exercise?

Many native associations routinely meet with candidates to find out RPAC contributions. Does this represent lobbying exercise? The reply might be sure. Affiliation bills related to candidate-related RPAC expenditures (not the worth of the contributions themselves) could be a part of the calculation, as could be different affiliation bills that additional the affiliation’s political functions. It’s a good suggestion to seek the advice of along with your CPA or tax advisor for association-specific purposes.

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