[Code of Federal Regulations]
[Title 26, Volume 1]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.276-1]

[Page 638-642]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.276-1  Disallowance of deductions for certain indirect contributions 
to political parties.

    (a) In general. Notwithstanding any other provision of law, no 
deduction shall be allowed for income tax purposes in respect of any 
amount paid or incurred after March 15, 1966, in a taxable year of the 
taxpayer beginning after December 31, 1965, for any expenditure to which 
paragraph (b)(1), (c), (d), or (e) of this section is applicable. 
Section 276 is a disallowance provision exclusively and does not make 
deductible any expenses which are not otherwise allowed under the Code. 
For certain other rules in respect of deductions for expenditures for 
political purposes, see Sec. Sec. 1.162-15(b), 1.162-20, and 1.271-1.
    (b) Advertising in convention program--(1) General rule. (i) Except 
as provided in subparagraph (2) of this paragraph, no deduction shall be 
allowed for an expenditure for advertising in a convention program of a 
political party. For purposes of this subparagraph it is immaterial who 
publishes the convention program or to whose use the proceeds of the 
program inure (or are intended to inure). A convention program is any 
written publication (as defined in paragraph (c) of this section) which 
is distributed or displayed in connection with or at a political 
convention, conclave, or meeting. Under certain conditions payments to a 
committee organized for the purpose of bringing a political convention 
to an area are deductible under paragraph (b) of Sec. 1.162-15. This 
rule is not affected by the provisions of this section. For example, 
such payments may be deductible notwithstanding the fact that the 
committee purchases from a political party the right to publish a 
pamphlet in connection with a convention and that the deduction of costs 
of advertising in the pamphlet is prohibited under this section.
    (ii) The application of the provisions of this subparagraph may be 
illustrated by the following example:

    Example. M Corporation publishes the convention program of the Y 
political party for a convention not described in subparagraph (2) of 
this paragraph. The corporation makes no payment of any kind to or on 
behalf of the party or any of its candidates and no part of the proceeds 
of the publication and

[[Page 639]]

sale of the program inures directly or indirectly to the benefit of any 
political party or candidate. P Corporation purchases an advertisement 
in the program. P Corporation may not deduct the cost of such 
advertisement.

    (2) Amounts paid or incurred on or after January 1, 1968, for 
advertising in programs of certain national political conventions. (i) 
Subject to the limitations in subdivision (ii) of this subparagraph, a 
deduction may be allowed for any amount paid or incurred on or after 
January 1, 1968, for advertising in a convention program of a political 
party distributed in connection with a convention held for the purpose 
of nominating candidates for the offices of President and Vice President 
of the United States, if the proceeds from the program are actually used 
solely to defray the costs of conducting the convention (or are set 
aside for such use at the next convention of the party held for such 
purpose) and if the amount paid or incurred for the advertising is 
reasonable. If such amount is not reasonable or if any part of the 
proceeds is used for a purpose other than that of defraying such 
convention costs, no part of the amount is deductible. Whether or not an 
amount is reasonable shall be determined in light of the business the 
taxpayer may expect to receive either directly as a result of the 
advertising or as a result of the convention being held in an area in 
which the taxpayer has a principal place of business. For these 
purposes, an amount paid or incurred for advertising will not be 
considered as reasonable if it is greater than the amount which would be 
paid for comparable advertising in a comparable convention program of a 
nonpolitical organization. Institutional advertising (e.g., advertising 
of a type not designed to sell specific goods or services to persons 
attending the convention) is not advertising which may be expected to 
result directly in business for the taxpayer sufficient to make the 
expenditures reasonable. Accordingly, an amount spent for institutional 
advertising in a convention program may be deductible only if the 
taxpayer has a principal place of business in the area where the 
convention is held. An official statement made by a political party 
after a convention as to the use made of the proceeds from its 
convention program shall constitute prima facie evidence of such use.
    (ii) No deduction may be taken for any amount described in this 
subparagraph which is not otherwise allowable as a deduction under 
section 162, relating to trade or business expenses. Therefore, in order 
for any such amount to be deductible, it must first satisfy the 
requirements of section 162, and, in addition, it must also satisfy the 
more restrictive requirements of this subparagraph.
    (c) Advertising in publication other than convention program. No 
deduction shall be allowed for an expenditure for advertising in any 
publication other than a convention program if any part of the proceeds 
of such publication directly or indirectly inures (or is intended to 
inure) to or for the use of a political party or a political candidate. 
For purposes of this paragraph, a publication includes a book, magazine, 
pamphlet, brochure, flier, almanac, newspaper, newsletter, handbill, 
billboard, menu, sign, scorecard, program, announcement, radio or 
television program or announcement, or any similar means of 
communication. For the definition of inurement of proceeds to a 
political party or a political candidate, see paragraph (f)(3) of this 
section.
    (d) Admission to dinner or program. No deduction shall be allowed 
for an expenditure for admission to any dinner or program, if any part 
of the proceeds of such event directly or indirectly inures (or is 
intended to inure) to or for the use of a political party or a political 
candidate. For purposes of this paragraph, a dinner or program includes 
a gala, dance, ball, theatrical or film presentation, cocktail or other 
party, picnic, barbecue, sporting event, brunch, tea, supper, auction, 
bazaar, reading, speech, forum, lecture, fashion show, concert, opening, 
meeting, gathering, or any similar event. For the definition of 
inurement of proceeds to a political party or a political candidate and 
of admission to a dinner or program, see paragraph (f) of this section.

[[Page 640]]

    (e) Admission to inaugural event. (1) No deduction shall be allowed 
for an expenditure for admission to an inaugural ball, inaugural gala, 
inaugural parade, or inaugural concert, or to any similar event (such as 
a dinner or program, as defined in paragraph (d) of this section), in 
connection with the inauguration or installation in office of any 
official, or any equivalent event for an unsuccessful candidate, if the 
event is identified with a political party or a political candidate. For 
purposes of this paragraph, the sponsorship of the event and the use to 
which the proceeds of the event are or may be put are irrelevant, except 
insofar as they may tend to identify the event with a political party or 
a political candidate. For the definition of admission to an inaugural 
event, see paragraph (f)(4) of this section.
    (2) The application of the provisions of this paragraph may be 
illustrated by the following example:

    Example. An inaugural reception for A, a prominent member of Y party 
who has been recently elected judge of the municipal court of F city, is 
held with the proceeds going to the city treasury. The price of 
admission to such affair is not deductible.

    (f) Definitions--(1) Political party. For purposes of this section 
the term political party has the same meaning as that provided for in 
paragraph (b)(1) of Sec. 1.271-1.
    (2) Political candidate. For purposes of this section, the term 
political candidate is to be construed in accordance with the purpose of 
section 276 to deny tax deductions for certain expenditures which may be 
used directly or indirectly to finance political campaigns. The term 
includes a person who, at the time of the event or publication with 
respect to which the deduction is being sought, has been selected or 
nominated by a political party for any elective office. It also includes 
an individual who is generally believed, under the facts and 
circumstances at the time of the event or publication, by the persons 
making expenditures in connection therewith to be an individual who is 
or who in the reasonably foreseeable future will be seeking selection, 
nomination, or election to any public office. For purposes of the 
preceding sentence, the facts and circumstances to be considered 
include, but are not limited to, the purpose of the event or publication 
and the disposition to be made of the proceeds. In the absence of 
evidence to the contrary it shall be presumed that persons making 
expenditures in connection with an event or publication generally 
believe that an incumbent of an elective public office will run for 
reelection to his office or for election to some other public office.
    (3) Inurement of proceeds to political party or political 
candidate--(i) In general. Subject to the special rules presented in 
subdivision (iii) of this subparagraph (relating to a political 
candidate), proceeds directly or indirectly inure to or for the use of a 
political party or a political candidate (a) if the party or candidate 
may order the disposition of any part of such proceeds, regardless of 
what use is actually made thereof, or (b) if any part of such proceeds 
is utilized by any person for the benefit of the party or candidate. 
These conditions are equally applicable in determining whether the 
proceeds are intended to inure. Accordingly, it is immaterial whether 
the event or publication operates at a loss if, had there been a profit, 
any part of the proceeds would have inured to or for the use of a 
political party or a political candidate. Moreover, it shall be presumed 
that where a dinner, program, or publication is sponsored by or 
identified with a political party or political candidate, the proceeds 
of such dinner, program, or publication directly or indirectly inure (or 
are intended to inure) to or for the use of the party or candidate. On 
the other hand, proceeds are not considered to directly or indirectly 
inure to the benefit of a political party or political candidate if the 
benefit derived is so remote as to be negligible or merely a coincidence 
of the relationship of a political candidate to a trade or business 
profiting from an expenditure of funds. For example, the proceeds of 
expenditures made by a taxpayer in the ordinary course of his trade or 
business for advertising in a publication, such as a newspaper or 
magazine, are not considered as inuring to the benefit of a political 
party or political candidate merely because the

[[Page 641]]

publication endorses a particular political candidate or candidates of a 
particular political party, the publisher independently contributes to 
the support of a political party or candidate out of his own personal 
funds, or the principal stockholder of the publishing firm is a 
candidate for public office.
    (ii) Proceeds to political party. If a political party may order the 
disposition of any part of the proceeds of a publication or event 
described in paragraph (c) or (d) of this section, such proceeds inure 
to the use of the party regardless of what the proceeds are to be used 
for or that their use is restricted to a particular purpose unrelated to 
the election of specific candidates for public office. Accordingly, 
where a political party holds a dinner for the purpose of raising funds 
to be used in a voter registration drive, voter education program, or 
nonprofit political research program, partisan or nonpartisan, the 
proceeds are considered to directly or indirectly inure to or for the 
use of the political party. Proceeds may inure to or for the use of a 
political party even though they are to be used for purposes which may 
not be directly related to any particular election (such as to pay 
office rent for its permanent quarters, salaries to permanent employees, 
or utilities charges, or to pay the cost of an event such as a dinner or 
program as defined in paragraph (d) of this section).
    (iii) Proceeds to political candidate. Proceeds directly or 
indirectly inure (or are intended to inure) to or for the use of a 
political candidate if, in addition to meeting the conditions described 
in subdivision (i) of this subparagraph, (a) some part of the proceeds 
is or may be used directly or indirectly for the purpose of furthering 
his candidacy for selection, nomination, or election to any elective 
public office, and (b) they are not received by him in the ordinary 
course of a trade or business (other than the trade or business of 
holding public office). Proceeds may so inure whether or not the 
expenditure sought to be deducted was paid or incurred before the 
commencement of political activities with respect to the selection, 
nomination, or election referred to in (a) of this subdivision, or after 
such selection, nomination, or election has been made or has taken 
place. For example, proceeds of an event which may be used by an 
individual who, under the facts and circumstances at the time of the 
event, the persons making expenditures in connection therewith generally 
believe will in the reasonably foreseeable future run for a public 
office, and which may be used in furtherance of such individual's 
candidacy, generally will be deemed to inure (or to be intended to 
inure) to or for the use of a political candidate for the purpose of 
furthering such individual's candidacy. Or, as another example, proceeds 
of an event occurring after an election, which may be used by a 
candidate in that election to repay loans incurred in directly or 
indirectly furthering his candidacy, or in reimbursement of expenses 
incurred in directly or indirectly furthering his candidacy, will be 
deemed to directly or indirectly inure (or to be intended to inure) to 
or for the use of a political candidate for the purpose of furthering 
his candidacy. For purposes of this subdivision, if the proceeds 
received by a candidate exceed substantially the fair market value of 
the goods furnished or services rendered by him, the proceeds are not 
received by the candidate in the ordinary course of his trade or 
business.
    (iv) The application of the provisions of this subparagraph may be 
illustrated by the following examples:

    Example 1. Corporation O pays the Y political party $100,000 per 
annum for the right to publish the Y News, and retains the entire 
proceeds from the sale of the publication. Amounts paid or incurred for 
advertising in the Y News are not deductible because a part of the 
proceeds thereof indirectly inures to or for the use of a political 
party.
    Example 2. The X political party holds a highly publicized ball 
honoring one of its active party members and admission tickets are 
offered to all. The guest of honor is a prominent national figure and a 
former incumbent of a high public office. The price of admission is 
designed to cover merely the cost of entertainment, food, and the 
ballroom, and all proceeds are paid to the hotel where the function is 
held, with the political party bearing the cost of any deficit. No 
deduction may be taken for the price of admission to the ball since the 
proceeds thereof inure to or for the use of a political party.
    Example 3. Taxpayer A, engaged in a trade or business, purchases a 
number of tickets

[[Page 642]]

for admission to a fundraising affair held on behalf of political 
candidate B. The funds raised by this affair can be used by B for the 
purpose of furthering his candidacy. These expenditures are not 
deductible by A notwithstanding that B donates the proceeds of the 
affair to a charitable organization.
    Example 4. A, an individual taxpayer who publishes a newspaper, is a 
candidate for elective public office. X Corporation advertises its 
products in A's newspaper, paying substantially more than the normal 
rate for such advertising. X Corporation may not deduct any portion of 
the cost of that advertising.

    (4) Admission to dinners, programs, inaugural events. For purposes 
of this section, the cost of admission to a dinner, program, or 
inaugural event includes all charges, whether direct or indirect, for 
attendance and participation at such function. Thus, for example, 
amounts spent to be eligible for door prizes, for the privilege of 
sitting at the head table, or for transportation furnished as part of 
such an event, or any separate charges for food or drink, are amounts 
paid for admission.

[T.D. 6996, 34 FR 833, Jan. 18, 1969, as amended by T.D. 7010, 34 FR 
7145, May 1, 1969]