An organization exempt under section 501(c) of the Code that spends any amount for an exempt function (within the meaning of Code section 527) must file Form 1120–POL for any year which it has political taxable income. These organizations must include in gross income the lesser of:
The total amount of its exempt function expenditures, or
The organization’s net investment income.
Exempt function. An exempt function means influencing or attempting to influence the selection, nomination, election, or appointment of any individual to any federal, state, local public office or office in a political organization, or the election of the Presidential or Vice Presidential electors, whether or not such individual or electors are selected, nominated, elected, or appointed. It also includes certain office expenses of a holder of public office or an office in a political organization.
Separate segregated fund. A section 501(c) organization can set up a separate segregated fund that will be treated as an independent political organization. The earnings and expenditures made by the separate fund will not be attributed to the section 501(c) organization.
Caution: Section 501(c)(3) organizations are precluded from, and suffer loss of exemption for, engaging in any political campaign on behalf of, or in opposition to, any candidate for public office.