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Proxy Tax

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Proxy Tax
In the United States, a tax levied on the political or lobbying activity of certain tax-exempt organizations. Subject to certain restrictions, the proxy tax applies to organizations under section 501(c)4, 501(c)5, and 501(c)6. Generally speaking, this includes labor unions, civic groups, chambers of commerce, and similar groups. Unless the organization meets exemption requirements (usually meaning the organization is a veterans' group or volunteer fire department), it must pay the proxy tax on its lobbying efforts. The proxy tax rate is 35%. An organization may avoid the proxy tax if it establishes to the IRS that members do not deduct membership dues, contributions, or other similar amounts on their personal or business taxes.
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However, a section 501(c)(6) organization that engages in lobbying may be required either to notify its members about the percentage of dues that are used for lobbying activities or to pay a proxy tax.
Organizational characteristics of successful advocates by Petrescu, Claudia A. / Michigan Academician
Simplifying the Code will also reduce the heavy proxy tax of recordkeeping that can impede routine, day-to-day business transactions.
Tax reform: challenges and opportunities by Bernard, David L. / Tax Executive
An organization with more than $1,000 in gross income from UBI must file Form 990-T, Exempt Organization Business Income Tax Return (and proxy tax under section 6033(e)), and is subject to corporate tax rates on unrelated business taxable income.
IRS audit issues for exempt organizations by Chin, Jason / The Tax Adviser
 
 
 
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