Are PACs subject to income tax?

Like individuals and businesses, political organizations are taxed on their taxable income. A big difference is that political organizations have a special exemption available to them.

PACs are not required to include exempt function income in calculating taxable income. Exempt function income includes things along the lines of campaign contributions, membership fees and fundraising event proceeds. Assuming that a PAC takes in only exempt function income and the funds are only used for the organization’s exempt function — influencing an election — there will be no tax due.

But if a PAC has other business, interest or investment income, an income tax may apply. In addition, if any exempt function income is expended on anything other than an exempt function, the amount of the expenditure may be included in the PAC’s taxable income.