ALLOWANCE OF CREDIT.

SEC. 701. ALLOWANCE OF CREDIT. (a) Subpart A of part IV of subchapter A of chapter 1 (relating to credits against tax) is amended by inserting after section 40 (as added by section 601 of this Act) the following new section: “SEC. 41. CONTRIBUTIONS TO CANDIDATES FOR PUBLIC OFFICE. “(a) General Rule—In the case of an individual, there shall be allowed, subject to the limitations of subsection (b), as a credit against the tax imposed by this chapter for the taxable year, an amount equal to one-half of all political contributions, payment of which is made by the taxpayer within the taxable year. “(b) Limitations— “(1) Maximum credit—The credit allowed by subsection (a) for a taxable year shall be limited to $12.50 ($25 in the case of a joint return under section 6013). “(2) Application with other credits—The credit allowed by subsection (a) shall not exceed the amount of the tax imposed by this chapter for the taxable year reduced by the sum of the credits allowable under section 33 (relating to foreign tax credit), section 35 (relating to partially tax-exempt interest), section 37 (relating to retirement income), and section 38 (relating to investment in certain depreciable property). “(3) Verification—The credit allowed by subsection (a) shall be allowed, with respect to any political contribution, only if such political contribution is verified in such manner as the Secretary or his delegate shall prescribe by regulations. “(c) Definitions—For purposes of this section— “(1) Political contribution—The term ‘political contribution’ means a contribution or gift of money to— 85 Stat. 561 “(A) an individual who is a candidate for nomination or election to any Federal, State, or local elective public office in any primary, general, or special election, for use by such individual to further his candidacy for nomination or election to such office; “(B) any committee, association, or organization (whether or not incorporated) organized and operated exclusively for the purpose of influencing, or attempting to influence, the nomination or election of one or more individuals who are candidates for nomination or election to any Federal, State, or local elective public office, for use by such committee, association, or organization to further the candidacy of such individual or individuals for nomination or election to such office: “(C) the national committee of a national political party; “(D) the State committee of a national political party as designated by the national committee of such party: or “(E) a local committee of a national political party as designated by the State committee of such party designated under subparagraph (D). “(2) Candidate—The term ‘candidate’ means, with respect to any Federal, State, or local elective public office, an individual who— “(A) has publicly announced that he is a candidate for nomination or election to such office; and “(B) meets the qualifications prescribed by law to hold such office. “(3) National political party—The term ‘national political party means— “(A) in the case of contributions made during a taxable year of the taxpayer in which the electors of President and Vice President are chosen, a political party presenting candidates or electors for such offices on the official election ballot of ten or more States, or “(B) in the case of contributions made during any other taxable year of the taxpayer, a political party which met the qualifications described in subparagraph (A) in the last preceding election of a President and Vice President, “(4) State and local—The term ‘State’ means the various States and the District of Columbia; and the term ‘local’ means a political subdivision or part thereof, or two or more political subdivisions or parts thereof, of a State. “(d) Cross References— “For disallowance of credits to estates and trusts, see section 642(a)(3).” (b) Section 642(a) (relating to credits against tax for estates and trusts) is amended by adding at the end thereof the following new paragraph: “(3) Political contributions—An estate or trust shall not be allowed the credit against tax for political contributions provided by section 41.”