Proxy Tax

DEFINITION of 'Proxy Tax'

A tax on lobbying or political expenses that exceed an allowable amount set by the IRS. The proxy tax rate is set at the same rate as the highest corporate tax rate for that particular year. Organizations may be required to pay a proxy tax if they spend more on lobbying efforts than they initially estimated, or if dues used to pay for lobbying were lower than expected.

BREAKING DOWN 'Proxy Tax'

A proxy tax is a penalty, and can also be accompanied by other charges or penalties. If an organization pays a proxy tax on all of its lobbying expenditures then it allows members, whose dues paid for those efforts, to be able to deduct the value of their dues from their taxes.