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During election season, some not-for-profit organizations may do some campaigning of their own, promoting issues and candidates that are friendly to their causes. But how far can an organization go before running afoul of the prohibited activity laws? If not-for-profits engage in the wrong type of
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The law does not allow charities to participate in political campaigns. | campaigning, they might encounter trouble with the IRS — including the loss of their tax-exempt status.
In recent years, the IRS has stepped up its scrutiny of not-for-profits and how they conduct themselves in political campaigns. In the 2004 election season, for example, the IRS examined complaints of illegal political activities committed by 110 organizations. Of those, 82 complaints were found to be credible, and after investigations were complete, three quarters were determined to have violated the law.
What Restrictions Apply? A qualifying 501(c)(3) organization is exempt from federal tax if it is organized and operated exclusively for one of the following purposes: charitable, religious, educational, scientific, public safety testing, literary, to foster national or international amateur sports competition and to prevent cruelty to children or animals.
These organizations cannot directly or indirectly take part in campaigns for — or against — identifiable candidates for public office. Prohibited activity also includes contributing campaign funds, as well as making written or verbal public statements that support or oppose candidates. Violations could result in the loss of tax-exempt status and the imposition of certain excise taxes.
However, organizations can take some steps to inform the public, such as hosting public forums and publishing voter education guides, provided the presentation is not partisan. They can also encourage the public to register to vote and show up on Election Day — again, as long as the activity is done in a non-partisan manner.
The key: Is an organization advocating for an issue or attempting to intervene in a federal, state or local election? It can be acceptable to promote a position on a public policy issue if the message follows certain guidelines. Here are the factors the IRS considers if a not-for-profit becomes the subject of an investigation:
- Does the organization's statement identify a candidate for public office? This includes mentioning a candidate by name, posting a picture, or using some other identifying biographical information (for example, describing the person as a former CEO of a Fortune 500 company).
- Does the organization's message express approval or disapproval for the actions or positions of a candidate?
- Does a statement coincide with the timing of an upcoming election and does it mention voting or the election?
- Is the issue raised in an organization's statement one that distinguishes between candidates for office (for example, pro-life versus pro-choice)?
- Is the message part of an ongoing series on the same topic, regardless of the timing of an election?
- Is the timing of a message and the identification of the candidate related to a non-electoral event (such as a scheduled vote on specific legislation by an officeholder who also happens to be running for public office)?
Here are two examples from the IRS that illustrate acceptable voter education versus prohibited activity:
Example 1: A section 501(c)(3) organization, which promotes community involvement, set up a booth at the state fair where citizens could register to vote. The booth's signs listed only the name of the organization, the date of the next upcoming statewide election, and notice of the opportunity to register. No reference to any candidate or political party was made by the volunteers staffing the booth or in the available materials, other than the official voter registration forms allowing registrants to select a party affiliation. According to the IRS, this organization did not engage in prohibited political campaign intervention when it operated the voter registration booth.
Example 2: Another section 501(c)(3) organization educates the public on environmental issues. An upcoming election involved one candidate running for the state legislature. An important element of her platform challenged the environmental policies of the incumbent. Shortly before the election, the organization set up a phone bank to call registered voters in the candidate's district. In the phone conversations, the organization's representative told voters about the importance of environmental issues and asked questions about their views. If voters appeared to agree with the incumbent’s position, the organization's representative thanked them and ended the calls. However, if voters seemed to agree with the candidate, the organization's representative reminded them about the upcoming election, stressed the importance of voting and offered to provide transportation to the polls. According to the IRS, this organization did engage in prohibited political campaign intervention when it conducted this type of get-out-the-vote drive.
The IRS recently released Revenue Ruling 2007-41, which outlines a number of scenarios to help charities and churches understand the ban on political campaign activity. Click here to read it. On its Web site, the IRS also provides lengthy guidelines that spell out what tax-exempt organizations can and cannot do in political campaigns. Click here to read the material.
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