Many 501(c)(3) organizations are blissfully unaware that certain political activities could cost them their tax exemption and result in punitive excise taxes. Specifically, the Internal Revenue Code regulates two types of political activities:
- Political Campaign Activities – Exempt organizations cannot participate or intervene in a political campaign on behalf of or in opposition to a candidate for public office; and
- Lobbying Activities – “No substantial part” of an exempt organization’s activities can consist of carrying on propaganda or otherwise attempting to influence legislation.
As the 2012 election campaigns kick into high gear, charities and other 501(c)(3) organizations need to be aware of the IRS guidelines on political campaign activities. This post will focus on the area of prohibited political campaign activities. We will follow up with a separate post discussing the lobbying activity rules.
Political Campaign Intervention
Non-profit organizations cannot directly or indirectly participate or intervene in a political campaign. Examples of prohibited activities include:
- Contributing to political campaigns of a candidate for public office;
- Making verbal or written statements on behalf of or in opposition to a candidate for public office;
- Commenting on specific statements or positions taken by a candidate for public office;
- Using the nonprofit’s resources to support a particular candidate for public office; or
- Sponsoring events that promote a promote candidate for public office.
Political campaign intervention is serious stuff. Even one act of intervention or participation in a political campaign can cause loss of tax exemption and an excise tax on the nonprofit organization.
What constitutes intervention in a political campaign?
Although participation or intervention in a political campaign is prohibited, certain “voter education” activities are not. How do we distinguish between prohibited political campaign intervention and permissible voter education? Here are a few guidelines to keep in mind:
- Activities that are done in election season are particularly dangerous. The closer the election, the more likely the activity will be considered impermissible intervention in a campaign.
- Publication of Congressional incumbents’ voting records on selected issues in a nonpartisan manner has been held not to constitute intervention in political campaign.
- A forum held for the purpose of educating and informing voters, and which provides fair and impartial treatment of candidates, and does not promote or advance one candidate over another, does not constitute participation or intervention in any political campaign on behalf of or in opposition to any candidate for public office.
In each case, nonpartisan participation is key to a finding that the activity is voter education (as opposed to campaign intervention). If a public forum is involved, all legally-qualified candidates should be invited and given equal opportunity and time to present their position. The organization must be very careful to present the facts as impartially as possible.
Who is a candidate for public office?
Questions sometimes arise about who is a “candidate for public office” within the meaning of the political campaign activity rules. IRS regulations define a candidate to include anyone offering himself or herself or proposed by others for national, state, or local public office. IRS rulings and case law have added a few clarifications to this general definition:
- Candidacy does not depend on whether the election is contested (i.e., an unopposed candidate is still a candidate).
- Candidacy does not depend on whether the election involves political parties.
- “Candidate” includes incumbents who have not formally announced their candidacy but are likely to do so.
- Status as a prominent public figure does not make one a candidate, even if accompanied by public speculation about a future run for office.
- Judicial nominees are not candidates.
There is often a fine line between impermissible endorsement of a candidate and support of a prominent donor or other public figure. As we near the 2012 elections, organizations should tread carefully in this area.
When will political campaign activities of leaders or members be attributed to the organization?
Sometimes the directors of an organization are themselves influential public figures who want to lend their support to a particular candidate. In this situation, the director must make it clear that it is the director (and not the nonprofit organization) that is endorsing the candidate. If the nonprofit organization is mentioned, it must only be for identification purposes. There should be no doubt that the endorsement is the director’s individual capacity and does not represent the position of the nonprofit organization.
Next month, we will discuss lobbying activities by exempt organizations.