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Tax-Exempt Organizations and Political Campaigns: Staying Out of the Fray

With the 2016 political campaign season heating up, the IRS is poised to vigorously pursue any complaints made against nonprofits regarding improper political activity.

Nonprofit organizations exempt from tax under section 501(c)(3) of the Internal Revenue Code, including churches and other religious organizations, are prohibited from intervening on behalf of, or in opposition to, candidates for local, state or national office.  The stakes are high: a nonprofit that violates the rule against political intervention is subject to an excise tax on the amount expended on the campaign activity; more seriously, the organization risks losing its tax-exempt status. It is thus important that nonprofits understand the complex rules and highly nuanced distinctions employed by the IRS in enforcing its rules.  Some key points and definitions follow.

The Law: To be classified as tax-exempt, a nonprofit organization must not “participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of (or in opposition to) any candidate for public office.” Any degree of political activity is enough to disqualify an organization, and the intervening political campaign activity does not need to form a substantial part of the organization’s activities for it to lose its tax-exempt status.

  • Campaign: A campaign is considered the running for local, state or national office.
  • Participating or intervening in a campaign:  Participating or intervening in a campaign can include making a contribution to a candidate (including a loan where the funds are to be used for the campaign),  endorsing a candidate, providing a candidate with the use of facilities or employees, or evaluating or rating the qualifications of the various candidates for office, even if done so in a nonpartisan manner.
  • Candidate: IRS regulations define a candidate to include “any individual who offers himself, or is proposed by others, as a contestant for elective public office.” Prominent political figures are not necessarily considered candidates, even if there is speculation regarding their election to specific offices, but organizations should exercise caution with respect to such individuals.
  • Public Office:  Public office can include local, state or national office. A public office is distinguished from public employment in that an individual must be elected to public office. As a general rule, if an individual’s name is listed on a ballot, he or she is a candidate for office.

Determining Improper Political Activity: The IRS engages in highly fact-specific analyses when determining whether an organization’s specific activities constitute participation or intervention in a political campaign.  For example, while nonprofit organizations may engage in “voter education,” they are prohibited from presenting information about political issues and candidates in a biased way.  Nonprofits may not express opinions on the candidates, publish answers to questions that indicate a bias on the issues, or provide a voter guide reflecting voting records on only select issues.   Such activities as convening public forums, publishing candidate voting records or voter guides, sponsoring get-out-the-vote drives, and hosting candidate appearances may be subject to close scrutiny by the IRS on whether they cross the line.

Individual vs. Organizational Participation: Individuals, of course, still retain the right to participate in the political sphere. The law distinguishes between an individual’s personal activities and activities that individuals undertake in conjunction with their official responsibilities in an organization. Only activities that are directly or indirectly authorized or ratified by the nonprofit organization, or that are reimbursed by the organization, will be considered organizational activities.

For detailed guidance and specific examples of political activity deemed improper by the IRS, please see the Pro Bono Center’s complete legal alert:  Monitoring Your Section 501(c)(3) Organization’s Activities With Respect to Political Campaigns or listen to our on-demand webinar: Lobbying and Political Activity: A Webinar for 501(c)(3) Organizations.