Nonprofits and Politics
You can’t avoid politics this time of year, especially if you live in the Washington D.C. area like I do. If you are speaking on behalf of a nonprofit organization, however, it’s best to keep your endorsement of, or opposition to, a candidate to yourself.
The ability of tax-exempt organizations under 26 U.S.C § 501(c) to engage in political activity, such as campaign activity and lobbying, depends on the nature of the organization.
For example, the charitable organizations described in § 501(c)(3) may not engage in any campaign activity and may only conduct a limited amount of lobbying. Meanwhile, § 501(c)(4) social welfare organizations, § 501(c)(5) labor unions, and § 501(c)(6) trade associations may engage in campaign activity (so long as such activity is not their primary activity) and an unlimited amount of lobbying.
Other types of § 501(c) organizations appear either to be subject to restrictions like those imposed on § 501(c)(3) organizations or treated similarly to § 501(c)(4), (c)(5), and (c)(6) organizations.
While some types of organizations are permitted to engage in campaign and lobbying activities under the Internal Revenue Code, § 501(c) organizations are subject to tax for making certain political expenditures.
This means your organization cannot make contributions to political campaign funds or make public statements (this includes verbal or written) in favor of or in opposition to any candidate for public office. Doing so is a clear violation of the prohibition against political campaign activity.
What’s the worst thing that could happen? Violating this prohibition may result in denial or revocation of tax-exempt status and the imposition of certain excise taxes.
The organizations managers may also be subject to tax. A tax equal to 2.5% of the expenditures (limited to $5,000 with respect to any one expenditure) is imposed on the organization’s managers who agreed to the expenditures knowing they were political expenditures, unless the agreement is not willful and is due to reasonable cause.1
Additionally, § 501(c) organizations must report information regarding their political activities to the Internal Revenue Service (IRS) on Schedule C of the Form 990. The organization and the IRS must make this information publicly available. Information about substantial donors also must be reported to the IRS on Form 990’s Schedule B, but any identifying information about those donors generally is not publicly disclosed.2
The key point to remember is that partisan activity is what is prohibited.
Get Out the Vote and Other Exceptions
There are certain activities or expenditures which may seem political, but are not prohibited depending on the facts and circumstances.
Voting is a treasured right and a privilege in the United States. Voter education or encouraging people to register to vote through get-out-the-vote drives and other voter education activities when conducted in a non-partisan manner, are not considered prohibited political campaign activity.
On the other hand, voter education or registration activities with evidence of bias that (a) would favor one candidate over another; (b) oppose a candidate in some manner; or (c) have the effect of favoring a candidate or group of candidates, will constitute prohibited participation or intervention.
In a 2007 Revenue Ruling, the IRS laid out 21 examples of allowable political activity. Remember whether your activity is an exception to the prohibition on political activity is a facts and circumstances test. The entire Revenue Ruling is linked here if you want to read it.
I’ll give you the summary with the caveat that the IRS included in the Revenue Ruling, each example only includes ONE kind of activity. If an organization mixes the activities, the interaction among the activities may affect the determination of whether or not the organization is engaged in political campaign intervention, which is prohibited.
A section 501(c)(3) organization that promotes community involvement, sets up a booth at the state fair where citizens can register to vote. The signs and banners in and around the booth give only the following information:
the name of the organization,
the date of the next upcoming statewide election, and
notice of the opportunity to register.
No reference is made to any candidate or political party by the volunteers staffing the booth or in the materials available at the booth, other than the official voter registration forms which allow registrants to select a party affiliation.
The organization is not engaged in political campaign intervention when it operates this voter registration booth. ALLOWED
Save the Ocean (“STO”) is a section 501(c)(3) organization that educates the public on environmental issues. Candidate New Gal is running for the state legislature and an important element of her platform is challenging the environmental policies of the incumbent. Shortly before the election, STO sets up a telephone bank to call registered voters in the district in which Candidate New Gal is seeking election. In the phone conversations, C’s representative tells the voter about the importance of environmental issues and asks questions about the voter’s views on these issues. If the voter appears to agree with the incumbent’s position, C’s representative thanks the voter and ends the call. If the voter appears to agree with Candidate G’s position, C’s representative reminds the voter about the upcoming election, stresses the importance of voting in the election and offers to provide transportation to the polls.
STO is engaged in political campaign intervention when it conducts this get-out-the-vote drive. NOT ALLOWED
Nonprofit Leaders are People Too!
The intent of the prohibition against partisan speech is not to keep individuals who represent nonprofit organizations from having a voice in the political process or to keep them from commenting on policies that impact their organizations. They certainly may do so in their capacity as individuals.
However, for their organizations to remain tax exempt under section 501(c)(3), leaders cannot make partisan comments in official organization publications or at official functions of the organization. It’s important to remember which hat you have on when you are commenting on politics!
President A is the Chief Executive Officer of Hospital J, a section 501(c)(3) organization, and is well known in the community. With the permission of five prominent healthcare industry leaders, including President A, who have personally endorsed Candidate T, Candidate T publishes a full page ad in the local newspaper listing the names of the five leaders. President A is identified in the ad as the CEO of Hospital J. The ad states, “Titles and affiliations of each individual are provided for identification purposes only.” The ad is paid for by Candidate T’s campaign committee. Because the ad was not paid for by Hospital J, the ad is not otherwise in an official publication of Hospital J, and the endorsement is made by President A in a personal capacity, the ad does not constitute campaign intervention by Hospital J.
This one is tricky because while President A was identified as the President of Hospital J, because the ad wasn’t paid for by the hospital and the the ad is not an official publication of the hospital, this activity is ALLOWED.
President B is the president of University K, a section 501(c)(3) organization. University K publishes a monthly alumni newsletter that is distributed to all alumni of the university. In each issue, President B has a column titled “My Views.” The month before the election, President B states in the “My Views” column, “It is my personal opinion that Candidate U should be reelected.” For that one issue, President B pays from his personal funds the portion of the cost of the newsletter attributable to the “My Views” column. Even though he paid part of the cost of the newsletter, the newsletter is an official publication of the university. Because the endorsement appeared in an official publication of University K, it constitutes campaign intervention by University K. NOT ALLOWED
Minister C is the minister of Church L, a section 501(c)(3) organization and Minister C is well known in the community. Three weeks before the election, he attends a press conference at Candidate V’s campaign headquarters and states that Candidate V should be reelected. Minister C does not say he is speaking on behalf of Church L. His endorsement is reported on the front page of the local newspaper and he is identified in the article as the minister of Church L. Because Minister C did not make the endorsement at an official church function, in an official church publication or otherwise use the church’s assets, and did not state that he was speaking as a representative of Church L, his actions do not constitute campaign intervention by Church L. ALLOWED
Chairman D is the chairman of the Board of Directors of M, a section 501(c)(3) organization that educates the public on conservation issues. During a regular meeting of M shortly before the election, Chairman D spoke on a number of issues, including the importance of voting in the upcoming election, and concluded by stating, “It is important that you all do your duty in the election and vote for Candidate W.” Because Chairman D’s remarks indicating support for Candidate W were made during an official organization meeting, they constitute political campaign intervention by M. NOT ALLOWED
Candidate Appearances
What about when candidates for political office want to visit your organization? Candidate visits are common at churches, mosques, and synagogues during campaign season. Depending on the circumstances, this is fine and does not jeopardize the organizations tax-exempt status. There are three situations in which a candidate may visit:
as a candidate;
as an individual; and
if they just show up at a public event.
If your Congressman is visiting your church as a congregant, he’s not acting in his official capacity. If there’s a community event where anyone is welcome, well, anyone is welcome including him!
When a candidate is invited to speak at an organization event in his or her capacity as a political candidate, however, there are factors that we look at in determining whether the organization participated or intervened in a political campaign include the following:
• Whether the organization provides an equal opportunity to participate to political candidates seeking the same office (same type/size of audience);
• Whether the organization indicates any support for or opposition to the candidate (including candidate introductions and communications concerning the candidate’s attendance); and
• Whether any political fundraising occurs.
President E is the president of Society N, a historical society that is a section 501(c)(3) organization. The month before the election, President E invites the three Congressional candidates for the district in which Society N is located to address the members, one each at a regular meeting held on three successive weeks. Each candidate is given an equal opportunity to address and field questions on a wide variety of topics from the members. Society N’s publicity announcing the dates for each of the candidate’s speeches and President E’s introduction of each candidate include no comments on their qualifications or any indication of a preference for any candidate. Society N’s actions do not constitute political campaign intervention. ALLOWED
The facts are the same as in Situation 7 except that there are four candidates in the race rather than three, and one of the candidates declines the invitation to speak. In the publicity announcing the dates for each of the candidate’s speeches, Society N includes a statement that the order of the speakers was determined at random and the fourth candidate declined the Society’s invitation to speak. President E makes the same statement in his opening remarks at each of the meetings where one of the candidates is speaking. Society N’s actions do not constitute political campaign intervention. ALLOWED
Minister F is the minister of Church O, a section 501(c)(3) organization. The Sunday before the November election, Minister F invites Senate Candidate X to preach to her congregation during worship services. During his remarks, Candidate X states, “I am asking not only for your votes, but for your enthusiasm and dedication, for your willingness to go the extra mile to get a very large turnout on Tuesday.” Minister F invites no other candidate to address her congregation during the Senatorial campaign. Because these activities take place during official church services, they are attributed to Church O. By selectively providing church facilities to allow Candidate X to speak in support of his campaign, Church O’s actions constitute political campaign intervention. NOT ALLOWED
Not Speaking As a Candidate
Often candidates for public office have distinguished careers beyond their current race. Governor Wes Moore of Maryland is also a decorated veteran. Former Governor Arnold Schwarzenegger was a well known celebrity prior to running for office. What if they are invited to speak at an event NOT because of their political aspirations, but rather because of their past accomplishments? You guessed it, there are a number of factors the IRS looks at to determine whether the invitation constitutes campaign intervention:
Whether the individual is chosen to speak solely for reasons other than candidacy for public office;
Whether the individual speaks only in a non-candidate capacity;
Whether either the individual or any representative of the organization makes any mention of his or her candidacy or the election;
Whether any campaign activity occurs in connection with the candidate’s attendance;
Whether the organization maintains a nonpartisan atmosphere on the premises or at the event where the candidate is present; and
Whether the organization clearly indicates the capacity in which the candidate is appearing and does not mention the individual’s political candidacy or the upcoming election in the communications announcing the candidate’s attendance at the event.
Historical society P is a section 501(c)(3) organization. Society P is located in the state capital. President G is the president of Society P and customarily acknowledges the presence of any public officials present during meetings. During the state gubernatorial race, Lieutenant Governor Y, a candidate, attends a meeting of the historical society. President G acknowledges the Lieutenant Governor’s presence in his customary manner, saying, “We are happy to have joining us this evening Lieutenant Governor Y.” President G makes no reference in his welcome to the Lieutenant Governor’s candidacy or the election. Society P has not engaged in political campaign intervention as a result of President G’s actions. ALLOWED
Chairman H is the chairman of the Board of Hospital Q, a section 501(c)(3) organization. Hospital Q is building a new wing. Chairman H invites Congressman Z, the representative for the district containing Hospital Q, to attend the groundbreaking ceremony for the new wing. Congressman Z is running for reelection at the time. Chairman H makes no reference in her introduction to Congressman Z’s candidacy or the election. Congressman Z also makes no reference to his candidacy or the election and does not do any political campaign fundraising while at Hospital Q. Hospital Q has not intervened in a political campaign. ALLOWED
University X is a section 501(c)(3) organization. X publishes an alumni newsletter on a regular basis. Individual alumni are invited to send in updates about themselves which are printed in each edition of the newsletter. 8 After receiving an update letter from Alumnus Q, X prints the following: “Alumnus Q, class of ‘XX is running for mayor of Metropolis.” The newsletter does not contain any reference to this election or to Alumnus Q’s candidacy other than this statement of fact. University X has not intervened in a political campaign. ALLOWED
Mayor G attends a concert performed by Symphony S, a section 501(c)(3) organization, in City Park. The concert is free and open to the public. Mayor G is a candidate for reelection, and the concert takes place after the primary and before the general election. During the concert, the chairman of S’s board addresses the crowd and says, “I am pleased to see Mayor G here tonight. Without his support, these free concerts in City Park would not be possible. We will need his help if we want these concerts to continue next year so please support Mayor G in November as he has supported us.” As a result of these remarks, Symphony S has engaged in political campaign intervention. NOT ALLOWED
Issue Advocacy vs. Intervention
This is a tough one as many organizations are formed around advocating for certain issues.
Section 501(c)(3) organizations may take positions on public policy issues, including issues that divide candidates in an election for public office. However, section 501(c)(3) organizations must avoid any issue advocacy that functions as political campaign intervention. Even if a statement does not expressly tell an audience to vote for or against a specific candidate, an organization delivering the statement is at risk of violating the political campaign intervention prohibition if there is any message favoring or opposing a candidate. A statement can identify a candidate not only by stating the candidate’s name but also by other means such as showing a picture of the candidate, referring to political party affiliations, or other distinctive features of a candidate’s platform or biography. All the facts and circumstances need to be considered to determine if the advocacy is political campaign intervention.
These are some of the factors we look at to determine whether a communication results in political campaign intervention:
Whether the statement identifies one or more candidates for a given public office;
Whether the statement expresses approval or disapproval for one or more candidates’ positions and/or actions;
Whether the statement is delivered close in time to the election;
Whether the statement makes reference to voting or an election;
Whether the issue addressed in the communication has been raised as an issue distinguishing candidates for a given office;
Whether the communication is part of an ongoing series of communications by the organization on the same issue that are made independent of the timing of any election; and
• Whether the timing of the communication and identification of the candidate are related to a non-electoral event such as a scheduled vote on specific legislation by an officeholder who also happens to be a candidate for public office.
A communication is particularly at risk of political campaign intervention when it makes reference to candidates or voting in a specific upcoming election. Nevertheless, the communication must still be considered in context before arriving at any conclusions.
University O, a section 501(c)(3) organization, prepares and finances a full page newspaper advertisement that is published in several large circulation newspapers in State V shortly before an election in which Senator C is a candidate for nomination in a party primary. Senator C represents State V in the United States Senate. The advertisement states that S. 24, a pending bill in the United States Senate, would provide additional opportunities for State V residents to attend college, but Senator C has opposed similar measures in the past. The advertisement ends with the statement “Call or write Senator C to tell him to vote for S. 24.” Educational issues have not been raised as an issue distinguishing Senator C from any opponent. S. 24 is scheduled for a vote in the United States Senate before the election, soon after the date that the advertisement is published in the newspapers. Even though the advertisement appears shortly before the election and identifies Senator C’s position on the issue as contrary to O’s position, University O has not violated the political campaign intervention prohibition because the advertisement does not mention the election or the candidacy of Senator C, education issues have not been raised as distinguishing Senator C from any opponent, and the timing of the advertisement and the identification of Senator C are directly related to the specifically identified legislation University O is supporting and appears immediately before the United States Senate is scheduled to vote on that particular legislation.
The candidate identified, Senator C, is an officeholder who is in a position to vote on the legislation. ALLOWED
Organization R, a section 501(c)(3) organization that educates the public about the need for improved public education, prepares and finances a radio advertisement urging an increase in state funding for public education in State X, which requires a legislative appropriation. Governor E is the governor of State X. The radio advertisement is first broadcast on several radio stations in State X beginning shortly before an election in which Governor E is a candidate for re-election. The advertisement is not part of an ongoing series of substantially similar advocacy communications by Organization R on the same issue. The advertisement cites numerous statistics indicating that public education in State X is under funded. While the advertisement does not say anything about Governor E’s position on funding for public education, it ends with “Tell Governor E what you think about our under-funded schools.” In public appearances and campaign literature, Governor E’s opponent has made funding of public education an issue in the campaign by focusing on Governor E’s veto of 10 an income tax increase the previous year to increase funding of public education. At the time the advertisement is broadcast, no legislative vote or other major legislative activity is scheduled in the State X legislature on state funding of public education.
Organization R has violated the political campaign prohibition because:
the advertisement identifies Governor E, appears shortly before an election in which Governor E is a candidate;
it is not part of an ongoing series of substantially similar advocacy communications by Organization R on the same issue,
is not timed to coincide with a non election event such as a legislative vote or other major legislative action on that issue, and
the advertisement takes a position on an issue that the opponent has used to distinguish himself from Governor E. NOT ALLOWED
Candidate A and Candidate B are candidates for the state senate in District W of State X. The issue of State X funding for a new mass transit project in District W is a prominent issue in the campaign. Both candidates have spoken out on the issue. Candidate A supports funding the new mass transit project. Candidate B opposes the project and supports State X funding for highway improvements instead.
P is the executive director of C, a section 501(c)(3) organization that promotes community development in District W. At C’s annual fundraising dinner in District W, which takes place in the month before the election in State X, P gives a lengthy speech about community development issues including the transportation issues. P does not mention the name of any candidate or any political party. However, at the conclusion of the speech, P makes the following statement, “For those of you who care about quality of life in District W and the growing traffic congestion, there is a very important choice coming up next month. We need new mass transit. More highway funding will not make a difference. You have the power to relieve the congestion and improve your quality of life in District W. Use that power when you go to the polls and cast your vote in the election for your state senator.”
C has violated the political campaign intervention as a result of P's remarks at C's official function shortly before the election, in which P referred to the upcoming election after stating a position on an issue that is a prominent issue in a campaign that distinguishes the candidates. NOT ALLOWED
Business Activity
The question of whether an activity constitutes participation or intervention in a political campaign may also arise in the context of a business activity of the organization, such as selling or renting of mailing lists, the leasing of office space, or the acceptance of paid political advertising.
In this context, some of the factors to be considered in determining whether the organization has engaged in political campaign intervention include:
Whether the good, service or facility is available to candidates in the same election on an equal basis,
Whether the good, service, or facility is available only to candidates and not to the general public,
Whether the fees charged to candidates are at the organization’s customary and usual rates, and
Whether the activity is an ongoing activity of the organization or whether it is conducted only for a particular candidate.
Museum K is a section 501(c)(3) organization. It owns an historic building that has a large hall suitable for hosting dinners and receptions. For several years, Museum K has made the hall available for rent to members of the public. Standard fees are set for renting the hall based on the number of people in attendance, and a number of different organizations have rented the hall. Museum K rents the hall on a first come, first served basis. Candidate P rents Museum K’s social hall for a fundraising dinner. Candidate P’s campaign pays the standard fee for the dinner. Museum K is not involved in political campaign intervention as a result of renting the hall to Candidate P for use as the site of a campaign fundraising dinner. ALLOWED
Theater L is a section 501(c)(3) organization. It maintains a mailing list of all of its subscribers and contributors. Theater L has never rented its mailing list to a third party. Theater L is approached by the campaign committee of Candidate Q, who supports increased funding for the arts. Candidate Q's campaign committee offers to rent Theater L's mailing list for a fee that is comparable to fees charged by other similar organizations. Theater L rents its mailing list to Candidate Q's campaign committee. Theater L declines similar requests from campaign committees of other candidates. Theater L has intervened in a political campaign. NOT ALLOWED
Websites
There are so many layers to this, even more since 2007 when this Revenue Ruling was originally published. Think about social media, being “tagged” or “tagging” other organizations, YouTube lives and so much more.
Section 501(c)(3) organizations use their own websites to disseminate statements and information. They may also routinely link their websites to websites maintained by other organizations as a way of providing additional information that the organizations believe is useful or relevant to the public.
A website is a form of communication. If an organization posts something on its website that favors or opposes a candidate for public office, the organization will be treated the same as if it distributed printed material, oral statements or broadcasts that favored or opposed a candidate.
An organization has control over whether it establishes a link to another site. When an organization establishes a link to another web ]site, the organization is responsible for the consequences of establishing and maintaining that link, even if the organization does not have control over the content of the linked site. Because the linked content may change over time, an organization may reduce the risk of political campaign intervention by monitoring the linked content and adjusting the links accordingly. Links to candidate-related material, by themselves, do not necessarily constitute political campaign intervention. All the facts and circumstances must be taken into account when assessing whether a link produces that result.
The facts and circumstances to be considered include, but are not limited to:
the context for the link on the organization’s web site,
whether all candidates are represented,
any exempt purpose served by offering the link, and
the directness of the links between the organization’s website and the web page that contains material favoring or opposing a candidate for public office.
A section 501(c)(3) organization, maintains a web site and posts an unbiased, nonpartisan voter guide that is prepared consistent with the principles discussed in Rev. Rul. 78-248. For each candidate covered in the voter guide, M includes a link to that candidate’s official campaign web site. The links to the candidate web sites are presented on a consistent neutral basis for each candidate, with text saying “For more information on Candidate X, you may consult [URL].” M has not intervened in a political campaign because the links are provided for the exempt purpose of educating voters and are presented in a neutral, unbiased manner that includes all candidates for a particular office. ALLOWED
Hospital N, a section 501(c)(3) organization, maintains a website that includes such information as medical staff listings, directions to Hospital N, and descriptions of its specialty health programs, major research projects, and other community outreach programs.
On one page of the web site, Hospital N describes its treatment program for a particular disease. At the end of the page, it includes a section of links to other websites titled “More Information.” These links include links to other hospitals that have treatment programs for this disease, research organizations seeking cures for that disease, and articles about treatment programs.
This section includes a link to an article on the website of O, a major national newspaper, praising Hospital N’s treatment program for the disease. The page containing the article on O’s web site contains no reference to any candidate or election and has no direct links to candidate or election information.
Elsewhere on O’s web site, there is a page displaying editorials that O has published. Several of the editorials endorse candidates in an election that has not yet occurred. Hospital N has not intervened in a political campaign by maintaining the link to the article on O’s web site because the link is provided for the exempt purpose of educating the public about Hospital N’s programs and neither the context for the link, nor the relationship between Hospital N and O nor the arrangement of the links going from Hospital N’s web site to the endorsement on O’s web site indicate that Hospital N was favoring or opposing any candidate. ALLOWED
Church P, a section 501(c)(3) organization, maintains a website that includes such information as biographies of its ministers, times of services, details of community outreach programs, and activities of members of its congregation.
B, a member of the congregation of Church P, is running for a seat on the town council. Shortly before the election, Church P posts the following message on its website, “Lend your support to B, your fellow parishioner, in Tuesday’s election for town council.” Church P has intervened in a political campaign on behalf of B. NOT ALLOWED
Bottom line, what is allowed and what is not allowed, are largely determined by facts and circumstances. I attended a service on Friday where our imam (who is also a lawyer) delivered a master class on promoting voter engagement without endorsing or opposing any candidate. He addressed social issues, without crossing into politics and made it clear that while voting is a civic responsibility, it is not the job of your place of worship to tell you who to vote for.
Election day is on November 5th in the United States, encouraging your members to vote is always ok, telling them who to vote for may cost you your tax exemption.
