It's all political - or is it?
It's all political - or is it?
What nonprofits can and can't do in campaigns
With election season heating up, not-for-profits must take care not to stray into prohibited political activity that could jeopardize their tax-exempt status. The IRS has addressed the acceptability of several common activities. Knowing the agency's position on these activities could save you tax trouble down the road.
Ban on political campaign intervention
The Internal Revenue Code is clear: For a nonprofit to maintain its status, it can't "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."
But that doesn't mean your hands are completely tied. If certain conditions are met, not-for-profits can indeed be active — though nonpartisan — players in the political arena.
Nonprofits can conduct voter registration and get-out-the-vote drives if they're conducted in a neutral, nonpartisan manner. But you can't, for example, refer to any candidate or party, either in support or opposition.
Voter education activities, such as the preparation and distribution of voter guides, are similarly allowed if conducted in a nonpartisan way. The IRS will consider whether the questionnaire used to solicit candidate positions or the guide itself demonstrates a bias or preference in content or structure with respect to the views of a particular candidate. The timing and distribution of voter education materials also could be relevant.
A not-for-profit can invite a candidate to speak at an event in his or her capacity as a candidate if 1) it provides to all of the candidate's rivals an equal opportunity to participate, 2) it doesn't indicate support for or opposition to any candidate (including in introductions and communications about a candidate's attendance), and 3) no political fundraising takes place.
When evaluating whether equal opportunity to participate has been provided, the IRS will consider both the manner of presentation and the nature of the event to which each candidate is invited. You'll probably violate the prohibition if, for example, you invite one candidate to speak at a heavily attended annual banquet but invite his or her opponent only to a poorly attended general meeting.
If you invite a candidate to appear in his or her individual, noncandidate capacity, you must ensure that:
Candidates also may attend a not-for-profit's event that's open to the public as long as the organization doesn't publicly recognize the candidate or invite him or her to speak.
An activity such as selling or renting mailing lists, leasing office space or accepting paid political advertising may constitute prohibited activity. The determination will depend on several factors.
These may include whether the good, service or facility is available to rival candidates on an equal basis, whether it's available to the general public, whether the fees charged are the nonprofit's usual rate, and whether the activity is an ongoing activity of the organization (as opposed to conducted for only a particular candidate).
Proceed with caution
Violation of the ban on political activity could result in the denial or revocation of your nonprofit's tax-exempt status, as well as the imposition of an excise tax on the amount spent on the prohibited activity. The determination of whether an activity is political will ultimately depend on the specific facts and circumstances. But remember, the underlying criterion for an activity not to be political is generally that the activity clearly be nonpartisan.
Other "political" involvement — know the limits
Many people think of any involvement in government as "political," but tax law distinguishes between politics involving candidates and lobbying involving legislation. Certain involvement, including making certain contributions, is permissible.
A 501(c)(3) organization can make a contribution to a ballot measure committee, for instance, because it's a type of lobbying that supports or opposes initiatives or referenda. The nonprofit must, however, include such contributions in its lobbying calculations to determine if a substantial part of its activities consists of attempting to influence legislation.
Tax-exempt organizations other than 501(c)(3)s can have limited involvement with politics. A 501(c)(4) organization, for example, is allowed to favor candidates when that accomplishes the organization's exempt purpose.
A 501(c)(3), however, can't make a contribution to a 501(c)(4) for political activity — or to certain political organizations, including candidate committees, political party committees or political action committees. In addition, a 501(c)(3) can't establish a separate segregated fund under Section 527 of the Internal Revenue Code, "Political Organizations."