Transcript Political Activity for Charitable Organizations

Political Activity for Charitable
Organizations:
Protecting Your Exemption While Furthering Your Mission
Elaine Waterhouse Wilson
[email protected]
February 28, 2012, 12-1:30PM (CST)
Welcome to Election Season!
• With the primaries upon us and the Presidential election
arriving sooner than we know it, it is especially important for
Section 501(c)(3) organizations to understand the “rules of
the road” with regard to political issues.
• It is often said that Section 501(c)(3) organizations “can’t get
involved in politics.” Whether this statement is true or false
depends upon how you define “politics.”
• Our goals for today:
• Define “politics” for purposes of Section 501(c)(3)
• Discuss some of the activities that can be permissible – or can be
problematic, if done improperly
• Understand the ramifications of political activity for a Section
501(3) organization
Section 501(c)(3)
[Entities] organized and operated exclusively for religious,
charitable, scientific, testing for public safety, literary, or
educational purposes . . . no part of the net earnings of which
inures to the benefit of any private shareholder or individual, no
substantial part of the activities of which is carrying on
propaganda, or otherwise attempting, to influence legislation . .
. , and which does 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.
Statutory Requirements
• The statutory language of Section 501(c)(3) specifically
requires that the charity
• Must be organized and operated exclusively for tax-exempt
(charitable, religious, educational, etc.) purposes;
• No substantial part of its activities is influencing legislation (also
known as lobbying); and
• Does not participate or intervene in any political campaign for a
candidate for public office (also known as electioneering).
• Accordingly:
• A charity MAY pursue activities that further its tax-exempt
purpose; and
• MAY engage in a LIMITED amount of lobbying; but
• MAY NOT engage in ANY electioneering
• IMPORTANT CAVEAT: the rules for private foundations are more
limited – know your tax status!
Education Versus Lobbying
• Activities that educate a charity’s constituents regarding issues
that are important to its mission are permissible so long as
they don’t cross the line into lobbying or electioneering.
• The technical definition of lobbying requires the charity to
contact, or urge its constituents to contact, a legislator
regarding current or potential legislation.
• Contacting a legislator on other issues is not lobbying
• Contacting executive branch officials on issues that don’t involve
drafting legislation is not lobbying.
• Referenda and initiatives are treated as legislation with the
general public acting as legislators – generally, involvement in
referenda and initiatives is treated as lobbying
Electioneering
• Statutory language: “[D]oes 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.”
• Impermissible electioneering involves the participation or
intervention in a political campaign for public office
• Therefore, some things that we might think are “political” in a
general sense are not electioneering in a technical sense
• There is no de minimis rule for electioneering activities (compare
“exclusively” for tax-exempt purposes and “no substantial part”
for lobbying); therefore, in theory, even one penny of
electioneering expenditure should cost an organization its
exemption.
Does this seem vague to you?
• These general rules are easy to read on paper, but can become
difficult in real world application.
• The IRS said that it looks at all the facts and circumstances of a
situation to determine each case. Therefore, something that
appears to be educational (e.g., a candidate forum or voter
guides) can become electioneering if it is done improperly
(e.g., only one candidate is invited or only one view point
presented).
• The IRS issued Revenue Ruling 2007-41, which gives 21
different common fact patterns showing the application of
these general rules.
• www.irs.gov/charities/charitable/article/0,,id=179750,00.html
Rev. Rul. 2007-41 Examples
• The Revenue Ruling breaks the examples into different
categories:
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Voter Education, Voter Registration and Get Out the Vote
Individual Activity by Organization Leaders
Candidate Appearances
Candidate Appearances as a Non-Candidate
Issue Advocacy v. Political Campaign Intervention
Business Activity
Web Sites
• In general:
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Endorsements need not be explicit
Be content neutral
Provide equal opportunity
Even small expenditures and actions can be impermissible
Ramifications
• In theory, the statutory language of Section 501(c)(3) prohibits
ALL electioneering activity – as indicated, there is no de
minimis exception
• In practice, the IRS uses a couple of different techniques in
enforcement:
• Excise tax on political activities – Section 4955
• Closing Agreements
• Special rules for church audits
• Political Activity Compliance Initiative (PACI) in prior years
• Special procedures to review political activity compliance
• www.irs.gov/charities/charitable/article/0,,id=179738,00.html