As another year of presidential election campaigns heats up, not-for-profit organizations may be tempted to join the fray.
Although it’s been said that politics and tax exemptions for not-for-profits don’t mix, that’s an oversimplification of the restraints imposed on Section 501(c)(3) organizations.
Granted, Section 501 not-for-profits can’t engage in political campaigning. Because of the consequences, they must be vigilant. In the worst-case scenario, a misstep could result in losing its tax-exempt status. Nevertheless, there may be more leeway in the political arena than you think.
Essentially, tax-exempt organizations aren’t allowed to directly or indirectly act in federal, state or local campaigns either for or against a candidate or party. Thus, you cannot support or oppose candidates for offices such as:
- Senator or congressman,
- Member of a school board,
- City supervisor, or
- County trustee.
The IRS will base its determinations of violations on an organization’s other activities and its current situation.
For instance, if your nonprofit invites a candidate to make a campaign speech at a fundraising event for your charity, or you feature an elected official stumping for a candidate, your organization has clearly violated the prohibition. Similarly, posting messages on your website supporting or opposing a candidate isn’t allowed. However, some advocacy and lobbying may be allowed. (See “Lobbying Has Different Rules” below.)
What Your Organization Can Do
Here are a few examples of what your nonprofit is allowed to do:
1. Sponsor an appearance by a candidate or public official. If the person is being invited as a candidate, don’t indicate any support or opposition and give other candidates the opportunity to appear. If it’s in some other capacity, such as being involved in your charitable mission, be sure the appearance doesn’t turn into a campaign stop or fundraiser for that person.
2. Hold a debate between candidates. You must invite all the candidates, have an independent panel prepare the questions, cover a broad range of topics (including those significant for your organization) and provide every candidate with an equal opportunity to speak. An impartial moderator should state that the views expressed within the debate don’t represent those of your organization.
3. Advocate a political issue without attempting to intervene in a campaign. You can go so far as to try to sway the candidates to your way of thinking and encourage them to take a public stand.
4. Help to build planks within a party’s platform. This may be accomplished by delivering testimony to the party’s platform committee — as long as you clarify that the testimony is strictly educational and report the testimony in your organization’s newsletter or other publication.
5. Launch a nonpartisan “get out the vote” drive. The drive must be designed solely to educate the public about voting and can’t promote or oppose a candidate or party.
What Your Organization Can’t Do
Now here are some things you aren’t allowed to do:
1. Support a candidate or party for election. For instance, you can’t get behind or oppose a declared candidate or third-party movement, engage in efforts to draft someone to run for office, or do advance exploratory work for electing a candidate or party.
2. Contribute to a campaign or endorse a candidate. This includes indirect support, such as volunteering to make calls on behalf of a candidate as well as direct financial support. Not-for-profit workers can, however, contribute their own time and money away from work.
3. Provide any form of monetary support. Not only are organizations barred from donating funds to a candidate or party, they can’t use another event to raise funds. In the same vein, your group cannot hold a dinner or other event to sponsor a candidate or political organization. Section 501(c)(3) not-for-profits are also barred from making loans for these purposes.
4. Request support for your organization or charitable mission from a candidate, political party or other political organization in exchange for your endorsement.
5. Distribute any materials encouraging recipients to vote one way or another. This includes any website communications.
If the IRS suspects that your organization has violated the rules, it may notify you by letter and then conduct an on-site investigation. Offenses are punishable by revocation of tax-exempt status, but first-time offenders may get away with a slap on the wrist. For example, you might agree to change procedures and stipulate that the violation won’t occur again. If your nonprofit spent funds on the banned activity, however, the IRS may impose excise taxes.
The IRS provides a wide variety of guidance regarding political campaign activity on this page of its website.
Finally, consult with your professional advisors for assistance where the boundaries aren’t clear.
Lobbying Has Different Rules
Don’t confuse “political campaigning” with “lobbying.”
While the former is strictly prohibited, some of the latter may be permissible.
In effect, your nonprofit engages in lobbying anytime it attempts to persuade members of a legislative body to propose, support, oppose, amend or repeal legislation. Lobbying also means trying to help to enact or oppose a law or other item that requires a vote.
Under IRS guidelines, a not-for-profit will continue to quality for tax-exempt status as long as no “substantial part” of its overall activities related to influencing legislation or promoting propaganda. Unfortunately, there’s no bright-line test other than the IRS examining all the relevant facts and circumstances for each particular case. In the past, devoting only 5% of activities to lobbying was allowable, but more than 20% was not.
Practical advice: Tread carefully.
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