Political Campaign Activity by Nonprofit Organizations

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Political Campaign Activity by Nonprofit
Organizations

• Dos and Don'ts

By Clifford Perlman Perlman Perlman, LLP 41
Madison Avenue, Suite 4000 New York, NY
10010 Ph 212-889-0575 Fx 212-748-8120 Email
cliff_at_perlmanandperlman.com
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Scope of Rules

• 501(c)(3) provides federal tax exemption to a
  charitable organization Section so long as it
• 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.
• These rules apply to all of your organizations
  political activities from a presidential election
  to local school board elections.

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The Statutes

• Federal tax law - means those federal laws,
  regulations and rulings under the Internal
  Revenue Code ("IRC") of 1986, as amended, that
  pertain to a nonprofit organization's tax-exempt
  status.
• Federal election law - means those federal laws,
  regulations and rulings under the Federal
  Election Campaign Act ("FECA") of 1971, as
  amended, which govern nonprofits' participation
  in campaigns for federal office. The term
  "election law" includes federal, state and local
  law relating to the financing and conduct of
  elections.

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Scope of Prohibitions

• The prohibition also includes
• - third-party movements
• - efforts to "draft" someone to run
• - exploratory advance work
• Code forbids tax-exempt nonprofits from trying to
  prevent a public official from being re-nominated
  or re-elected.
• Code does not bar working for or against the
  appointment of a public official.

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Penalties for Violating these Rules

• The IRS may revoke your tax-exempt status
• No exception for "de minimis" violations
• The IRS also can impose a tax on your
  organization and its managers personally
• - 10 percent tax on political expenditures of
  501(c)(3) groups.
• - 2 percent tax on 501(c)(3) organization
  managers who approve
• such expenditures. (nonprofit managers
  can be protected from the
• personal 2 percent tax if they obtain
  and rely upon - a written,
• reasonable opinion of legal counsel
  supporting the organization's right
• to conduct a particular activity).

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Issue Advocacy and Express Advocacy as Compared
to Political Activity

• 501(c)(3) organizations can and should use the
  occasion of an election to get greater exposure
  for their issues of concern.
• 501 (c)(3)s may not attempt to intervene
  surreptitiously in a political campaign by using
  "code words" such as "conservative", "liberal",
  "anti-gay" or "pro-choice" in messages timed to
  improve or diminish the prospects for the
  election of candidates with whom they agree or
  disagree.
• The IRS frowns on 501(c)(3)s encouraging voters
  to "vote green", "vote pro-life" or "throw out
  the liberals", considering such forms of
  expression to be implied advocacy and a form of
  "political intervention.

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Criticism of Incumbents

• If a 501(c)(3) has a record of criticizing
  incumbents, lobbying them and working to hold
  them accountable, it may continue those
  activities during an election year. However, be
  warned close to an election, the IRS may view
  negative comments about someone running for
  re-election as illegal "intervention" in the
  campaign.

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Endorsements

• Individuals associated with 501(c)(3)
  organizations are free to endorse, support or
  oppose candidates, so long as it is clear that
  they speak for themselves and not on behalf of an
  organization and so long as they do not in any
  way utilize the organization's financial
  resources, facilities or personnel, and clearly
  and unambiguously indicate that the actions taken
  or statements made are those of the individuals
  and not of the organization.

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Candidate Appearances

• A 501(c)(3) may sponsor an appearance by a
  candidate or public official, but proceed
  cautiously.
• If he or she was invited as a candidate, you must
  take steps to ensure that you indicate no support
  of or opposition to the candidate at the event.
  No political fundraising should occur at the
  event, and the other candidates should be given
  an equal opportunity to participate, either at
  the same event or a comparable one.
• If you invited the person in a capacity other
  than candidate, you don't need to invite the
  opposition, but do everything you can to make
  sure that the event does not turn into a campaign
  appearance.

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Other Issues

• Voter registration and get-out-the-vote (GOTV)
• Candidate questionnaires and voter guides
• Candidate debates and forums
• Issue briefings for candidates
• Public opinion polls

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Contributions - Again

• 501(c)(3) organizations may not contribute to a
  candidate, political action committee (PAC) or
  political party, pay to attend partisan political
  dinners and similar events, or provide loans.
• Other restrictions are less obvious. The IRS
  considers you to be making "in-kind
  contributions" when you provide anything of value
  to a candidate, party or political organization
  and do not receive fair market value in return,
  your mailing list, facilities, equipment, staff
  time or any other resource.
• For example, the IRS takes the position that you
  may only rent your mailing list to a candidate or
  political group if you charge full price, offer
  the list to other contenders, and report
  unrelated business taxable income on the
  transaction.

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• End

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