Jennifer A. Gniady

While the current presidential election is remarkable so far, it’s important not to lose sight of the fact that the same rules apply to lower-profile elections. These include those ranging from either house of Congress, state gubernatorial offices and municipal governance to mayors, council members, sheriffs and dogcatchers.

Potential Implications

The rules for 501(c)(3) organizations place conditions on various types of political speech, including limits on the amount of lobbying that can be done by the organization and an absolute prohibition on political campaign activity. The prohibition in Section 501(c)(3) is commonly referred to as a prohibition against “political activity,” “political campaign intervention” or “electioneering.”

In short, any activity that endorses or opposes a political candidate could result in the organization losing its tax-exempt status. The resulting loss would not only subject all income to corporate-level taxation but would cost donors to the organization their charitable deductions for gifts. Short of losing the exemption completely, the IRS can levy a tax on the political expenditure of the organization and, in serious cases, may impose both a tax and revoke the exemption.

What Counts as Electioneering?

Given these high stakes, it’s important to understand what constitutes electioneering and know how to keep it from jeopardizing an organization’s exemption. In general, political campaign intervention includes actions related to any candidate, political party or political action committee, such as:

• Statements of support or opposition in any medium.
• Providing or soliciting financial support.
• Providing or soliciting in-kind support.
• Distributing biased voter education materials.
• Conducting biased public forums, debates or lectures.
• Conducting biased voter registration or get-out-the-vote drives.
   

Who counts as a candidate and when an organization’s actions become support or opposition can be complex in primary season as candidates enter and leave races or tease their participation. The term “candidate” refers to any individual who enters the contest for an elected public office or is proposed by others to run for office at any level of government, whether national, state or local. The timing of when a person becomes a candidate isn’t always clear-cut and must be determined based on all relevant facts and circumstances. Simply being a political figure doesn’t automatically make someone a candidate without more — usually a connection to an election that is close in time.

Permitted and Prohibited Activities

Not everything to do with the political process is off-limits. Organizations are permitted to provide nonpartisan information about voting processes, monitor or recommend changes to election procedures, and broadly encourage citizens to vote. Most activities focused on the process and not the person or party are likely to be permitted. Clear statements that voters should cast or withhold a vote for a candidate are entirely prohibited. Fortunately, those are easy to spot (and to avoid). However, endorsements also come in many other forms, including statements that support or oppose a political party in general or distinguish a group of candidates running for office.

The flipside of opposition is support, and prohibited support can come in monetary or in-kind contributions. It’s not just writing a check but also providing resources (such as copiers, paper, office supplies, vehicles, etc.), the organization’s space, or staff time and publicity that count as promoting a candidate or opposing his or her opponents. For example, organizations with substantial spaces may be asked to rent facilities to candidates or political parties for partisan activities, such as party conventions or caucuses, candidate rallies, or local community gatherings.

An organization’s first-ever rental of its space likely should not be to a candidate or political party. Putting appropriate policies in place could make the difference between prohibited support and nonpartisan (and permitted) activity. For example, policies may require that a fair market rate be charged rather than providing the facility for free or at a nominal cost, demonstrating that the facility is equally available to all candidates or parties with no preference for one over another.

Candidate Events

Many nonprofits in the civic area may naturally want to focus on voter education and access to candidates as part of their mission. Others may have an independent reason why a politician would normally be invited to address the group. Any candidate event can present issues of both actual and perceived electioneering. In the case of an independent purpose for the candidate being present at an event, it should be clear that the candidate is invited to speak in his or her capacity as a public figure, expert or celebrity.

If the purpose is more to provide access to the candidates and issues in an election, then it must invite and provide equal access to the event to all candidates in the race. It cannot just be a perfunctory invitation, as the IRS has indicated that an organization that invited two opposing candidates knowing and expecting that one would not accept the invitation to the event because of well-known opposing viewpoints would likely not be considered to have provided equal access and could be engaging in electioneering. If a candidate attends a non-political event sponsored by an exempt organization that is open to the public and no political intervention is automatically assumed, the organization should ensure that no political campaigning occurs, such as letting the candidate distribute literature or speak about the campaign.

Individual Capacity

What about the political opinions of individuals associated with an organization, whether board members, senior leadership or other employees? While they don’t give up their right to participate in the political process and voice opinions on the candidates, it is important that they only do so while acting in their individual capacities. If they identify themselves as being in connection with the organization, they should make it clear they are acting in their individual capacities and not on behalf of the organization.

Statements or actions in their individual capacity should never be in the context of an employee’s scope of employment or the organization’s publications, websites or organizational events. Actions of employees within the scope of their employment will generally be treated as having been conducted with the organization’s authorization.

Inadvertent Electioneering

A frequent issue is when an organization identified inadvertent prohibited political campaign intervention; for example, through an unauthorized statement made by an employee on the organization’s official social media accounts. Even individual actions will be attributed to an organization if the organization either ratifies those acts or fails to disavow the individual actions performed under its apparent authority.

In such an example, the organization should immediately delete and clearly announce that the statement was not authorized or ratified by the organization. The disavowal should be communicated in the same medium as the original prohibited action. If the inadvertent activity includes the expenditure of funds (including the use of resources), that activity should be corrected and safeguards established to prevent a similar problem from occurring. This might include refunding or restoring money spent, implementing policies, or conducting staff or board training.

Inquiries into Political Activities

When considering what a potential inquiry into prohibited political activities would look like, keep in mind the standard applied by the IRS is one of “facts and circumstances” considered in the totality of the activity’s context. While it may seem reassuring on its face that all the factors would be considered, since an actual or alleged infraction may only be understood in hindsight, this test provides little certainty or opportunity to document those facts and circumstances contemporaneously in the event of a future inquiry. With a few more months to go before this election season wraps up, it is not too late to make sure your organization understands and is protected from electioneering violations.

Available Resources

IRS, Revenue Ruling 2007-41: Complete official guidance regarding election participation.

IRS, Political Campaigns and Charities: The Ban on Political Campaign Intervention: Video presentation on prohibited campaign activities for 501(c)(3) organizations.