Political Interventions
Actions Tax-Exempt Organizations Should Avoid

By Judy D. Lewis and Quepha Lynn

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JUNE 2008 - Because 2008 is a national election year, tax-exempt IRC section 501(c)(3) organizations need to be especially aware of which political activities they are allowed to engage in, which actions are considered political interventions, and which could jeopardize their tax-exempt status. While the leaders of many charitable organizations know that express endorsements of political candidates are prohibited, they may not realize that political intervention is a much broader issue than endorsement.

Reported allegations of political campaign activity by 501(c)(3) organizations have increased in recent election cycles, and the IRS has stepped up enforcement by selecting more cases for investigation. Because few cases involving revocation of the tax-exempt status of a 501(c)(3) organization have been challenged in court, charitable organizations and their advisors have had relatively little detailed guidance on what activities are and are not allowable. IRS Revenue Ruling 2007-41 clarifies the law for charitable organizations, providing specific examples to follow when in doubt. The ruling states that 501(c)(3) organizations may not, directly or indirectly, “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” [Revenue Ruling 2007-41, IRB 2007-25 (June 4, 2007), www.irs.gov/irb/2007-25_IRB/ar09.html].

The prohibition against political activities is absolute. For example, the Seventh Circuit Court of Appeals stated: “Exemption is lost … by participation in any political campaign on behalf of any candidate for public office. It need not form a substantial part of the organization’s activities” [United States v. Dykema, 666 F2d 1096,1101 (7th Cir. 1981), cert. denied, 456 U.S. 983 (1982)]. The regulations under IRC section 501(c)(3) provide that prohibited participation and intervention include not only written or oral statements on behalf of or in opposition to a candidate, but also certain biased applications of voter education; registration and get-out-the-vote drives; certain activities of organization leaders; certain candidate appearances; certain business activities, such as the use of mailing lists; and use of the organization’s website.

Whether an organization is participating or intervening in a political campaign depends upon the facts and circumstances of each case. The underlying determinant is whether the activity provides “a fair and impartial treatment of candidates and does not promote or advance one candidate over another” [Revenue Ruling 86-95, 1986-2 C.B. 73]. The combination of two or more types of political activities increases the probability that a charitable organization will be found to have participated or intervened in a political campaign.

Education Versus Endorsements

Charitable organizations have an interest in educating their members on political issues. Membership education may include issuing voter guides, sponsoring public forums, or organizing debates. Care must be taken, however, to ensure that the content, structure, and timing of such efforts do not lend themselves to bias for or against any political candidate.

Voter guides. Voter guides may be prepared by charitable organizations and distributed to voters as long as the content of the publication is nonpartisan and unbiased. The content of the publication should show no preference or favorability to any one candidate or party, and all candidates seeking the same office should have an equal opportunity to be represented. For example, in 1983 the Association of the Bar of the City of New York had been a tax-exempt organization under IRC section 501(c)(6) and applied for section 501(c)(3) tax-exempt status with the IRS. The IRS denied the application because the organization had been known to regularly publish and distribute a press release ranking candidates running for judgeships in upcoming elections. The court upheld the IRS’s position, stating that the organization’s ranking of candidates is the equivalent of an endorsement and is considered an intervention in political campaign activity. [The Association of the Bar of the City of New York v. Comm’r, 858 F.2d 876 (2nd Circuit 1988; cert. denied, No. 88-1053, April 27, 1989)]

Forums and debates. If a candidate for a particular office is given the opportunity to participate in a voter-education program such as a forum or debate, all candidates for that office must be offered an equal opportunity to participate in that program. Neutrality in the choice and wording of questions and the breadth of issues discussed is important for the activity not to be deemed a political intervention. Comments by moderators of debates and forums must be impartial.

It is not necessary that all candidates for a political office participate in a political education event sponsored by a charitable organization, only that they all have an equal opportunity to do so. For example, assume a charitable organization sponsors a forum or debate to discuss upcoming election issues. All candidates seeking the same office were extended an invitation to appear; however, one or more candidates decline the offer. Under such circumstances, charitable organizations often fear they are jeopardizing their 501(c)(3) status if they hold the event with only the candidates that accept the invitation. It is, however, acceptable to hold the event as scheduled as long as the moderator announces to participating members that an offer was extended to the absent candidates, and they declined.

Meetings. Charitable organizations may invite candidates for political office to speak at meetings or other events as long as all candidates seeking the same office have equal opportunity to appear at the same or similar meeting arrangements. The organization should not indicate support of or opposition to a candidate at events or in public statements. Assume, for example, that at a charitable organization’s annual conference, a moderator thanks Candidate X for speaking by saying, “We need to send Candidate X back to Washington.” Such a statement advocates support for Candidate X and would be considered an intervention in a political campaign. The moderator’s statement would put the charitable organization at risk of losing its tax-exempt status. Because all section 501(c)(3) organizational events must be nonpartisan, it is important for organizations to tell candidates that no fundraising of any kind is allowed.

These rules do not prohibit organizations from inviting candidates to speak at public events unrelated to their candidacy. Such invitations will not violate the prohibition against partisan intervention as long as the candidate was invited to speak solely for reasons unrelated to the candidacy and spoke only in a noncandidate capacity. For example, a sitting representative may be invited to speak to a teachers’ organization about new legislation affecting schools. Similarly, a medical professional who is also a candidate for public office might be invited to speak on healthcare issues at an event sponsored by a 501(c)(3) organization. Organizations obviously must be very careful in these circumstances, however. First, there should be a specific purpose for the candidate’s appearance that is clearly independent from the political campaign. In addition, no campaign activity can occur at the event, and no mention can be made of the speaker’s candidacy or the election.

It is advisable that organizations holding such events do so well in advance of an election, leaving time to schedule a comparable event at which the candidate’s opponents may be invited if the candidate’s discussion takes an inappropriate turn. Obviously, it is important that no direct or indirect reference is made on the part of the organization regarding the need to elect or reelect the candidate, and a nonpartisan atmosphere should be maintained at all times.

Role of Charitable Organization Leaders

Leaders of section 501(c)(3) organizations may freely express their political views as individuals, but must do so in a way that makes it clear that they are not speaking for the organization. This may be done in advertisements by stating that titles and affiliations of each individual are provided for identification purposes only, and during speaking engagements by a specific disclaimer delivered by the leader that he is speaking for himself, not as a representative of the organization. Leaders should not make political statements at organizational meetings, and they may not use any organizational resources or publications to espouse political views. Doing so may jeopardize the organization’s 501(c)(3) status.

While leaders of section 501(c)(3) organizations are free to advocate public policy issues, the organization must take care not to send any message that advocates or opposes any candidate. Factors that will determine whether political campaign intervention has occurred include whether an organization’s statement identifies or expresses an opinion regarding one or more candidates or their positions. Other relevant factors are whether the statement distinguishes candidates, mentions the election, or is issued shortly before the election.

The All Saints Episcopal Church in Pasadena, Calif., is an interesting, well-known example of the type of cases that the IRS is examining closely. Four days before the 2004 election, Reverend George Regas gave a guest sermon to All Saints Episcopal Church in which he spoke about the immorality of war by describing a hypothetical conversation that Jesus would have with both presidential candidates. He prefaced his sermon by telling the congregation that “good people of profound faith” could vote for either man. He added, however, that Jesus would oppose the war in Iraq. He preached that Jesus would say to the candidates, “I will tell you what I think of your war: The sin at the heart of this war against Iraq is your belief that an American life is of more value than an Iraqi life. That an American child is more precious than an Iraqi baby. God loathes war.” On June 9, 2005, the church received a letter from the IRS stating that it would be investigated for violating the IRC section 501(c)(3) guidelines. During the investigation, IRS officials said that “they would be willing not to revoke tax-exempt status if the church admitted intervening in an election.” The church declined the IRS official’s offer and chose to protest the investigation’s validity. After several months of attention and hundreds of thousands of dollars in legal fees, the church received a letter from the IRS informing it that the case would be dropped without sanction. [Patricia Ward Biederman and Jason Felch, “Antiwar Sermon Brings IRS Warning,” Los Angeles Times, November 7, 2005]

Charitable organizations are not prohibited from taking a stand on matters of public policy, and that is why the IRS ultimately did not prevail in the All Saints Episcopal Church case. Nevertheless, 501(c)(3) organizations are prohibited from engaging in political activity. Organizational leaders may not make partisan statements at official functions that one might imply reflect the views of the organization.

Charitable organizations should be careful about the public-policy positions they choose to take. Policy positions should relate to the organization’s purpose, and the organization should consider that some policy issues are so politically divisive along party lines that any public position on such issues may invite IRS scrutiny. Note that although All Saints Episcopal Church ultimately prevailed in this dispute, it incurred substantial costs in defending itself. Many organizations may determine that the potential costs outweigh any benefit from appearing to take sides on issues not directly related to their charitable mission.

Issue Advocacy Versus Campaign Intervention

Business activities. Charitable organizations should be aware of rules concerning business activities that could be construed as political interventions, such as selling or renting mailing lists, leasing office space, or accepting paid political advertising. To avoid such a determination, it is important that any services provided are available to all candidates in the same election, on an equal basis, and at usual and customary fees.

For example, assume a charitable organization regularly receives an incumbent candidate’s e-mail release advocating her positions on election issues, and forwards that release to all of its members. Furthermore, assume that another candidate seeking the same office sends the charitable organization an e-mail release on election issues and asks that the organization forward the e-mail to all of its members—and the organization declines. Under these circumstances, the charitable organization has intervened in a political campaign and risks losing its 501(c)(3) tax-exempt status.

Websites. Another area of concern for section 501(c)(3) organizations is the content of their own websites, as well as websites to which they are linked. IRC section 501(c)(3) organizations are probably aware that they are prohibited from posting statements on websites that advocate or oppose a candidate. Charitable organizations may not be aware, however, that they are also responsible for the consequences of establishing and maintaining links to other websites, and should therefore monitor the sites to which its website is linked. Determination of whether political campaign intervention has occurred depends, as in all cases, upon the facts and circumstances of each situation. Factors to be considered “include, but are not limited to, the context for the link,” “whether all candidates are represented,” “any exempt purpose” for the link, and “the directness of the link between the organization’s web site and the web page that contains material favoring or opposing a candidate” (Revenue Ruling 2007-41, Examples 18–21).

Assume that a charitable organization maintains a website that is linked to the website of Organization Y. Organization Y actively supports one political party and candidates within that party. The link to Organization Y on a tax-exempt organization’s website would be considered intervention in campaign activity by association, and it would put the tax-exempt status of the charitable organization at risk.

Prudent Advice

In light of the IRS’s announced intention to scrutinize political activity by tax-exempt organizations, 501(c)(3) organizations must be careful about what activities they undertake in the realms of politics and public policy. Tax advisors should be familiar with Revenue Ruling 2007-41 and what constitutes prohibited “intervention” in the political process. Charitable organizations engaging in these prohibited activities jeopardize their tax-exempt status. It is, therefore, very important that 501(c)(3) organizations and their advisors fully understand what distinguishes allowable education on political issues from disallowed intervention in political campaigns.

Judy D. Lewis, PhD, CPA, is a visiting professor of accounting, and Quepha Lynn, MSA, CPA, CVA, is an instructor of accounting, both at the Jerry S. Rawls College of Business Administration of Texas Tech University, Lubbock, Texas.




















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