Election Year: Be Careful to Keep Your Tax-Exempt Status

A presidential election year is a good time for nonprofits to review their policies governing political activism.

Most charities, churches, universities, hospitals and social service organizations have severe limitations imposed on partisan political activities to maintain their tax-exempt status. The types of permissible political activities vary with the exempt status of the organization.

Of course, many groups support or oppose certain political issues. While these groups may articulate their views on political issues germane to their exempt purpose, the tax law prohibits them from directly or indirectly participating in, or intervening in, any political campaign on behalf of, or in opposition to, any candidate for elective public office.

The prohibition applies to all campaigns at every level: federal, state and local. Even if the organization affirmatively states that it does
not expressly solicit a vote for or against a particular candidate, the prohibition may be violated by a message favoring or opposing an unnamed candidate, if the candidate can be identified through the message.

Violation of the prohibition can result in a warning letter from the IRS, the imposition of excise taxes and, in egregious cases, denial or revocation of the organization’s tax-exempt status.

The prohibition is not intended to restrict members of a group from expressing individual political views. However, partisan comments should be avoided in official organization publications or at official functions.

A group can also run afoul of the prohibition without actually endorsing or opposing a candidate, by engaging in activities such as:

• Distributing statements prepared by others that favor or oppose a candidate
• Allowing a candidate to use the group’s assets or facilities without giving equivalent access to other candidates
• Conducting get-out-the-vote drives in a partisan manner
• Preparing voter guides that compare candidates’ positions to positions supported by the tax-exempt organization
• Conducting prohibited activities on the group’s website, including placing links to other websites that deliver messages the tax-exempt organization is prohibited from delivering directly

An organization can sponsor functions at which candidates appear. But if the group invites a candidate to speak as a political candidate at a group function, it must provide an equal opportunity to all candidates seeking the same office. The group may not indicate support or opposition for any candidate. A presidential election year is a good time for nonprofits to review their policies governing political activism.

An organization may invite a candidate to speak for nonpolitical reasons, or the candidate may choose to attend an organization-sponsored event that is open to the public. Such events should be nonpartisan, and neither the candidate nor any member of the organization should mention the candidacy. Communications announcing the candidate’s attendance at the event should make no mention of the individual’s candidacy or the upcoming election.

A candidate may seek to assure the group that certain activities are permissible. Keep in mind that the candidate’s staff may be focused on election laws, not the laws governing the organization’s tax-exempt status. Be sure to make an independent determination of what is permissible.

If you serve as an executive or on the board of an affected organization, you should confirm that your group has a written policy regarding political activities and that the policy has been disseminated throughout the organization.