United States: IRS Revenue Ruling Provides New Information On Permissible Political Activity

Following the release of these findings in 2006, some groups alleged that the timing of the investigation and choice of organizations to investigate was politically motivated. Although the Treasury Inspector General for Tax Administration (TIGTA) found the IRS’s review of the cases was not politically motivated, release of these guidelines increases transparency into this review process and decreases uncertainty among nonprofit organizations about the parameters of campaign intervention.

Generally, Section 501(c)(3) organizations are not permitted to engage in political campaign intervention, which includes any action that indicates support or opposition for a particular candidate for public office. However, such organizations are entitled to engage in election-related activities that are nonpartisan, such as holding events and distributing materials to objectively inform voters, promoting election participation, and advocating for the passage of particular legislation. To help distinguish between what is permissible and what is impermissible, the revenue ruling issued last month outlined some factors the IRS considers, and how they bear on particular fact patterns with respect to eight types of election-related activities. Each of type of activity is described below.

Generally, nonprofit organizations are permitted to engage in voter education, voter registration and get out the vote drives so long as they are conducted in a nonpartisan manner. However, conducting activities in a biased manner that favors one or more candidates is prohibited.

The IRS held that organizations are not engaged in political campaign intervention when they promote voter registration without naming any particular candidate, but that organizations promoting voter participation to registered voters through a phone drive, whose callers read voters a different script depending on whether they support a particular candidate or issue, are engaged in campaign intervention.

While leaders of organizations are not restricted in their free speech when giving their opinion as individuals, they are prohibited from making partisan comments in official organization publications or at official functions of the organization.

For example, a church leader may endorse a particular candidate when he is at that candidate’s press conference and does not state that he is minister of the church because the press conference is not a church function.

Even where an organization leader’s name is listed with his title in an advertisement about leaders in the health care industry who contributed to the candidate’s campaign, the leader’s organization will not be considered having engaged in campaign intervention where the advertisement states the leader’s title is given for identification purposes only and the organization does not contribute any funds to the campaign.

However, the president of a University cannot state his personal views on an election in an alumni newsletter even if he pays the cost of publishing that article because the newsletter is nonetheless an official University publication. Likewise, a chair of a board of directors cannot tell the board during a meeting that they should do their duty and vote for a certain candidate, because the board meeting is clearly an official organization meeting.

Candidates may appear at events in their capacity as candidates, or in their individual capacities, and different rules apply to each scenario.

Section 501(c)(3) organizations may invite candidates to events, but they must give each candidate the equal opportunity to participate in the same or similar events, and should not indicate their opinion on any particular candidate. Likewise, when candidates appear at events, several aspects including the nature of questions asked, equal opportunity to give their views and pressure to endorse the organization’s views are considered in deciding whether campaign intervention has occurred.

For example, a historical society may invite each candidate for Congress to come to different regular meetings and field questions from members, where each meeting has been publicized equally and no qualitative comments about the candidates are made. The legitimacy of this type of activity does not change if one candidate declines to speak, provided the organization makes clear that the candidate declined to speak.

However, if a church invites only one candidate for Senate to speak during a church service, and the candidate asks for the congregation’s vote, that church is engaging in campaign activity.

Where an organization claims that a candidate was invited in his individual capacity, the IRS will consider the extent to which the individual is there only in a non-candidate capacity, and whether other remnants of the campaign, including mention of candidacy, campaign activity, or a partisan atmosphere, taint the event.

Therefore, the president of a historical society may thank a lieutenant governor for attending a meeting, where no reference is made to his status as a candidate, and a University may announce in a newsletter that an alumnus is running for office, where it does not give any additional information about the campaign. However, a chairman of a symphony’s board who publicly thanks the Mayor for attending a concert may not add: "Without this support, these free concerts in City Park would not be possible. We will need help if we want these concerts to continue next year so please support Mayor G in November because he has supported us."

One of the most difficult distinctions for tax-exempt organizations may be that between advocating an issue and advocating a candidate. While nonprofits may take positions on policy issues, including those that divide candidates in an election, they must not do so where it would have the effect of advocating for a particular candidate. This generally means they should not identify the candidate in any way, including by reference to party or distinguishing characteristics. Factors that affect this assessment include the proximity in time of the statement to the election, whether the statement makes reference to voting or an election, and whether the issue in question has been raised as an issue about which candidates disagree. A nonprofit may be entitled to identify a candidate if the timing of the advocacy coincides with another non-campaign-related event such as a vote on legislation.

If an organization buys a full-page advertisement in several newspapers shortly before an upcoming election in which it identifies the Senator as opposed to a particular issue and encourages readers to ask the Senator to vote a particular way, the organization has not engaged in campaign intervention where it does not mention the election but only the Senate vote. However, where an organization finances a similar radio advertisement asking listeners to tell their Senator to support public school funding, but no pending legislation related to school funding exists, and the issue has been raised as contested in the election, campaign intervention has occurred.

An executive director of a nonprofit may not state his position on a contentious election issue at a fundraising dinner, even if he does not mention a candidate or a political party, where he does mention the election and tells the audience they have the power to sway the issue with their vote.

Business activity may also sometimes constitute political campaign activity where an entity provides goods or services to one candidate and not another, to only candidates and not the general public, or to one can didate at a nonstandard rate. If, for example, a museum that generally rents out its space rents its hall to a candidate for a fundraising dinner, the museum is not involved in campaign intervention. However, if a theater rents out its mailing list to a candidate who is a supporter of the arts, but denies similar requests to rent the mailing list to other candidates, the theater has engaged in political intervention.

Links to other organizations’ Web sites on a nonprofit organization’s Web site may constitute campaign intervention if the content of the link, and the manner in which it is posted, indicate that the link advocates for a particular candidate. Where an organization’s Web site posts a voter guide including nonpartisan information about each candidate with a link to their Web site, no campaign intervention has occurred because the context in which the candidates’ sites are posted is neutral and treats all candidates equally. Furthermore, if an organization posts a link to a newspaper article relevant to the Web site’s content, but other articles elsewhere on that newspaper’s Web site advocate for a particular candidate, no campaign intervention has occurred. However, a church Web site may not post a message stating: "Lend your support to B, your fellow parishioner, in Tuesday’s election for town council."

Section 501(c)(3) organizations should review these rules and ensure the organization does not inadvertently participate in impermissible partisan political activity.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.