Political Activity and Nonprofits: Why It’s Vinegar And Oil

nonprofit political activity

Those not in mourning over American Idol’s last season may have noticed a little election going on. Loaded with enough drama and hot button issues to give the Housewives franchise a run for its money.

With so much at stake, it’s natural for organizations to want to jump in. As an ambassador, you might wonder what you can do for candidates? Or how you can contribute to an important campaign?

The answer is nada and nothin’.

Well, that’s not entirely true. There are a few things you can do. A very limited few. But don’t worry your little civic heart. I’ll run through the problem and how you can get into some of the action.

But Why Can’t I?!

You may recall, a 501(c)(3) exemption hinges on operating for the general public. When you start choosing one demographic over another that “generalness” comes into question. You start to look selective, and your “charitable” purpose hazy. Another reason? The IRS doesn’t want little campaign tax shelters running around. Reason numero uno for all the ruckus on 501(c)(4) organizations.


But Who Says That I Can’t?!

The Federal Tax Code, that’s who.


So What Can’t I Do? 

You can’t:

– act on behalf of,

-or endorse

political campaigns, or candidates running, for public office. In other words, act favorably or unfavorably to a particular candidate.

Other restricted activities? Hosting political rallies, putting up signs or creating mailing lists for one candidate. The IRS has a list of other activities to avoid here but this doesn’t include everything. And note, the restriction applies whether you act directly or indirectly.  For the tricky betty’s out there.

What might be an example of indirect activity? An Executive Director or Board of Director engaging in the prohibited activities. Or an organization advocating by speech instead of a writing.

Oh, and engage in political activities without meaning to? The IRS has said too bad, so sad. Intent doesn’t matter when it comes to penalties. Activities purely educational on specific candidates?  With no bias and only objective criteria? That isn’t enough to avoid the prohibition either.


What Happens If We Participate In a Political Activity? 

Your exemption status can be revoked. Or you could wind up with really gnarly tax penalties. 

 
What Can I Do? 

You can lobby, to a certain extent. But again, not for specific candidates or campaign. So it gets tricky. Best practice is to focus on “issues” without endorsing a candidate. Good example? If my organization focuses on green space and there’s a referendum coming up on parks. Even then, lobbying can’t take up a “substantial” part of your time. What’s the threshold for substantial? Good question…there isn’t one. But the number commonly thrown out  is 5%.  Whatever lobbying you do is reported annually in your federal tax filing. But note your status may come into jeopardy where the lobbying becomes TOO much. There are precautions you can take where you know you’ll consistently exceed the average threshold, but that has to be looked at case by case. 

Other  permissible activities are public forums (with all candidates invited) or voter registration drives.

The focus must be on education without endorsement. Education without endorsement. Write it down. Memorize it. Once it starts to look as if you’re favoring a specific candidate, do not collect and do not pass ‘GO’. And where activities are permitted it helps to have someone knowledgeable working with the organization because the line is incredibly thin. And it’s always moving. 

 

In Conclusion…

In all of this thoughtfulness and strategy are key. 

Keep in mind, political activity and lobbying are treated differently under the different exemptions. Where political activity is not allowed at all under a 501(c)(3) it is in some circumstances under a 501(c)(4). Something to keep in mind if you plan on this taking up a large swath of your organization’s vision board. There are  intricacies around what a “candidate” is or what “public office” can be, so handle these carefully. And if all else fails, consider opting for the tried and true weatherman instead. 


Another Good Read

https://www.irs.gov/pub/irs-tege/eotopici02.pdf

 


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