Certain Tax Exempt Organizations May Not
Engage in Political Campaign Activities

WASHINGTON - Charities should be careful that their efforts to educate voters stay within the Internal Revenue Service guidelines for political campaign activities.

Organizations exempt from federal income tax as organizations described in section 501(c)(3) of the Internal Revenue Code are prohibited by the terms of their exemption from participating or intervening, directly or indirectly, in any political campaign on behalf of, or in opposition to, any candidate for public office. Charities, educational institutions, and religious organizations, including churches, are among those tax exempt under this code section.

These organizations cannot endorse any candidates, make donations to their campaigns, engage in fund raising, distribute statements, or become involved in any other activities that may be beneficial or detrimental to any candidate.

Whether an organization is engaging in prohibited political campaign activity depends upon all the facts and circumstances in each case For example, organizations may sponsor debates or forums to educate voters. But if the forum or debate shows a preference for or against a certain candidate, it becomes a prohibited activity.

The motivation of an organization is not relevant in determining whether the political campaign prohibition has been violated. The U.S. Court of Appeals for the Second Circuit held that "voter education activities" of the Association of the Bar of the City of New York constituted prohibited campaign activities, even though these activities were nonpartisan and in the public interest. The association rates and publishes the ratings of candidates for elective judicial office. The association had been tax-exempt as an organization described in section 501(c)(6) (a provision that permits some political campaign activity) and had requested reclassification as an organization described in section 501(c)(3). The Service denied the reclassification on the grounds that the association's rating of candidates violates the political campaign prohibition of that section. The Second Circuit upheld the action. Thus, activities that encourage people to vote for or against a particular candidate on the basis of non-partisan criteria nevertheless violate the political campaign prohibition of section 501(c)(3).

If the Service finds a section 501(c)(3) organization engaged in prohibited political campaign activity, the organization could lose its exempt status and, further, could be subject to an excise tax on the amount of money spent on that activity. In cases of flagrant violation of the law, the Service has specific statutory authority to make an immediate determination and assessment of tax. Also, the Service can ask a federal district court to enjoin the organization from making further political expenditures. In addition, contributions to organizations that lose their status as section 501(c)(3) organizations because of political activities are not deductible by the donors for federal income tax purposes.

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