Political Campaign Activity by Non-profit Organizations – Part 1

Our society is very much a political society.  Even though not everyone may vote for a number of reasons, citizens are aware of elections and often the issues that are matters of discussion.  Opinions are plentiful, some are not factually-based, but that does not deter the individual from expressing his or her opinions.  Political campaigns are pervasive – we see advertising on various media, our mailboxes are filled with flyers from competing candidates, our phone often rings with pitches from various candidates. With everyone seemingly getting in on the action, there may be a temptation for a church or non-profit organization to throw in their two cents worth.

At one level, it makes sense for an organization to take a stand in favor or opposition to a candidate.  For example, a church may be a strong supporter of the nation of Israel.  One particular candidate has come out strongly in favor of Israel.  The church may be inclined to express its support for this candidate.  However, it cannot.  The Internal Revenue Code (IRS) prohibits intervention in political campaigns by IRS 501(c)(3) organizations. Some may raise the issue that a church is not a 501(c)(3) organization, as it never applied for that status.  However, this is incorrect.  Under the IRC regulations, a church, unlike other organizations, is automatically considered a 501(c)(3) organization.  The regulations do apply.

These restrictions are one of the conditions of maintaining tax-exempt status.  Failure to adhere to rules about intervention in political campaigns may result in a loss of tax-exempt status.  These restrictions are often referred to as the “Johnson” rule.  They became a part of the tax code in 1954 when then-senator Lyndon Johnson introduced these restrictions on the floor of the Senate.  It is thought that this was done by Johnson in retaliation for opposition to Johnson’s re-election campaign by religious organizations opposing his candidacy. The prohibition was added without hearings, testimony, or comment by any tax-exempt organization.

What is Prohibited?

The language states that 501(c)(3) organizations are prohibited from participating or intervening, directly or indirectly, in a political campaign on behalf of or in opposition to any candidate for elective public office.  This is an absolute prohibition.  However, one must understand how the IRS defines the terms in this definition.

Direct intervention includes the making statements (oral, written, or in an electronic medium) supporting or opposing any candidate, political party, or political action committee (PAC).  The establishment of a political action committee is also prohibited. In addition, the organization cannot rate candidates.  The provision of support, loans, or loan guarantees are likewise prohibited.  In addition, like-kind support for any political party, PAC, or candidate is prohibited.

Prohibited indirect campaign intervention includes anything that indicates a bias for or against any candidate, political party, or PAC.  The key in this area is that the activity is biased.  It includes voter education materials, a candidate forum, and voter registrations drives.  These items are permitted, but the prohibition is against doing these activities in a biased manner that favors or discriminates against any candidate.

This does not prohibit religious organizations from restricting their discussion of issues during campaign periods.  The key is that the discussions not be linked to support for or opposition to candidates.  As an example, the church could discuss the issue of legalization of marijuana. That is a political issue.  But it could not take the step of saying “We are against this, and Candidate A is in favor of legalization.”  That is an overt indication of opposition to a particular candidate and is prohibited.

Seven factors have been identified by the IRS to help determine if an advocacy is considered political campaign intervention:

1.  Does the communication identifies one or more candidates for public office?

2. Does the communication speaks positively or negatively about one or more candidate’s positions or actions?

3. Is the communication is delivered on a timely basis in regard to an upcoming election.

4. Does the statement makes reference to voting in an election?

5. Is the issue mentioned in the communication been made an issue by one of the candidates?

6. Is the communication part of a series of communications on the same issue independent of the timing of an election?

7. Is the timing of the communication and the identification of the candidate related to a non-electoral event, such as a vote on specific legislation by an officeholder who is also a candidate for public office?

In addition, religious organizations may not distribute voter education guides prepared by a candidate, political party, or PAC.

At this point, it appears pretty much one-sided as we have given an overview of the law and discussed what is prohibited.  In Part 2 of this article, we will look at what a religious organization can do and not risk its tax-exempt status.

Next:  Political Campaign Activity by Non-profit Organizations – Part 2

Dr. John Stancil (My Bald CPA) is Professor Emeritus of Accounting and Tax at Florida Southern College in Lakeland, FL. He is a CPA, CMA, and CFM and passed all exams on the first attempt. He holds a DBA from the University of Memphis and the MBA from the University of Georgia. He has maintained a CPA practice since 1979 with an emphasis in taxation. His areas of expertise include church and clergy tax issues and the foreign earned income credit. He prepares all types of returns, individual and business.

Dr. Stancil has written for the Polk County Business Journal and has presented a number of papers at academic conferences. He wrote the Instructor’s Manual for the 13th edition of Horngren’s Cost Accounting. He is published in the Global Sustainability as a Business Imperative, Green Issues and Debates, The Encyclopedia of Business in Today’s World, The Palmetto Business Review, The CPA Journal, and in the NATP TaxPro Journal. His paper, “Building Sustainability into the Tax Code” was recognized as the outstanding accounting paper at the annual meeting of the South East InfORMS. He wrote a book entitled “Tax Issues Faced by U. S. Missionary Personnel Abroad ” that will soon be published.

He has recently launched a new endeavor, Church Tax Solutions, which presents online, on demand seminars on various church and clergy tax issues.

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1 comment on “Political Campaign Activity by Non-profit Organizations – Part 1”

  • The Canadian government has pretty strict criteria for the “charitable organization” designation; political activities, such as protest rallies, are forbidden. Since the Conservative government does not agree with the Supreme Court’s recent decision to allow physician assisted dying, the Dying with Dignity organization has lost its charitable status and with it the ability to issue tax receipts for donations. Consequently, the organization will now be able to protest and undertake political actions BUT with reduced funding.

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