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This Election Season, Beware of IRS Rules Surrounding Political Intervention

Authored By: D.C. Bar Pro Bono Center

Nonprofit News, Spring 2022

 

With the 2022 midterm and local election season in full swing, the IRS is poised to vigorously pursue any complaints made against nonprofits regarding improper political activity.

Background – The Prohibition on Political Intervention & Electioneering by Nonprofits
Nonprofit organizations exempt from tax under section 501(c)(3) of the Internal Revenue Code, including churches and other religious organizations, are prohibited from intervening on behalf of, or in opposition to, candidates for local, state, or national office.

The stakes are high: a nonprofit that violates the rule against political intervention is subject to an excise tax on the amount expended on the campaign activity; more seriously, the organization risks losing its tax-exempt status. It is thus important that nonprofits understand the complex rules and highly nuanced distinctions employed by the IRS in enforcing its rules. Some key points and definitions include:

Prohibited Political Activity/Political Electioneering: To be classified as tax-exempt, a nonprofit organization must not “participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of (or in opposition to) any candidate for public office.” Any degree of political activity is enough to disqualify an organization, and the intervening political campaign activity does not need to form a substantial part of the organization’s activities for it to jeopardize the organization’s tax-exempt status.

Campaign: A campaign is considered the running for local, state, or national office, including D.C. elected offices.

Participating or Intervening in a Campaign: Participating or intervening in a campaign can include making a contribution to a candidate (including a loan where the funds are to be used for the campaign), endorsing a candidate, approving of a candidate’s profile, views, and/or positions, providing a candidate with the use of facilities or employees, or evaluating or rating the qualifications of the various candidates for office, even if done so in a nonpartisan manner. Analogous “negative” acts, including encouraging the public to defeat or remove a candidate, also count as political intervention.

Candidate: IRS regulations define a candidate to include “any individual who offers himself, or is proposed by others, as a contestant for elective public office.” Prominent political figures are not necessarily considered candidates, even if there is speculation regarding their election to specific offices, but organizations should exercise caution with respect to such individuals.

Public Office: Public office can include local, state, or national office. A public office is distinguished from public employment in that an individual must be elected to public office. As a general rule, if an individual’s name is listed on a ballot, he or she is a candidate for office.

Individual vs. Organizational Participation: Employees and volunteers affiliated with nonprofits still retain their right to personally participate in political campaigns. The law distinguishes between an individual’s personal activities and activities that individuals undertake in their official capacity. Activities that are directly or indirectly authorized or ratified by the nonprofit organization, or that are reimbursed by the organization, will be considered organizational activities. For more guidance, see this legal alert from the Pro Bono Partnership of Atlanta.

Determining Improper Political Activity
The IRS engages in highly fact-specific analyses when determining whether an organization’s specific activities constitute participation or intervention in a political campaign. While explicit efforts to either endorse or oppose a candidate are easy to identify as prohibited conduct, the IRS is also attuned to more subtle efforts to preference or indirectly support and/or oppose candidates, especially during an election year.

A limited number of election-related educational activities, including “voter education” and “get-out-the-vote” campaigns conducted in a non-partisan manner, may be permissible, but are subject to important rules and limitations. Candidates may also appear in an organization’s events or publications in their non-candidate capacity, but organizations must be extremely careful to ensure that no partisan or election-related speech or activities occur as part of the appearance.

The prohibition on political intervention does not impact the ability of nonprofits to lobby for or against pending legislation (up to certain lobbying limits) and/or to advocate around social and public policy issues—or on behalf of constituents—so long as these lobbying and advocacy activities do not implicate political candidates and/or indirectly favor or disfavor candidates and political parties.

In an election year, the lines between permissible education, lobbying, and/or advocacy activities become even more difficult for nonprofits to navigate. Activities that are generally permissible may take on a partisan sheen if they align with the positions of recognizable candidates or political parties. For example, advocacy in support of increased public-school spending in a specific jurisdiction will likely be permissible in a non-election year, but may be problematic if that issue sharply divides two opposing candidates for public office in that jurisdiction. The IRS will look at the totality of the circumstances when determining whether a communication constitutes political intervention, including:

  • Whether the statement is delivered close in time to the election;
  • Whether the communication is part of an ongoing series of communications by the organization, on the same issue, that are made independent of the timing of any election;
  • Whether the statement makes reference to voting or an election; and
  • Whether the issue addressed in the communication has been raised as an issue distinguishing candidates for a given office.​​​​

Nonprofits should review their educational, lobbying, and advocacy-related communications to ensure they will not be construed as partisan or election-related speech in the context of upcoming elections. Other Resources For detailed guidance and specific examples of political activity deemed improper by the IRS, please see the Pro Bono Center’s webpage on Nonprofit Advocacy.   

 

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