Charities, religious organizations, educational institutions, and other groups that are recognized as exempt from taxation under Section 501(c)(3) of the Internal Revenue Code (the "Code"), are prohibited from participating or intervening in any federal, state or local political campaign on behalf of or in opposition to any candidate for political office. This means that a tax-exempt organization may not endorse a candidate, distribute statements for or against a candidate, raise funds for or donate to a candidate or become involved in any activity that would be either supportive or opposed to any candidate. Violation of this prohibition may result in the imposition of certain excise taxes and denial or revocation of the organization's tax-exempt status.
In 2004, the IRS began a "Political Activities Compliance Initiative" ("PACI") to both educate tax-exempt organizations about prohibited political campaign activities and to identify those tax-exempt organizations that engage in such prohibited activities. The IRS promises to expand the activities of the PACI during the 2006 campaign season. Whether a tax-exempt organization has engaged in prohibited political activity is highly dependent on all of the facts and circumstances of a particular situation. The following are general guidelines to help tax-exempt organizations stay out of trouble during the upcoming 2006 campaign season.
Voter Education, Vote Registration, and Get Out the Vote Drives
A tax-exempt organization is permitted to conduct certain voter education activities, provided such activities are carried out in a non-partisan manner. For example, a tax-exempt organization may sponsor a public forum, publish a voter education guide, or participate in a voter registration/get-out-the-vote drive if such activity is conducted in a manner whereby one candidate is not favored over all others.
Individual Activity by Organization Leaders
A tax-exempt organization's leader and other staff members are not restricted from engaging in political campaign activity, provided the individuals engage in such activity in their individual, rather than official, capacity. To avoid attribution of an individual's political activity to a tax-exempt organization, such individual should clearly indicate that their comments are personal and not representative of the views of the tax-exempt organization.
A tax-exempt organization may invite a candidate for political office to speak at its event either in his or her capacity as a candidate for political office or in his or her individual capacity. If a candidate is invited to speak as a political candidate, the tax-exempt organization must provide an equal opportunity to all other political candidates seeking the same office, explicitly state that it does not support or oppose such candidate, and disallow any political fundraising to occur during or in any way connected to the event. As mentioned previously, a candidate for political office may attend an event in his or her individual capacity. If the tax-exempt organization invites the candidate who appears at the event in his or her individual capacity to speak or is publicly recognized at the event, the tax-exempt organization must clearly indicate that the candidate is appearing in his or her capacity as an individual and for reasons that are unrelated to his or her candidacy for political office (while managing to refrain from mentioning that individual's candidacy for political office!), maintain a non-partisan atmosphere, and prohibit any campaign activity or political fundraising from occurring during the event.
Issue Advocacy vs. Political Campaign Intervention
A tax-exempt organization may take a position on a public policy issue without violating the prohibition against political activity, provided such tax-exempt organization's stance on the issue does not function as political campaign activity. A tax-exempt organization should not issue a statement that expressly tell an audience to vote for or against a specific candidate or that creates a message that favors or opposes a specific candidate. A tax-exempt organization should also be careful not to issue a statement that is too close to an election and try to limit their statements to a non-electoral event such as a scheduled vote on a specific piece of legislation.
A voter guide is a short document that is intended to help votes compare candidates' positions on a set of issues. A tax-exempt organization may prepare or distribute a vote guide, provided the guide does not focus on a single issue or a narrow range of issues and does not reflect bias. To avoid the appearance of political campaign activity, a tax-exempt organization should make sure that the content of the vote guide is clear and unbiased in structure and content. In addition, the voter guide should cover all candidates for a particular office.
If a tax-exempt organization posts material on its web site that favors or opposes a candidate for public office, the organization will be deemed to have engaged in political campaign activity. A tax-exempt organization that establishes a link to another web site may not be deemed to have engaged in political campaign activity even if the other web site is political. A tax-exempt organization that is contemplating posting a link to a political site on its web site should consider the following to determine whether or not it could be deemed to have engaged in political campaign activity: the context for the link to the other web site, whether all candidates will be represented, whether any exempt purpose will be served by offering the link, and the directness of the links between the tax-exempt organization's web site and the web page that contains material favoring or opposing a candidate for political office.
A tax-exempt organization should be aware that when activities are combined, the totality of the situation may result in the tax-exempt organization being deemed to have engaged in political campaign activity. This may be the result even if any single activity would not be considered to be political campaign activity.
Whether a tax-exempt organization has engaged in prohibited political campaign activity is highly dependent on the facts and circumstances of each situation. It is important for a tax-exempt organization to educate itself as to the parameters of acceptable, nonpolitical behavior so that it does not inadvertently engage in prohibited behavior and possibly jeopardize its tax-exempt status.