Political Activities of Tax-exempt Nonprofit Organizations: an Overview
| Publication year | 1995 |
| Pages | 2157 |
| Citation | Vol. 24 No. 9 Pg. 2157 |
1995, September, Pg. 2157. Political Activities of Tax-Exempt Nonprofit Organizations: An Overview
This article summarizes limitations imposed by the Internal Revenue Code ("Code")(fn1) on the political activities of nonprofit organizations that are exempt from federal income taxes under Code § 501(c)(3). It also discusses options for planning to stay within, or to avoid, those limitations.(fn2)
Most § 501(c)(3) organizations operate to further one or more aspects of public welfare. They may have agendas about, or stakes in, issues of public policy that can be affected through lobbying and participating in election campaigns. When an issue of public policy affects the mission or activities of a § 501(c)(3) organization, its directors and managers may naturally be inclined, and may even consider it their duty, to use the organization's resources to affect the outcome.
The attorney who serves on the board of directors of a § 501(c)(3) organization or who otherwise advises it about legal matters should educate his or her colleagues, in advance, about limitations on the organization's political activities. If the directors and officers of the organization know about and observe those limitations, they achieve two perhaps equally important goals: (1) tax-related sanctions will not be imposed on the organization; and (2) the organization's political opponents will not be able to make a negative lobbying or campaign issue out of the organization's "improper" political involvement.
The historical justification for the limitations imposed on the political activities of § 501(c)(3) organizations is usually phrased in terms of maintaining the political neutrality of the federal tax system: a § 501(c)(3) organization enjoys significant tax advantages;(fn3) it therefore has resources available to it in excess of those available to nonexempt organizations; and exclusion from full participation in lobbying and campaigning activities keeps § 501(c)(3) organizations from having an unfair "leg up on" their nonexempt competitors in the political arena.
Section 501(c)(3) limits lobbying activities and proscribes elective campaign activities.
"[N]o substantial part" of the activities of a § 501(c)(3) organization may consist of "carrying on propaganda, or otherwise attempting, to influence legislation."(fn4) Legislation is defined broadly to include actions by federal, state or local legislative bodies (whether or not specific legislation is pending and whether or not the legislation is related to the exempt purpose of the § 501(c)(3) organization in question) and actions by the public with respect to referendums, initiatives, constitutional amendments and similar matters.(fn5)
Attempting to influence legislation is also a broad concept that includes:
1) advocacy of the adoption or rejection of legislation;(fn6)
2) direct contacts with members of legislative bodies to advocate action on legislation;(fn7)
3) communications with executive or administrative officers concerning pending acts of legislative bodies;
4) grass roots lobbying of the public that refers to specific legislation, that reflects a view on it and that encourages the public to take action consistent with that view;
5) time and efforts required to prepare, discuss and formulate positions to be lobbied and to plan lobbying activities;(fn8)
6) actions undertaken through agents; and
7) financial or other support of the lobbying activities of other organizations (including affiliates).
If a § 501(c)(3) organization violates the limitations on lobbying, the Internal Revenue Service ("IRS") can classify it as an action...
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