Some nonprofits enjoy tax-exempt status under stringent Internal Revenue Service (IRS) regulations. However, they must meet guidelines regarding their formation, creation, and activities. An organization may be scrutinized when it strays from approved activities. For example, what might happen when a 501(c)(3) organization engages in political campaigning? To learn the answer, we need to understand the parameters within which a 501(c)(3) organization operates.
What the IRS Says About 501(c)(3) Organizations
According to the IRS:
“A section 501(c)(3) organization must not be organized or operated for the benefit of private interests, such as the creator or the creator’s family, shareholders of the organization, other designated individuals, or persons controlled directly or indirectly by private interests.” [emphasis added].
However, there are limited to how a section 501(c)(3) organization can assist the public.
For example, the Internal Revenue Code states that section 501(c)(3) organizations “must be organized and operated exclusively for exempt purposes…” in order to receive tax-exempt status. The IRS defines the term “exempt purposes” as:
“…charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, and preventing cruelty to children or animals.”
There’s at least one activity that groups organized under section 501(c)(3) cannot do.
Political Campaigning and the 501(c)(3)
The IRS does not merely suggest that charitable organizations refrain from political campaigning. Instead, 501(c)(3) groups are “absolutely prohibited” from political activities, including:
“…directly or indirectly participating in, or intervening in, any political campaign…”
In fact, the IRS prohibits direct or indirect participation in political campaigns. It does not matter if the 501(c)(3) intervenes on behalf of or against a candidate for public office – both are prohibited.
Groups organized under 501(c)(3) also cannot contribute to campaigns or provide any verbal or written position statements.
The Internal Revenue Code does permit some lobbying activity. However, the law in this area is so complex that no church should engage in lobbying without assistance from legal counsel.. Nonpartisan voter education activities and voter registration may not be considered prohibited activity. However, the emphasis here is on the term “nonpartisan.” Biased or partisan behavior generally will be considered a violation of section 501(c)(3).
Talk to an Attorney About Your Nonprofit’s Political Activities
Charitable organizations that engage in political campaigning may be fined. The board of directors may also be held legally liable for the prohibited activity. Finally, the 501(c)(3) may lose its tax-exempt status.
The Church Law Center of California advises churches and other nonprofits on how to protect themselves from risk while furthering their mission. Call us today at (949) 892-1221 or reach out to us through our contact page.