The right to vote is central to a thriving democracy. In recent years there have been a number of cases where voting rights have been perceived as under attack or underused by the public. In response, nonprofit groups have begun organizing to encourage voting and lobby for legal changes to the way voting is conducted. Here are a few ideas worth considering for a group thinking about doing work on matters of voting.
Choosing the right form of organization
In any examination of a nonprofit’s organizational structure there are really two key questions that must be answered. The first is what legal form the entity will take as a matter of state law. Whether a nonprofit group wants to operate as a nonprofit association, nonprofit corporation, or other permissible form depends on a range of considerations, including the kinds of risks it faces, how the founders want to organize its governance, and how it will raise money.
Another consideration that drives the form of organization is the kind of tax exemption it wishes to qualify for. Tax exemption is both a state and federal issue, with federal law often taking the more important role in an analysis. For many organizations focused on lobbying for legislation related to voting, an organization that qualifies under Section 501(c)(4) of the Internal Revenue Code, a so-called social welfare organization, will be the appropriate choice. Among other things, a 501(c)(4) organization can spend an unlimited amount of money and resources on lobbying activities, as long as they advance the tax exempt purpose of the organization.
The chief downside of a 501(c)(4) is that contributions to them are not tax deductible. If the organization will chiefly be engaged in nonpartisan efforts to increase voter turnout, with relatively little emphasis on lobbying work, it might instead operate as a 501(c)(3) organization. Unlike donations to a 501(c)(4), donations to a 501(c)(3) are tax deductible.
Think about geographic scope
Voting is simultaneously a local and national issue. A new nonprofit is probably better off focusing on local efforts. Every nonprofit needs to comply with its home state’s reporting requirements, including things like state lobbying disclosures. As the reach of a nonprofit’s efforts expands beyond its home state, it will need to examine its compliance obligations in any state where it operates. In some cases the choice of legal form can be influenced by the way different states treat legal entities in general and nonprofits specifically.
Be mindful of “partisan speech”
One of the principles governing a nonprofit’s tax exempt status is the idea that the organization isn’t operated to benefit any particular individual or group, but instead is operated to benefit the public at large. A 501(c)(4) organization is allowed to lobby freely, but needs to take care to avoid spending too much time engaged in activity that might be deemed to have a partisan character. A modest amount of partisan activity is fine, but if the IRS determines that the organization is “primarily” engaged in partisan activity it may revoke the organization’s tax exemption.
Consult with a nonprofit attorney about your organization’s plans
The Church Law Center of California provides legal counsel to secular and religious nonprofits. We can help a new nonprofit understand its structural options and get organized with a comprehensive governance plan. To find out how we can help your organization, call us at (949) 892-1221 or reach out to us through our contact page.
