Legal Considerations for 501(c)(4) Political Advertising

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Section 501(c)(4) of the Internal Revenue Code grants an exemption from federal income tax for nonprofits that pursue social welfare causes. Unlike organizations that qualify under other sections of the code, like the more common 501(c)(3) organization, a nonprofit that qualifies for 501(c)(4) status is allowed to engage in a range of political activities, including lobbying. But there are important limits that a 501(c)(4) must keep in mind, especially when it is considering running ads.

To qualify for the exemptions offered under section 501(c)(4), an organization’s primary purpose must be to promote social welfare. “Social welfare” is an open-ended, subjective concept that mostly can be examined from the perspective of the individuals running the 501(c)(4). For example, an organization might qualify for 501(c)(4) status if it is organized to promote or oppose gun rights.

An important rule is that the purpose of the organization should be to benefit the public at large. It cannot be for the benefit of an individual, such as a particular political candidate, or a group of individuals, such as a political party. The IRS has taken the position that an organization that is primarily engaged in activity that benefits a partisan campaign does not qualify for 501(c)(4) status (here is one example).

This doesn’t mean that a 501(c)(4) cannot engage in any partisan activities at all. The rule is only that those activities can’t be the “primary” focus of the organization. Unfortunately there isn’t a bright line rule defining what “primary purpose” means. In examining whether partisan activities are a primary purpose of an organization, the IRS will look at the cost of the activities relative to the organization’s budget, and will also examine the amount of time and effort spent by employees and volunteers.

It’s important to understand that these restrictions only limit a 501(c)(4)’s “political activities.” This term is specific to political processes that involve someone obtaining an office or official role: elections, nominations, political appointments, and so on. The rule applies to federal, state, and local political offices, as well as offices in political organizations. A 501(c)(4) cannot provide substantial direct or indirect support for specified candidates. This means they cannot run ads, make endorsements, contribute money or significant time, and so forth.

What these rules mean is that a 501(c)(4) may still be able to run advertising that presents the arguments for its primary mission. The advertising can’t mention specific candidates who agree with the organization’s position, and it may still cross the line if a candidate has already made the issue a topic of his or her campaign. For example, if a candidate for the local school board has made teacher pay a core issue in her campaign, a 501(c)(4) will want to be cautious about running ads that promote that issue, even if the ads don’t mention the candidate or the election.

Before launching a campaign that managers know will potentially benefit a specific candidate or political party, it’s a good idea to closely examine the content of the proposed messages to ensure that they stick to the organization’s primary, social welfare purpose and don’t align in risky ways with ongoing political campaigns. The Church Law Center of California works with religious, secular, and political nonprofits to ensure their compliance with rules like these. To find out how we can help your organization call us today at (949) 689-0437 or through our contact page.

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