Labor Day is the traditional start of the political season for even-year elections (though it seems to start earlier every year). This season promises to be different from any other, with a pandemic and fights over mail-in voting. What you can do depends on what type of nonprofit you are. We will discuss the rules for 501(c)(3), 501(c)(4), and 501(c)(6) organizations.
What is political activity: The IRS defines “political activity” as any partisan activity by which you support or oppose a candidate for office or a political party. This applies to national, state, and local candidates and political parties. Section 501(c)(3) organizations cannot support candidates for public office. Section 501(c)(4) and 501(c)(6) organizations can as long as it is not their primary activity.
Some cases are obvious. For example, a 501(c)(3) organization cannot encourage people to vote for candidate X and your organization cannot give money to a particular candidate. Some cases are less obvious and here the IRS will apply a facts and circumstances test (otherwise known as the smell test). Section 501(c)(4) and 501(c)(6) organizations can endorse candidates, but they must be careful to make sure it is not their primary activity.
What about getting out the vote? Organizations categorized as 501(c)(3)’s are allowed to encourage people to vote, as long as it is not done in a manner that looks like you are supporting one party or candidate over another.
What are the consequences of violation? There are two consequences if the IRS finds you violated the rules. First, the IRS can revoke or refuse tax-exempt status. Second, the IRS can impose an excise tax on the dollar amount that may have been spent on political activity.
Specific activities:
- If your organization is a 501(c)(3), make sure your Board members and staff do not use organization equipment for candidate political uses. For example, do not permit them to use the organization’s copy machine to copy political literature.
- Board members and staff can support the candidates of their choice. However, if your organization is a 501(c)(3), make sure that they do not imply by word or action that the organization supports that candidate. For example, if your organization s president supports Candidate X, and he is listed on the candidate’s letterhead, do not list him as President of your organization.
- If you permit a candidate to use your facilities, make sure you extend the same opportunity to other candidates running for the same office. You do not want to be seen favoring one over the other.
If you engage in issue advocacy, be careful about attacking a particular candidate’s stand on an issue. The closer you are to an election, the more likely it is to be interpreted as a partisan activity.
RECOMMENDATIONS: Prepare a policy on what activities your organization will allow. Distribute it to the relevant Board and staff people and train them on what the policy says.
If you have a question about non-profits including crowdfunding or business structure or discuss how the IRS will view your activity, call us today. It is better to avoid a problem, bad publicity, and worse, possible loss of tax exemption. If you have questions, please give us a call.
