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Don’t Jeopardize Your Tax Exempt Status This Election Season – Part Two

By: Bob Moreland, CPA, Manager

Note: This article is part two of a three-part series discussing issues that may jeopardize an organization’s tax exempt status. Part one provided an overall discussion of the issues. This article discusses detailed issues regarding political and lobbying activities. The series will conclude with an article addressing the consequences of private inurement and private benefit.

Given that 2012 is an election season, the IRS will be closely monitoring tax exempt organizations with respect to political and lobbying activities. For a §501(c)(3) organization, any participation in a political campaign can result in the revocation of the organization’s tax exempt status. Additionally, §501(c)(3) organizations are limited as to the amount of involvement which they may carry on activities that would influence legislation. Therefore it is important for the organization to establish guidance regarding these activities and communicate it to the board members, officers, and employees of the organization.

Because it would be unrealistic for a tax exempt organization to prohibit its board members, officers, and employees from participating in political activity, here are a list of do’s and don’ts that can help to insulate the tax exempt entity while allowing individuals connected with the organization an opportunity to support their candidate.

Acceptable Political Activities:

  • An individual may use personal funds to contribute to a candidate’s campaign fund, a political action committee (PAC) or political party.
  • An individual may personally contact people soliciting support for or opposition to a candidate or contributions to a candidate, so long as the facilities or equipment of the organization are not used.
  • An individual may serve on a candidate’s campaign committee and allow their name to be listed on the campaign letterhead or otherwise used by the candidate to indicate the individual is a support of the candidate.
  • An individual may write letters to the editor or other editorial articles supporting or opposing a candidate for publication in newspapers or publications not sponsored by the organization, if the letters or articles make it clear the individual is acting individually and not expressing opinions of the organization.
  • An individual may send a written communication to employees encouraging them to support, oppose or contribute to a candidate. The communication should be on personal stationery, with none of the costs borne by the organization. It should also clearly stat that the individual is acting personally, and not on behalf of the organization. Furthermore, the individual may not use the organization’s mailing list for this type of communication.
  • An individual may send a letter supporting or opposing a candidate and soliciting contributions on personal stationery, with mailing and printing costs paid for by the individual.
  • An individual may host a fundraiser or reception for a candidate at his/her home or at a location which is not owned by the organization if it is paid for by the candidate’s committee or by the individual personally.
  • An individual’s title may be used for identification purposes in any personal or campaign communication supporting, opposing or soliciting contributions to a candidate if it is clear and unambiguous in the communication that the individual is not acting on behalf of the organization.
  • An individual may personally contact employees and encourage them to support, oppose or contribute to a candidate. Any communication should make it clear that the individual is acting personally and not on behalf to the organization. Communications should not take place during working hours, on organization property or at an event paid for by the organization.

Unacceptable Political Activities:

  • Organizational funds may not be used to contribute to or otherwise support candidates, a political party or PAC that contributes to candidates or political parties.
  • In kind contributions of materials, supplies or services may not be made by the organization, including any of its affiliates or chapters.
  • Letters supporting or opposing a candidate or soliciting contributions to a candidate may not be sent in the organization’s name or using the organization’s stationery.
  • Sponsoring candidate forums or permitting a candidate forum to be held on the organization’s property should be avoided.
  • Articles supporting or opposing a candidate may not be included in an organization’s publications, regardless of whether the publican is directed to employees or the public.
  • The organization should not permit political literature to be placed or otherwise distributed on the organization’s premises.
  • The organization may not use its assets to form a PAC or lend its name to a PAC.
  • Organizational funds may not be used to pay for or reimburse the cost of printing or mailing materials supporting or opposing a candidate or soliciting contributions.
  • Fundraisers or other receptions or events which support or oppose a candidate or raise funds for a candidate cannot be held on organization property.
  • Fundraisers or other receptions or events which support or oppose a candidate or raise funds for a candidate cannot be held on organization property.
  • Organization equipment may not be used to support or oppose a candidate.
  • Materials supporting or opposing a particular candidate may not be placed in employee interoffice mailboxes, pay envelopes or other organization communications.
  • The organization’s mailing list, including a mailing list of employees, as well as a list of supporters, may not be provided to a candidate or otherwise used to support or oppose a candidate. This includes the use of the organization’s mailing list by an executive or board member of the organization to contact employees or supporters to solicit support, opposition, or contributions to a candidate.
  • The organization should not provide a forum for discussions of political candidate’s staff meetings. Placing political issues or candidates on the agenda for staff meetings or otherwise encouraging such discussions should be avoided.
  • Sponsoring voter registration drives or permitting voter registration drives to be held on organization property should be avoided.

Obviously, this list does not include all scenarios that a §501(c)(3) may encounter. The concept being communicated is that a board member, officer or employee may participate in political activities so long as it is clearly understood that, although the individual is connected with the organization, he or she is not acting on the organization’s behalf. By providing this guidance to individuals connected with the organization, the organization can minimize exposure related to participating in political activities.

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