With the current political climate and upcoming elections, your not-for-profit organization may be considering how you can get involved. The most important thing your organization can do is to make sure you understand the rules and regulations before you participate in any type of political activity.
This begins with understanding the distinction between political campaign activity and lobbying. Political campaign activity is defined by the IRS as “directly or indirectly participating in, or intervening in, any political campaign on behalf of (or in opposition to) any candidate for elective public office”. This differs from lobbying, which is considered to be supporting or opposing the legislation.
What an organization is permitted to do varies by the Internal Revenue Code section under which it is exempt.
- Lobbying activity is limited. Organizations should not have lobbying be a substantial part of its activities.
- Political campaign activities are prohibited for 501(c)(3) organizations. They cannot support (or oppose) candidates for office at any level.
- These organizations can urge people to vote for or against ballot measures, but it should be included in the organizations’ direct lobbying dollars.
- 501(c)(3) organizations do have the option to make the 501(h) election. This election opts the organization out of the undefined “substantial activity” guidelines and subjects the organization to a defined permissible amount of lobbying activity based on the organization’s overall exempt purpose expenditures.
501(c)(4), 501(c)(5), and 501(c)(6) organizations:
- Lobbying activity is unlimited.
- Political campaign activity is allowed but it may not be the organization’s primary activity. There is a tax applicable to the lesser of political expenditures or investment income. Form 1120-POL will need to be filed if this is required.
- Primary purpose of these organizations is political campaign activity. As such, lobbying is rare and may be subject to tax.
- 527 organizations are subject to tax on lesser of non-political expenditures or investment income. Form 1120-POL will need to be filed if this is required.
It is important to note the IRS evaluates political activity based on “facts and circumstances” which includes (but is not limited to):
- References to candidates or elections
- Timing of activities related to elections
- Aligning position to a particular candidate
- Issues related to the organization’s mission
While a large portion of lobbying or political campaign activity may be easy to identify, organizations should also make a note of their social media presence and the personal activities that employees are participating in that could be tied back to an organization.
Official social media accounts that include the name or logo of the organization should avoid posts that can be viewed as political campaign activity or lobbying. Personal accounts of an employee could be included for facts and circumstances purposes if it is mainly used to promote the organization and if there is an obvious association between the employee and the organization. Organizations should also monitor what others are permitted to post on their social media pages, and those in charge of the account(s) need to take care that they are not responding to political issues posted to their page.
Employees of not-for-profit organizations cannot use organization resources (such as office space, computers, phones, non-public information, etc.) to help candidates. They should also refrain from displaying support for candidates while working, talking about electoral activities with friends working for parties/campaigns, or partake in anything that might suggest they are doing it in the capacity as an employee of the organization.
Employees can volunteer on their own time or make personal contributions as long as it is clear they are doing so in a personal capacity.
Keep in mind that there are also federal, state, and local elections and campaign finance laws to take into consideration when partaking in political activity. Organizations should make sure they are aware of the laws in their locality before proceeding with political activity.
If you have any questions regarding this information, or any other issue affecting your Not-for-Profit organization, please contact your Blue & Co. advisor.