Political Activities Compliance Initiative (2008 Election)
The Internal Revenue Service's Political Activities Compliance Initiative (PACI) will remain in effect for the 2008 election season. PACI seeks to educate section 501(c)(3) organizations such as charities and churches about the federal ban on political activity.
As in previous years, the 2008 IRS effort will include both educational and compliance components. This year's initiative will include:
- Letters to the national political party committees explaining the law's ban on political campaign activity by charities and churches.
- A letter in the Federal Election Commission's monthly newsletter asking candidates to ensure that their contacts with charitable organizations do not inadvertently jeopardize the tax-exempt status of any organization.
- A news release reminding charities and churches of the ban.
- Reorganizing the IRS' Web site materials concerning the ban to make them more accessible to organizations, political candidates and parties, and the general public.
- Examinations of organizations the IRS believes may be violating the ban.
- A memorandum from the Director, Exempt Organizations Examinations, describes how the IRS will analyze political campaign activity issues involving websites of section 501(c)(3) organizations
The Restriction of Political Campaign Intervention by Section 501(c)(3) Tax-Exempt Organizations
Under the Internal Revenue Code, all section 501(c)(3) organizations are absolutely prohibited from directly or indirectly participating in, or intervening in, any political campaign on behalf of (or in opposition to) any candidate for elective public office. Contributions to political campaign funds or public statements of position (verbal or written) made on behalf of the organization in favor of or in opposition to any candidate for public office clearly violate the prohibition against political campaign activity. Violating this prohibition may result in denial or revocation of tax-exempt status and the imposition of certain excise taxes.
Certain activities or expenditures may not be prohibited depending on the facts and circumstances. For example, certain voter education activities (including presenting public forums and publishing voter education guides) conducted in a non-partisan manner do not constitute prohibited political campaign activity. In addition, other activities intended to encourage people to participate in the electoral process, such as voter registration and get-out-the-vote drives, would not be prohibited political campaign activity if conducted in a non-partisan manner.
On the other hand, voter education or registration activities with evidence of bias that
- would favor one candidate over another;
- oppose a candidate in some manner; or
- have the effect of favoring a candidate or group of candidates, will constitute prohibited participation or intervention.
Political Campaign Intervention by 501(c)(3) Tax-Exempt Organizations - Educating Exempt Organizations
As a key element in its program to secure compliance with the ban on political campaign activity by section 501(c)(3) organizations, the Internal Revenue Service educates organizations about the ban and puts them on notice of the enforcement program. Towards this end, it employs an array of educational tools:
- Guidance to exempt organizations on how to apply the ban in various factual situations.
- Revenue Ruling 2007-41 and Factsheet 2006-17 distill IRS guidance in this area, each providing 21 examples of how it applies.
- News releases and other resources for the media discussing the ban.
- Phone Forum on Rules for Tax-Exempt Organizations During an Election Year: Topics include the distinctions between political activity, lobbying, and general advocacy, and which activities are permissible by 501(c)(3), 501(c)(4), 501(c)(5), 501(c)(6) and 527 organizations. Read the script and see the slide show.
- Access to internal training materials . Note: These materials were designed for training purposes only; under no circumstances should the contents be used or cited as authority for setting or sustaining a technical position.
- Frequently asked questions
- 'Charities and Politics' audio interview featuring Steven T. Miller, Commissioner, Tax-Exempt and Government Entities.
- Other resources
- Program letter describing components of the IRS Political Activity Compliance Initiative (2008 election)
Examination Procedures – Prohibited Political Campaign Intervention by Section 501(c)(3) Organizations
In addition to the general procedures for audits of exempt organizations, the IRS has developed special procedures for cases involving potential political activity by section 501(c)(3) organizations. The goal of the procedures is two-fold:
- to educate 501(c)(3) organizations of the ban on political activity and put them on notice of the enforcement program in order to prevent violations, and
- to address noncompliance while the issue remains prominent, so that there are no recurrences and so correction can occur before the relevant election.
Guidance for Churches:
Publication 1828, Tax Guide for Churches and Religious Organizations -
Special Rules Limiting IRS Authority to Audit a Church
The IRS may only initiate a church tax inquiry if the Director, Exempt Organizations Examinations, reasonably believes, based on a written statement of the facts and circumstances, that the organization: (a) may not qualify for the exemption; or (b) may not be paying tax on unrelated business or other taxable activity.
Restrictions on Church Inquiries and Examinations
On February 3, 2009 the Chronicle of Philanthropy reported on an IRS vs Church-audit case involving alleged lobbying and candidate support. The article says in part:
Court Rules Against IRS in Church-Audit Case, By Grant Williams
The Internal Revenue Service has suffered another setback in its effort to pursue an audit of a church in Minnesota in a case that has ramifications for the tax agency and churches nationwide.
A U.S. District Court judge in Minneapolis ruled that the Living Word Christian Center, in Brooklyn Park, Minn., does not have to comply with an IRS summons for information because the summons was not authorized by a government official of sufficient rank.
The ruling by Judge Ann D. Montgomery concurs with a decision in December by U.S. Magistrate Judge Jeffrey J. Keyes.
Some tax-law experts have said that the IRS’s defeat could spur challenges to audits by other churches and force the IRS to engage in a lengthy, formal rule-making process to determine who has the authority to order an investigation into a church’s finances.
The IRS began to investigate Living Word in April 2007, following reports that the Rev. Mac Hammond had endorsed U.S. Rep. Michele Bachmann, a Minnesota Republican, from the pulpit—an act that would violate charity tax laws.
Faith leaders and other nonprofit leaders may want to monitor this over the next several years. It could take that long.
Alliance for Justice Material
Permissible Nonpartisan 501(c)(3) and Partisan Campaign Contact on Voter Engagement/Protection Efforts
Which says in part:
Under these rules, 501(c)(3) organizations may:
- Provide publicly available information to all candidates or parties—either upon request or at the organization’s initiative.
- Issue press releases or post information on their websites describing their nonpartisan voter outreach plans and strategies or concerns about voter intimidation or voting problems in particular districts.
- Share research on voter-protection problems or other issues of general concern, as long as it is made generally available to the public (e.g., posted on the 501(c)(3)’s website) or is offered to all candidates in a race or all viable political parties in a jurisdiction.
- Solicit support from all political parties or candidates for a particular office for the 501(c)(3)’s advocacy efforts to ensure a fair and effective voting system (e.g., asking all political parties to submit an amicus brief in support of the 501(c)(3)’s efforts).
- Support litigation brought by a party or candidate that, in the independent judgment of the 501(c)(3), furthers the security of the voting process. In doing so, though, the 501(c)(3) must avoid showing support for the party or candidate and should affirmatively state its neutrality.
501(c)(3) organizations may not:
- Explicitly or implicitly endorse any candidate or political party. Nothing should be said, done, or implied that suggests electoral favor or disfavor either for a specified candidate or political party, or for unnamed candidates or parties generally that subscribe to particular issue positions or have particular characteristics. For instance, 501(c)(3)s cannot suggest that any particular political party or candidate has a better or worse position on election-protection issues.
- Make any direct or indirect candidate, party, federal PAC or 527 contribution. A 501(c)(3) should not conduct research on an issue in order to provide it to a particular candidate or party or at the request of a particular candidate or party. In addition, it cannot use any of its resources to pay for or participate in a partisan event.
- Target election-protection efforts to a precinct based on the political party or candidate the precinct is likely to support.
- Consult with a particular party or candidate to determine where to target election-protection efforts.
- Coordinate voter outreach efforts with candidates, parties, federal PACs or other 527 groups, even if the 501(c)(3) itself otherwise follows nonpartisan guidelines. Public charities cannot tailor their efforts to mesh with those of partisan entities or share voter outreach strategies with one candidate or party only.
Even if these standards are satisfied, other groups or the media may raise questions about any 501(c)(3) engagement with a political candidate, party, or partisan group. Therefore, the risk of adverse publicity for your efforts should be considered in deciding whether to deal with them in any manner.
Note that 501(c )(3) organizations may coordinate their voter protection efforts with other 501(c)(3) organizations, and with other kinds of tax-exempt groups, businesses and other organizations, so long as the 501(c)(3)’s collaborators themselves are complying with 501(c)(3) nonpartisan standards in their coordinated efforts. (Underline in the original - DAG)
The Alliance for Justice states in one of its articles about lobbying, The Downside of Private Foundations Using Restrictive Grant Agreements:
Contrary to popular belief, federal tax law does not require private foundations to include lobbying prohibitions in grants made to public charities. Many foundations unfortunately make restricted grants by using grant agreement letters that prohibit their grantees from using grant funds for “any propaganda or attempt to influence legislation.” Such language is overly restrictive and may undermine the grantee’s ability to effectively and efficiently achieve its goals. The prohibition on using grant funds for lobbying only applies to private foundation grants to non-public charities, such as 501(c)(4) organizations.
Independent Sector Material
Election 2008: http://www.independentsector.org/programs/gr/ElectionResources.html
Democracy in Action -- Projects by Nonprofits
- Candidate Forums
- Election Judges for Charity
- Engaging Young Adults
- Funding Voter Engagement
- Get Out the Vote
- Personnel Policies
- Policy Agendas
- Voter Education
- Voter Registration
Elections Rules – Voter Education
Election Rules - Issue Advocacy vs. Political Campaign Intervention