Can 501(c)(3)s get involved in helping (or hindering) candidates for public office?

Summary:

Basically no. 501(c)(3)s are not permitted to do anything to help or hinder the election of any candidate to public office. This item reproduces the texts of IRS statements on this question and provides links to other IRS materials.

Answer:

Following complaints that religious organizations were exceeding the boundaries of permitted political activities and complaints that its own handling of such complaints was politically skewed, the IRS undertook a review of how such cases were dealt with in the years 2004-2006 and issued several new statements designed to clarify the range of permitted activities for organizations that are exempt from corporate income taxes in the US. Here is the summary page from the IRS website with links to several related documents:

IRS Reports on Political Activity Compliance Initiative

(This page is on the IRS website at http://www.irs.gov/charities/article/0,,id=154622,00.html.)

Internal Revenue Service officials have released a report, with executive summary, on the agency's examination of political activity by tax-exempt organizations during the 2004 election campaign. The report found some level of prohibited political activity by section 501(c)(3) organizations in nearly three-quarters of the cases reviewed.

In connection with the report, the IRS is also unveiling new procedures for the 2006 election season, which provide additional guidance to charities regarding political activities. As part of its approach to combating this activity, the IRS has begun its educational and enforcement efforts to help ensure that charities have enough advance notice of the statutory rules against engaging in political activities.

Additional information

News Release IR-2006-36

http://www.irs.gov/newsroom/article/0,,id=154780,00.html

Memorandum from Director, Exempt Organizations

http://www.irs.gov/pub/irs-tege/paci_cover_memo_with_sign.pdf

Executive Summary of Report

http://www.irs.gov/pub/irs-tege/exec__summary_paci_final_report.pdf

Final Report - Political Activity Compliance Initiative

http://www.irs.gov/pub/irs-tege/final_paci_report.pdf

Procedures for 501(c)(3) Organizations (Attachment A)

http://www.irs.gov/pub/irs-tege/paci_procedures-feb_22_2006.pdf.pdf (This memorandum describes the process the IRS follows when it receives a complaint or becomes aware of questionable political activities connected to an exempt organization or charity. --Ed.)

Letters and Information Document Requests (Attachment B)

• Letter 3934 -- http://www.irs.gov/pub/irs-tege/letter_3934.pdf.pdf
  
• Letter 3934C -- http://www.irs.gov/pub/irs-tege/letter_3934c_on_letterhead.pdf.pdf
  
• Information Document Requests -- http://www.irs.gov/pub/irs-tege/paci_idrs.pdf

2004 Political Activity Compliance Initiative Summary of Results

http://www.irs.gov/pub/irs-tege/one_page_statistics.pdf

Fact Sheet 2006-17

http://www.irs.gov/newsroom/article/0,,id=154712,00.html

On April 28, 2004, the IRS issued advisory IR-2004-59 with the title "Charities May Not Engage in Political Campaign Activities".Here is the text:
WASHINGTON -- Charities should be careful that their efforts to educate
voters comply with the Internal Revenue Code requirements concerning
political campaign activities, the tax agency said Monday in a presidential
election-year advisory.

Organizations described in section 501(c)(3) of the Code that are exempt
from federal income tax are prohibited from participating or intervening in
any political campaign on behalf of, or in opposition to, any candidate for
public office. Charities, educational institutions and religious
organizations, including churches, are among those that are tax-exempt under
this code section.

These organizations cannot endorse any candidates, make donations to their
campaigns, engage in fund raising, distribute statements, or become involved
in any other activities that may be beneficial or detrimental to any
candidate. Even activities that encourage people to vote for or against a
particular candidate on the basis of nonpartisan criteria violate the
political campaign prohibition of section 501(c)(3).

Whether an organization is engaging in prohibited political campaign
activity depends upon all the facts and circumstances in each case. For
example, organizations may sponsor debates or forums to educate voters. If
the debate or forum shows a preference for or against a certain candidate,
however, it becomes a prohibited activity.

The federal courts have upheld this prohibition on political campaign
activity, most recently in Branch Ministries v. Rossotti, 211 F.3d 137 (D.C.
Cir. 2000). The courts have held that it is not unconstitutional for the tax
law to impose conditions, such as the political campaign prohibition, upon
exemption from federal income tax.

(For the court's opinion in that case, see http://1stam.umn.edu/archive/fedctapp/branch-ministries.txt. -- Ed.)
If the IRS finds a section 501(c)(3) organization engaged in prohibited
campaign activity, the organization could lose its tax-exempt status and it
could be subject to an excise tax on the amount of money spent on that
activity.

In cases of flagrant violation of the law, the IRS has specific statutory
authority to make an immediate determination and assessment of tax. Also,
the IRS can ask a federal district court to enjoin the organization from
making further political expenditures.

In addition, contributions to organizations that lose their section
501(c)(3) status because of political activities are not deductible by the
donors for federal income tax purposes.

The political campaign prohibition as it applies to churches is discussed in
Publication 1828, Tax Guide for Churches and Religious Organizations. This
publication, along with other information about the political campaign
prohibition, is available on IRS.gov at www.irs.gov/eo.
The IRS issued similar election-year advisories to charities in 1992, 1996
and 2000.

(Note that political activity -- sometimes called electioneering -- is different from policy advocacy and lobbying. There is no prohibition against 501(c)(3)s adopting positions on questions of policy. Direct efforts to influence the outcome of legislative action -- lobbying -- is permitted under certain restrictions. For discussion of the lobbying rules and related questions about policy positions, see the FAQ items listed at http://www.idealist.org/en/faqcat/63-12. -- Ed.)

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Posted 4/28/04; 2006 initiative reports added 9/24/06 -- PB