An Election Season Revisit of the Political Activity Rules for Tax-Exempt Organizations

As we have now moved through the primaries and attention turns to the final election, it’s worthwhile for nonprofit organizations to review the rules that govern them regarding public policy, lobbying, and political activities.

Tax-exempt nonprofit organizations must be careful about the types of public and political activities they undertake, but a nonprofit organization doesn’t have to give up the ability to take positions on public issues or to take action to influence public policy merely because of its exempt status. Internal Revenue Service (IRS) rules governing the political activities of tax-exempt organizations are often narrower than many people think. Tax-exempt organizations have the right to engage in public debate and make their positions on important issues known, and even 501(c)(3) charities, which are the most heavily regulated, may engage in some public policy activities that further their tax-exempt, charitable purposes.

The main restrictions on the political activities of tax-exempt organizations involve lobbying (trying to convince Congress or a legislature to enact or reject specific legislation) and intervening in political campaigns (supporting or opposing candidates for election to office). But even when these restrictions apply, they leave a great deal of room for nonprofit organizations to participate in public policy activities. Many tax-exempt organizations engage in non-partisan activities such as hosting candidate debates, sponsoring public officials to speak at their conferences or other gatherings, issuing position papers or legislative policy agendas, or educating the public about current events and issues.

Tax-exempt organizations, especially charities, must still observe restrictions that do not apply to other organizations or individuals. Part of the difficulty exempt organizations face is that these restrictions are very subjective—the IRS rules apply a “facts and circumstances” test, and there are terms such as “no substantial part of activities” that can come into play.

Over the years, many nonprofit organizations and legal professionals have criticized the IRS’s approach as being too vague and too difficult to properly enforce. Some national exempt organizations have been advocating for clearer rules, and in late 2013 the IRS first proposed some regulations for certain types of organizations. However, the proposed regulations were withdrawn in 2015 due to criticism and opposition. Since then there have been proposed legislation and some attention to these issues by Congress, but no new law or regulations.

As a result, exempt organizations are left trying to figure out how to comply with the subjective standards. To do so, it’s important to distinguish among education and advocacy for policies (generally permitted); lobbying for or against specific legislation or referenda (which may be permitted but is more closely scrutinized)¹; and directly engaging in campaign activities or endorsements (never permitted for charities but may be possible for other types of exempt organizations so long as they are not “primarily” engaged in election campaigning).

You should make sure the rules are incorporated into your policies and procedures and review them with board members and employees annually. Here are some examples of permissible and prohibited activities.

Do’s (things that your organization can pursue without consulting an experienced attorney):

• Continue to speak out and educate the public. To be safe, avoid mentioning specific legislation or naming specific public officials. And remember that charities must stick to educational activities and avoid partisan messages.
• Sponsor candidate debates or forums at which all the candidates for a particular office are invited to attend or participate.
• Encourage others to vote, so long as your message is generic and not targeted in any way that could be interpreted in any way as intending to benefit particular candidates or political parties.
• Advocate for public policies for the good of society. But if you are a charity, consult an attorney first to learn how to frame your message so that it is considered educational (permissible) and not impermissibly partisan.

Do’s (but consider reviewing with counsel first–these activities raise issues that can be legally complex):

• Publish voter guides;
• Sponsor public officials to speak at your organization’s conferences or other gatherings;
• Issue position papers or legislative policy agendas that mention specific legislation or name public officials who are campaigning for election, or that are distributed close in time to election day.

Don’ts (especially for charities—some other types of nonprofits must avoid some of these activities, but can engage in others so long as they consult with counsel in advance):

• Endorse candidates for federal, state, or local office;
• Show preference with content or conduct;
• Make or solicit campaign contributions;
• Make written or oral statements that encourage people to vote for or against a candidate
• Place political ads;
• Mention the upcoming election when advocating for your issue;
• Make campaign statements on your website or link to candidate websites or published information;
• Board members and nonprofit executives: don’t speak on behalf of the organization when supporting candidates.

Now is a good time for tax-exempt organizations to review their policies and practices. Organizations that know and understand the rules of the road can actively participate in the political process without undermining their tax-exempt status.

If you have questions regarding the effects of the upcoming election on your tax-exempt organization, including Political Action Committee (PAC) or lobbying registration questions, please contact your Butzel Long attorney, a member of the Butzel Long Nonprofit Organizations group, or the authors of this Alert.

Mark Lezotte
313.225.7058
lezotte@butzel.com

Joseph Cosby
202.454.2880
cosby@butzel.com

Daniel Soleimani
248.258.2606
soleimani@butzel.com 

Shanika A. Owens
313.983.6908
owens@butzel.com

Conor M. Bowers
248.258.2916
bowers@butzel.com

[1] Nonprofit organizations that lobby are sometimes required to register as lobbyists, but these restrictions don’t usually apply to most nonprofit organizations. However, other rules may apply to organizations that receive government grants or funding. If your organization hires a lobbyist, pays an employee to influence the government, makes significant expenditures to influence government decisions, or receives grants or other assistance from the government, you should consult with counsel to determine what other restrictions apply to your organization.