Can Your Not-for-Profit Organization Participate in the Election?

As the presidential election campaigns continue to heat up, not-for-profit organizations may be tempted to join in the fray.  Although it’s been said that politics and tax exemptions don’t mix, that’s an over-simplification of the restraints imposed on Section 501(c)(3) organizations. Granted, Section 501 not-for-profits can’t engage in political campaigning. Because of the consequences, they must be vigilant. In the worst-case scenario, a misstep could result in losing its tax-exempt status. Nevertheless,   there may be more leeway in the political arena than you think. Ground Rules Essentially, tax-exempt organizations aren’t allowed to directly or indirectly act in federal, state or local campaigns either for or against a candidate or party. Thus, you cannot support or oppose  candidates for offices such as:
  • President,
  • Senator or member of congress,
  • Governor,
  • Mayor,
  • Member of a school board,
  • City supervisor, or
  • County trustee.
The IRS will base its determinations of violations on an organization’s other activities and its current situation. For instance, if your nonprofit invites a candidate to make a campaign speech at a fundraising event for your charity, or you feature an elected official stumping for a candidate, your organization has clearly violated the prohibition. Similarly, posting messages on your website supporting or opposing  a  candidate isn’t allowed. However, some advocacy and lobbying may be allowed. What Your Organization Can Do Here are a few examples of what your nonprofit is allowed to do:
  1. Sponsor an appearance by a candidate or public official. If the person is being invited as a candidate, don’t indicate any support or opposition and give other candidates the opportunity to appear. If it’s in some other capacity, such as being involved in your charitable mission, be sure the appearance doesn’t turn into a campaign stop or fundraiser for that person.
  2. Hold a debate between candidates. You must invite all of the candidates, have an independent panel prepare the questions, cover a broad range of topics (including those significant for your organization) and provide every candidate with an equal opportunity to speak. An impartial moderator should state that the views expressed within the debate don’t represent those of your organization.
  3. Advocate a political issue without attempting to intervene in a campaign. You can go so far as to try to sway the candidates to your way of thinking and encourage them to take a public stand.
  4. Help to build planks within a party’s platform. This may be accomplished by delivering testimony to the party’s platform committee — as long as you clarify that the testimony is strictly educational and report the testimony in your organization’s newsletter or other publication.
  5. Launch a nonpartisan “get out the vote” drive. The drive must be designed solely to educate the public about voting and can’t promote or oppose a candidate or party.
What Your Organization Can’t Do Now here are some things you aren’t allowed to do:
  1. Support a candidate or party for election. For instance, you can’t get behind or oppose a declared candidate or third-party movement, engage in efforts to draft someone to run for office, or do advance exploratory work for electing a candidate or party.
  2. Contribute to a campaign or endorse a candidate. This includes indirect support, such as volunteering to make calls on behalf of a candidate as well as direct financial support. Not-for-profit workers can, however, contribute their own time and money away from work.
  3. Provide any form of monetary support. Not only are organizations barred from donating funds to a candidate or party, they can’t use another event to raise funds. In the same vein, your group cannot hold a dinner or other event to sponsor a candidate or political organization. Section 501(c)(3) not-for-profits are also barred from making loans for these purposes.
  4. Request support for your organization or charitable mission from a candidate, political party or other political organization in exchange for your endorsement.
  5. Distribute any materials encouraging recipients to vote one way or another. This includes any website communications.
If the IRS suspects that your organization has violated the rules, it may notify you by letter and then - conduct an on-site investigation. Offenses are punishable by revocation of tax-exempt status, but first-time offenders may get away with a slap on the wrist. For example, you might agree to change  procedures and stipulate that the violation won’t occur again. If your nonprofit spent funds on the banned activity, however, the IRS may impose excise taxes.
About the Author(s)

Craig is the Principal-in-Charge of the Sarasota, Florida office of HBK CPAs & Consultants. He began his accounting career in 1999 and joined HBK in 2007.

He provides accounting, audit and financial reporting services to a wide range of industries, including manufacturing, wholesale distribution, not-for-profit, governmental, retail and entertainment.

Additionally, Craig is the leader of HBK’s Nonprofit Services Niche and a member of the firm’s Assurance Practice Committee. He is a recurring speaker, presenting on various accounting, auditing and internal control-related topics internally and for various external organizations. He also frequently authors non-profit articles for several external publications.

Hill, Barth & King LLC has prepared this material for informational purposes only. Any tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or under any state or local tax law or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Please do not hesitate to contact us if you have any questions regarding the matter.

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