The Internal Revenue Service (IRS) reminds charities to avoid becoming involved in political campaign activities during the coming election season. As a rule, charities, religious organizations such as churches, educational organizations and other groups that are tax-exempt under section 501(c)(3) of the tax code, may not participate or intervene in any political campaign on behalf of, or in opposition to, any candidate for public office.
“While the vast majority of charities and churches do not engage in politicking, an increasing number did take part in prohibited activities in the 2004 election cycle,” IRS Commissioner Mark W. Everson said in a prepared statement. “The rule against political campaign intervention by charities and churches is long established. We are stepping up our efforts to enforce it.”
The IRS has put procedures into place for the 2006 election season to more quickly address instances of potential prohibited activity on the part of charities, churches and other tax-exempt organizations. The procedures are meant to ensure that public referrals, as well as activities the IRS itself uncovers, are reviewed expeditiously and treated in a consistent, fair and nonpartisan manner.
The IRS noted an increase in politicking by 501(c)(3) organizations during the 2004 election season. The agency responded by increasing its educational efforts and launching an enforcement program, the Political Activity Compliance Initiative (PACI), to investigate specific, credible allegations of wrongdoing. For 501(c)(3) organizations, wrongdoing includes:
- Endorsing candidates
- Distributing statements for or against candidates
- Becoming involved in any activity that would be in support or in opposition to any candidate.
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. But if the debate or forum shows a preference for or against a certain candidate, it becomes a prohibited activity.
Federal courts have ruled that it is not unconstitutional for the tax law to impose conditions, such as the political campaign prohibition, upon exemption from federal income tax. This position was most recently upheld in Branch Ministries v. Rossotti, 211 F.3d 137 (D.C. Cir. 2000).
The IRS published a Fact Sheet on Election Year Activities and the Prohibition on Political Campaign for Section 501(c)(3) Organizations in February of this year. The Fact Sheet provides information to help Section 501(c)(3) organizations stay in compliance with the federal tax law, however, it is not intended to replace the law or be the sole source of information. In addition, churches and religious organizations can find further guidance in Publication 1828: Tax Guide for Churches and Religious Organizations.