nder normal circumstances, charities must be careful how they deal with political issues, to ensure they do not engage in prohibited political activity. During an election year, they must be especially careful. Failure to monitor a charity’s activities or those of its members may trigger IRS sanctions, which can range from imposition of excise taxes to revocation of the organization’s tax-exempt status. The rules for political and lobbying activities by public charities vary, depending on the type, scope and amount of activity conducted.
Public charities may engage in lobbying as long as it does not constitute a “substantial part” of their total activities; the IRS will consider both the quantity and the quality of a charity’s actions. Certain exempt organizations (other than churches and private foundations) may elect to apply an expenditures test; a charity will not jeopardize its exempt status as long as its lobbying expenditures do not exceed certain limits. Charities that go over these limits in any one year are subject to a 25% excise tax on the excess expenditures.
Some activities allowed. Exempt organizations may be involved in some activities that deal with public policy issues. These include conducting (on a nonpartisan basis) educational meetings or preparing and distributing educational materials.
Candidates may be asked to speak at charitable events about their personal experiences in their capacity as individuals (for example, because they are celebrities, military leaders or experts in a nonpolitical field). If they intend to speak on issues regarding a current political campaign, however, the charity must (1) provide an equal opportunity to other candidates seeking the same office, (2) not indicate any support or opposition to any candidate and state that explicitly in the introductions and (3) not engage in political fundraising.
Charitable organizations can engage in “issue advocacy” by taking a position on issues, but must avoid issue advocacy that functions as political campaign intervention. This usually hinges on whether the organization expressly or implicitly encourages voters to vote for or against a specific candidate.
Note that there is no bright-line test to determine whether a charity is involved in prohibited political campaign intervention. A charity might engage in several different activities, none of which would be considered political activity on its own. When viewed together, however, the activities may indicate that the organization has engaged in political activity.
For more information, see Tax Clinic, “Election-Year Focus on Lobbying and Political Activities of Public Charities” by Gretchen Kurhajetz, CPA, in the July 2006 issue of The Tax Adviser.
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