Ban on political activities: An election-year warning for charities

CPAs can help organizations avoid risks that endanger tax-exempt status.

As the 2012 elections draw near, the IRS is once again increasing its oversight of the ban on political campaign activities by Sec. 501(c)(3) charitable organizations. An IRS work plan (Exempt Organizations 2011 Annual Report & 2012 Work Plan, available at states that, in enforcing the ban this year, the IRS will use new information about organizations’ activities from Form 990, Return of Organization Exempt From Income Tax, which was expanded in 2008.

While many charities speak out on issues as an integral part of carrying out their charitable purpose, these organizations are prohibited from engaging in political campaign activities. The consequences of violations can be severe, including fines and possible revocation of the organization’s tax-exempt status. Understanding and communicating to organization managers the rules discussed in this article will help CPAs ensure that clients do not jeopardize their tax-exempt status.

A Sec. 501(c)(3) organization, including a church, is not permitted to be an “action” organization, as defined in any of three ways. First, an organization is an action organization if a substantial part of its activities is attempting to influence legislation, including by advocating its adoption or rejection, or by contacting federal, state, or local legislators to propose, support, or oppose legislation, or urging the public to do so (Regs. Sec. 1.501(c)(3)-1(c)(3)(ii)). The second definition likewise involves proposed legislation: A Sec. 501(c)(3) organization is an action organization if its main or primary objective may be attained only by the passage or defeat of proposed legislation and it advocates or campaigns for the attainment of the objective, as distinguished from engaging in nonpartisan analysis, study, or research and making those results available to the public (Regs. Sec. 1.501(c)(3)-1(c)(3)(iv)) (see also “Issue Advocacy vs. Political Intervention,” below).

Third—and the focus of this article—an organization is an action organization if it participates or intervenes, directly or indirectly, in any political campaign on behalf of or in opposition to any candidate for public office. Regs. Sec. 1.501(c)(3)-1(c)(3)(iii) defines “candidate for public office” as an individual who offers himself or herself, or is proposed by others, as a contestant for an elective public office, whether the office is national, state, or local.

It is crucial for CPAs to advise their exempt-organization clients about IRS guidance on what is and is not allowed in relation to political campaigns.

A good place to start is Rev. Rul. 2007-41, in which the IRS provides examples of acceptable and unacceptable campaign involvement. The IRS website (nonprofits and charities section) has additional resources, including answers to frequently asked questions on this topic (see the “Resources” box near the end of this article for links). The following sections of this article provide an overview of what constitutes inappropriate political activity and suggest what organizations can do to avoid engaging in political intervention.


The political campaign prohibition is not intended to restrict free expression of opinions on political or public policy issues by an organization’s leaders, including its board members, as long as they are speaking for themselves as individuals. However, leaders may not make partisan comments in their official capacity where it appears they are speaking on behalf of the charitable organization. Partisan comments in the organization’s publications and newsletters or at official functions are prohibited.

Rev. Rul. 2007-41 provides an example in which the CEO of a tax-exempt hospital endorsed a political campaign candidate, and his endorsement was made public in an ad in the local newspaper. Although the endorsement identified the individual as the CEO of the hospital, the ad also stated that “[t]itles and affiliations of each individual are provided for identification purposes only.” Because the ad was not paid for by the hospital and the CEO made the endorsement in a completely personal capacity, the IRS concluded that the ad did not constitute campaign intervention by the hospital. However, in another example, a university president supported a candidate in the “My Views” section of the university’s alumni newsletter. Even though the president paid for that portion of the newsletter, the IRS concluded that the university was guilty of campaign intervention because the comments were made in an official university publication.

Leaders who speak or write in their individual capacity, even outside official tax-exempt functions, should clearly indicate that their comments are not intended to represent the views of the organization. This disclaimer will help to avoid potential attribution of their comments to the organization. Since a Sec. 501(c)(3) organization acts through individuals, sometimes the political activity of an individual other than an officer or director may be attributed to the organization. Use of the organization’s resources, facilities, or personnel can indicate that the individual’s actions should be attributed to the organization. For example, distributing campaign material via the organization’s email, phone, or bulletin board is political intervention.

When considering the actions of employees and volunteers other than officials, the IRS need find only tacit authorization by the organization for those actions to be attributed to the organization. CPAs therefore should warn their tax-exempt clients that the organization’s failure to disavow the actions of individuals may be considered ratification of the actions and encourage them to take steps to prevent such unauthorized actions. When an employee or volunteer participates in political intervention that might be construed to be on the organization’s behalf, the organization should communicate its disapproval of the activity and take steps to ensure that similar actions are not repeated.


Organizations may invite candidates to speak at their official functions without fear of violating the prohibition on political intervention, as long as campaign activities do not occur at the function and the organization does not indicate any support of, or opposition to, the candidate. Announcements regarding the speaker should not mention the individual’s candidacy or the upcoming election. Other factors in determining whether the organization participated in a political campaign include whether the organization provided equal opportunity to opposing candidates and whether any fundraising occurred.

If an organization invites a candidate to participate in a forum or debate, all candidates for that particular office must be offered an equal opportunity to participate in the program. If the forum is operated in a way that shows bias for or against any candidate, it can be considered political intervention. Questions should be presented in an unbiased wording and manner and cover a broad range of issues relevant to the office sought. The candidates should not be asked to support or oppose a position or agenda of the charitable organization. Basically, the organization must conduct the forum as an educational event; no campaign fundraising or other political activities should take place (see Rev. Ruls. 74-574, 86-95, and 2007-41). The organization must be careful not to rely solely on the candidate’s assurance of what is acceptable. The candidate may be focused on election laws rather than tax laws and may also be unfamiliar with the organization’s tax status.


Sec. 501(c)(3) organizations often take positions on public policy issues, including those that divide candidates in an election. The charitable organization is not prohibited from communicating its stance on an issue.

However, when the issue is prominent, comes shortly before an election, and clearly distinguishes candidates, taking a stance may be viewed as indirectly supporting or opposing a specific candidate. Even if a statement does not tell the audience to vote for or against a specific candidate, it can be considered political intervention if such a directive is implied. For example, an organization might try to avoid directly endorsing a candidate by using code words to substitute for the candidate’s name, such as “conservative,” “liberal,” or other labels but still be considered to have made an endorsement by its use of the terms.

Legislative-related statements that are part of an ongoing series of communications on the same issue, are only coincidental to the timing of an election (and do not mention the election), or that relate to events other than the election will not be viewed as political intervention. A Sec. 501(c)(3) organization may take a stance on a current legislative issue, mention a current legislator (who is also a candidate) as supporting or opposing the issue, and even encourage its audience to contact the person to urge a vote for or against the legislation without engaging in political intervention; however, the communication should not mention the legislator’s candidacy (see Rev. Rul. 2007-41, situations 14 through 16).


Sec. 501(c)(3) organizations may not publish or distribute statements, including information posted on their websites or social media sites, supporting or opposing a candidate for public office. A charitable organization must pay particular attention when it establishes a link to another website or form of social media. The organization is responsible for the content of the linked site even if it does not have control over that site. If political campaign content is on the linked site, the charity will be deemed to have intervened in a political campaign. Because the content of linked sites may change over time, the organization should implement procedures to monitor the linked content and adjust the links as necessary.

According to Rev. Rul. 2007-41, links to candidate-related material do not necessarily constitute political campaign intervention. For example, if the link serves a purpose related to the organization’s charitable mission (e.g., education related to a charitable program), it might not be considered political intervention. All the facts and circumstances associated with the link must be assessed to determine how it should be characterized. Charities should also be aware that hosting chat rooms, bulletin boards, and other interactive forums may open the organization to criticism if the posted information contains biased political comments.


A Sec. 501(c)(3) organization may be considered as intervening in a political campaign through providing goods, services, or facilities to a candidate if it does so in a manner that differs from the way such items are offered to the general public or other candidates. Allowing one candidate the use of its facilities while denying other candidates the same privilege would be considered political intervention, as would providing use of facilities to one candidate at rates that differ from those charged to other candidates or the general public. If the organization rents its mailing list or accepts fees for advertising, the organization should allow all candidates access at the same rates to avoid political intervention.


A relatively minor incidence of political campaign activity can violate the political prohibition law. Unlike the prohibition on partisan legislative activity, it does not matter that political candidate intervention is inadvertent or that it represents an insubstantial part of the organization’s activities. The penalties for violating the prohibition are severe. The harshest penalty is that the IRS can revoke the organization’s tax-exempt status. In this case, all exempt-related revenues would become taxable, and contributions to the organization would no longer be tax-deductible.

A May 2009 report by the Treasury Inspector General for Tax Administration (TIGTA, Statistical Profile of Alleged Political Intervention by Tax-Exempt Organizations in the 2004 Election Season, No. 2009-10-080 (May 12, 2009)) showed that the IRS had substantiated prohibited political activity in 71% of the 107 organizations it examined as a result of its 2004 Political Activities Compliance Initiative. (Although TIGTA found this number to have been overstated because of case coding errors, the confirmed substantiation rate was still greater than 50%, it said.) Six of these organizations had their tax-exempt status revoked. Sixty-four percent of the examined organizations received a letter warning them of the consequences of future political intervention.

In addition to possible loss of tax-exempt status, an organization that violates the political intervention rules could face a 10% excise tax under Sec. 4955 on political expenditures paid or incurred, and that could increase to 100% if the political expenditure is not corrected within a certain period. An excise tax may also be imposed on managers who knew the expenditure was inappropriate. Perhaps the most significant consequence of political intervention is the loss of reputation and public trust, which is fundamental to the charitable organization’s message and fundraising.


IRS data show that local as well as national organizations have been investigated for political activities. The IRS opens examinations most often after it receives referrals from watchdog groups, individuals, opposing candidates, or IRS employees. CPAs should advise their clients to implement the following steps to prevent politicking:

  • Organizations should have a written policy prohibiting political activities and explaining what is unacceptable. All officers and directors should be educated periodically about this policy.
  • Employees must not be allowed to perform tasks related to political activities during working hours or using organizational resources. This prohibition should be included in the organization’s written policy and periodically communicated to all employees.
  • The organization should establish internal controls to prevent political expenditures.
  • When organization activities or communications involve candidates, disclaimers of support for candidates should always be included. For example, if the organization allows a candidate to speak at its function or accepts paid advertising from a candidate, the organization must clearly indicate that it does not endorse the candidate and that the candidate’s comments are not intended to represent its views.
  • The organization’s leaders should use similar disclaimers for their personal political activities.
  • Equal time and fees should be allowed or charged to all candidates.
  • Timing of issue advocacy should coincide with legislation rather than an election.
  • Political signs must not be displayed on the organization’s grounds.
  • Website links should be monitored to avoid political messages on the linked sites.
  • Social media content should also be reviewed to ensure no political material exists that could appear to be connected to the organization.

CPAs may advise their tax-exempt clients to set up a Sec. 501(c)(4) social welfare organization to conduct political campaign activities, since such organizations may engage in such activities as long as they do not constitute the organization’s primary activity, which must be the promotion of social welfare. An organization qualifies if it is operated primarily for the purpose of bringing about civic betterments and social improvements. The promotion of social welfare does not include direct or indirect participation or intervention in political campaigns on behalf of or in opposition to any candidate for public office. For example, in Rev. Rul. 67-368, the IRS held that an organization whose primary activity was nonpartisan rating of candidates for public office did not qualify for Sec. 501(c)(4) exempt status.

However, in Rev. Rul. 81-95, the IRS held that as long as a Sec. 501(c)(4) organization’s primary activity is promoting social welfare, it may participate in political campaigns on behalf of or in opposition to candidates for public office. As long as the social welfare requirement is observed, no funds pass to the (c)(4) organization from the (c)(3) organization, and the organizations maintain separate recordkeeping and reimbursement for facilities and services, the activities of the Sec. 501(c)(4) organization will not jeopardize the Sec. 501(c)(3) organization’s exempt status.

CPAs should watch for possible revisions of, or new guidance on, these rules, in the wake of recent controversy and calls for greater consistency and clarity in this area and calls for IRS enforcement of the social welfare requirement. In Letter Ruling 201224034, released June 15, the IRS denied Sec. 501(c)(4) status to an organization that it determined failed the requirement and existed primarily to promote its founder’s political interests.

The IRS uses a facts-and-circumstances approach in determining what actions violate the political campaign rules. When in doubt, the organization should be cautious and avoid the appearance of politicking. Because the penalties for political intervention are severe, CPAs must advise their tax-exempt clients to show no bias or preference—written, oral, or procedural—with respect to a particular candidate.


Charitable organizations exempt from tax under Sec. 501(c)(3) are prohibited from certain political activities, including intervening in political campaigns on behalf of, or in opposition to, candidates for public office.

In their official publications or at official functions, organizations may not make partisan comments or show bias for or against a candidate. Their leaders or other employees, acting in an official capacity, must also observe such limitations. However, employees may express such opinions, as long as it is made clear they do so only in their personal capacity.

Printed materials, websites, and social media webpages must also be neutral regarding candidates. Organizations may hold debates or forums at which political candidates may speak, as long as all candidates for an office are offered an equal opportunity to participate and other restrictions are followed.

Sec. 501(c)(4) tax-exempt organizations generally have greater latitude to engage in political campaigns as long as promoting social welfare, rather than political participation, is their principal activity.
Claudia L. Kelley ( ) and F. Douglas Roberts ( ) are a professor and an associate professor, respectively, with the Walker College of Business at Appalachian State University in Boone, N.C.

To comment on this article or to suggest an idea for another article, contact Paul Bonner, senior editor, at or 919-402-4434.



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