Political Campaign Intervention

Posted on Wednesday, October 10, 2012

It’s an election year which means an increased opportunity for nonprofit organizations to engage in activities that may jeopardize their tax exempt status – political campaign activity.  What exactly can a nonprofit do to make sure it doesn’t lose its exempt status?

First, there are three different types of political activities.

1.  Political campaign activity – any activities that favor or oppose a candidate for public office (attempts to influence public opinion about candidates)

2.  Lobbying – any attempts to influence specific pieces of legislation (attempts to influence public opinion about legislation)

3.  General advocacy – basically all other advocacy (attempts to influence public opinion on issues)

Some of these activities are allowable for a nonprofit to engage in while others are not.  It just depends on what section of the Internal Revenue Code the nonprofit falls under.

501(c)(3) charitable, religious, educational and scientific organizations are absolutely prohibited from participating in any political campaign activity.  However, 501(c)(3) organizations may engage in lobbying activity so long as it does not constitute a substantial activity of the organization and may also take part in general advocacy as an educational activity.  A 501(c)(3) organization that has engaged in political campaign activity may be subject to tax on the amount of money it spent on the activity.  The management of the organization may also be taxed if they knew money was being spent and did not intervene.  The organization may also face losing its tax exempt status due to political campaign activity or substantial lobbying.

501(c)(4) social welfare organizations, 501(c)(5) labor, agricultural and horticultural organizations, and 501(c)(6) business league organizations are allowed to take part in political activity so long as it does not constitute the organization’s primary activity.  These organizations may also participate in an unlimited amount of lobbying and general advocacy in furtherance of the organization’s exempt purpose.  Like 501(c)(3) organizations, these types of nonprofits may also be subject to tax on excess political activity; however, unlike 501(c)(3) organizations, organizations under sections 501(c)(4), 501(c)(5) and 501(c)(6) do not risk losing their exempt status.

During this election year, be sure to make sure your organization understands what type of activities it can and cannot participate in so that you don’t risk losing your tax-exempt status.

Posted by: Carrie Minnich, CPA

Posted in Mission Minded Nonprofits

Disclaimer: The information contained in Dulin, Ward & DeWald’s blog is provided for general educational purposes only and should not be construed as financial or legal advice on any subject matter. Before taking any action based on this information, we strongly encourage you to consult competent legal, accounting or other professional advice about your specific situation. Questions on blog posts may be submitted to your DWD representative.

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