voteA Brief Case Study:  Your nonprofit’s founder sends out an email in their official capacity to all of its members urging the them to vote for or against a political candidate or for or against a local proposition.

It may be a well-intended gesture, but a mistake that could result in excise taxes or the potential loss of your organization’s tax-exempt status.

Nonprofit organizations that qualify for federal income tax exemption under Internal Revenue Code (IRC) Section 501(c)(3) have various restrictions on political activities.  An organization that does not restrict its participation in certain political activities, and does not refrain from others, assumes the potential risks noted above.

Section 501(c)(3) public charities are absolutely prohibited from directly or indirectly participating in, or intervening in, any political campaign on behalf of or in opposition to a candidate for public office.  However, there are certain activities or expenditures that may be allowable based on the facts and circumstances.  Examples of these typically include voter registration drives or other voter education activities conducted in a non-partisan manner.

Despite the absolute prohibition on political campaign activities, Section 501(c)(3) public charities may engage in “legislative” activity, but it must be insubstantial in relation to its overall activities.  Whether an organization’s lobbying activities constitute a substantial part of its overall activities is determined by the facts and circumstances in each case.  Understanding the differences between political campaign activity and legislative activity is therefore critical, and content that is shared publicly should be carefully reviewed by your organization’s staff.

To be considered lobbying, a communication must involve and put forth a view on a specific legislative proposal or legislation that has already been introduced before a legislative body at the local, state or federal level.  The Internal Revenue Service takes the position that local ballot initiatives or similar procedures constitute “legislation”.  Actions by executive, judicial or administrative bodies (e.g., regulations) are excluded by definition.  Lobbying may either be direct or grassroots.

Direct lobbying is any attempt to influence legislation through a communication with any member or employee of a legislative body, or with any other governmental official who may participate in the formulation of legislation, if the principal purpose is to influence legislation.   Direct lobbying also includes communications by an association to its members directly encouraging them to engage in direct lobbying.

Grassroots lobbying is defined to include communications to the general public that: (i) Refer to a specific pending or proposed legislation; (ii) Reflect a view on that legislation, and (iii) Encourage the recipient to take action with respect to such litigation (commonly referred to as a “call to action”).  This includes communications to members directly encouraging them to urge nonmembers to lobby.

There are certain activities that are specifically excluded from the definition, such as:

  • Providing technical assistance or advice to a government body or committee in response to an unsolicited request;
  • Making available the results of nonpartisan analysis, study or research, so long as the presentation of the facts is sufficient to enable readers to reach independent conclusions;
  • Examining and discussing broad social, economic, and similar policy issues whose resolution would require legislation, even if the legislation is pending, so long as the organization’s discussion does not address the merits of the specific legislation;
  • Communications between an organization and its members about pending or proposed legislation, unless the communications directly encourage the members to attempt to influence legislation; or
  • “Self-defense” activities. Self-defense activities are communications with legislators concerning decisions which may affect the organization’s existence, powers and duties, 501(c)(3) status, or tax-deductibility of contributions.

These types of activities encourage nonprofits to involve themselves in issues of public policy without the activity being considered as lobbying.

If a situation arises where your organization would like to involve political candidate(s), speak on any political message, or engage in any lobbying activities, it is advisable to first seek legal counsel before taking any action.