During election years, there is a greater likelihood tax-exempt organizations may intentionally or unintentionally participate in impermissible political campaign activities resulting in the loss of their tax-exempt status. Because many questions arise during election year periods with respect to whether an activity is a prohibited political activity, the following frequently asked questions address whether a particular activity is permissible.
May Section 501(c)(3) organizations participate in political activities?
No. Section 501(c)(3) tax-exempt organizations are subject to a ban on the conduct of political activities. More specifically, they are prohibited from participating in, or intervening in (including the publishing or distributing of statements), any political campaign on behalf of or in opposition to any candidate for public office. The prohibition of political activities is absolute. Accordingly, one dollar spent by a Section 501(c)(3) tax-exempt organization is arguably sufficient to justify revocation of tax-exempt status.
Does it matter whether the candidate is running for local or state office, rather than a federal office?
No. For purposes of the prohibition against political activities, a “candidate for public office” is anyone who offers theirself, or is proposed by others, as a candidate for an elective public office. It is irrelevant whether the public office is national, state or local.
When will the acts of senior executives or other individuals associated with a Section 501(c)(3) organization be attributed to the organization?
Frequently, individuals closely associated with Section 501(c)(3) organizations make statements or engage in actions that may be interpreted as intervention in a political campaign. In order to avoid attribution of such political activities to the Section 501(c)(3) organization, any individual who is closely associated with a Section 501(c)(3) organization and who engages in political activities should make it clear the views being expressed are the individual’s views, and they are not speaking on behalf of the organization.
May employees of a Section 501(c)(3) organization engage in political activities on company time?
In general, no. Permitting employees to engage in political activities while on company time could be interpreted as impermissible intervention in a political campaign, depending upon the facts and circumstances. While employees are permitted to engage in political activities outside of their employment, the payment of compensation to such person while engaged in such activities (e.g., paid leave to work on a campaign) could be problematic.
May a Section 501(c)(3) organization form or otherwise contribute to a political action committee (PAC)?
No. Section 501(c)(3) organizations are precluded from forming or supporting a PAC. The directors, officers and key employees of a Section 501(c)(3) organization, however, are permitted to form an independent PAC. If a “non-connected” PAC is formed by directors, officers and key employees, extreme care must be devoted to the establishment and operation of the PAC to avoid attribution of its activities to the 501(c)(3) organization.
May a Section 501(c)(3) organization allow a candidate to use its facilities or supplies without charge?
In general, no. The prohibition against political activities includes direct and indirect financial support. Accordingly, Section 501(c)(3) organizations may not provide space or mailing lists to a candidate, sponsor a political event, allow a candidate to use supplies of the Section 501(c)(3) organization or permit the organization’s name to be used by the candidate to solicit contributions.
May a Section 501(c)(3) organization rent space or facilities to a candidate?
In general, yes. The prohibition against political activities includes direct and indirect financial support. Accordingly, as long as a Section 501(c)(3) organization charges a fair market value rent to the candidate for the facilities or supplies, the organization has not provided support to the candidate. However, certain facts and circumstances could arise where even charging a fair rental value may constitute proscribed intervention in a campaign. For example, if a Section 501(c)(3) organization rented its facilities to one candidate for fair market value, but refused to rent its facilities to the opposing candidate even at fair market value, the Internal Revenue Service (IRS) could take the position that renting to only one candidate constitutes improper political activities.
Finally, if a Section 501(c)(3) organization rents its facilities for fair market value to a single candidate, the IRS could still argue the activity was improper intervention in a political campaign even if the opposing candidate(s) does not request to use the Section 501(c)(3) organization’s facilities. The IRS could take the position the Section 501(c)(3) organization was favoring one candidate over another by not making the opposing candidate aware of the possible rental of the facilities,. Accordingly, if a candidate is allowed to use the facilities of a Section 501(c)(3) organization, advice of competent counsel is strongly recommended.
May a Section 501(c)(3) organization invite a candidate to speak at its events?
Depending upon the facts and circumstances of the event, a Section 501(c)(3) organization may invite a candidate to speak at an event without being considered to have participated or intervened in a political campaign. However, careful consultation with competent counsel is recommended prior to inviting candidates to speak at events.
If a candidate is invited to speak at an event sponsored by a Section 501(c)(3) organization or to visit the facilities of the Section 501(c)(3) organization, the first inquiry is whether the candidate was invited to speak in the capacity of a candidate or as an individual. If the candidate is invited in an individual capacity, there is no requirement to provide equal access to other candidates. In such circumstance, however, the Section 501(c)(3) organization must take steps to make sure campaign activity does not occur during the visit. Finally, if the candidate is to receive an award or other public recognition, it should be made clear the award is for past recognition of service for non-political causes supported by the Section 501(c)(3) organization.
If a candidate is invited to speak in the capacity of a candidate, additional precautions are in order. For example, the organization should expressly disclaim any endorsement of any candidate in any written materials describing the event. The disclaimer should note the organization does not participate or intervene in any political campaign and neither supports nor opposes any candidate for public office. In addition, when the candidate is introduced, the organization must avoid using any language that could be interpreted as supporting the individual as a candidate. If questions were prepared for the candidate it is important for the organization to ensure they were prepared in a non-partisan fashion. As well, no political fundraising should occur at or near the event. This could be crucial and should be carefully monitored. However, in the event the local press misinterprets the candidate’s presence or otherwise indicates the organization may support the individual as a candidate, the organization should consider responding to the newspaper (or other medium) stating it neither supports nor opposes any candidate for public office.
What are examples of impermissible political activities?
The following activities are examples of impermissible political activities and, accordingly, should be avoided completely:
making direct or indirect contributions to a PAC or a candidate's campaign committee (even if otherwise permitted under applicable election laws)
reimbursing employees or executives for their contributions to a candidate or their PAC
endorsing or opposing, directly or indirectly, a candidate for public office
purchasing tickets to political fundraisers or reimbursing employees for their attendance at political fundraisers
transferring or loaning funds to another entity, either related or unrelated, then having the entity make a political contribution
providing non-financial support to a candidate or their PAC, such as
providing space, sponsoring an event or permitting a Section 501(c)(3) organization’s name to be used to solicit contributions
providing use of a mailing list to a candidate
rating candidates for public office
What are examples of permissible activities?
The following activities are permissible but, nonetheless, should only be entered into with the advice of competent counsel:
conducting programs to educate candidates on issues
inviting candidates to speak at events
participating in candidate forums
What about internet activities?
A Section 501(c)(3) organization should carefully monitor its internet sites for any activities (particularly links to other sites) that could be construed as intervention in political campaigns. The organization may also wish to adopt and monitor a policy stating its e-mail system may not be used for political campaign purposes.