Many states have already held primary elections, and the airwaves are clogged with candidate ads. Yes, the November “mid-terms” election season has begun! So now is a good time to review political activity restrictions that affect Section 501(c)(3) organizations.
What activities are forbidden?
In general, tax-exempt organizations aren’t allowed to act directly or indirectly in federal, state or local campaigns either for or against a candidate or party — generally known as campaigning. What does this mean in practical terms? Your nonprofit can’t support or oppose a declared candidate or party for election. It also can’t engage in efforts to draft candidates or perform advance exploratory work for a candidate or party.
What about financial contributions?
Tax-exempt organizations are explicitly barred from donating funds to a candidate or party, and can’t use another event to raise funds. Section 501(c)(3) nonprofits are also barred from making loans to candidates or parties.
Are there any other prohibitions?
Your organization can’t ask for “support” from a candidate, political party or other political organization in exchange for your endorsement. And you can’t distribute campaign materials or anything that tells recipients how to vote. This includes online communications.
What activities are allowed?
Of course, there are ways your nonprofit can participate in elections. For example, you can:
Sponsor a candidate forum. If your nonprofit hosts a candidate forum or debate, invite all the candidates, have an independent panel prepare the questions and provide every candidate with equal speaking opportunities. An impartial moderator should state that the views expressed within the debate don’t represent those of your organization.
Launch a “get out the vote” drive. The effort must be designed to educate the public about voting and can’t promote or oppose a candidate or party.
Support a political issue. You can try to sway candidates to your way of thinking and encourage them to take a public stand. But you can’t endorse any of them.
Help build political party platforms. Your nonprofit can deliver testimony to a party’s platform committee, so long as you clarify that the testimony is strictly educational.
Make a nonpolitical invitation. If a candidate is invited to talk to your organization’s base — say, as a supporter of your charitable mission — make sure the appearance doesn’t turn into a campaign stop or fundraiser.
Violators of political campaigning rules are potentially subject to fines, excise taxes and even revocation of their tax-exempt status. However, such IRS actions are rare. Nevertheless, you don’t want to put your organization and programs in jeopardy. If you have questions about a proposed election-related activity, contact us your tax advisor.
Work with an accounting partner
To reduce financial risk, consider establishing a partnership with an accounting firm, if you don’t already have one. At Cordia Partners, we help nonprofit organizations operate their accounting function through outsourced accounting and technology consulting services. By working together, we position nonprofits to be tax-ready and audit-ready, while providing access to accurate financial data to help the executive team make sound business decisions. If you don’t have an accounting partner, contact us to learn more.