Certain Tax Exempt Organizations
May Not Engage in Political Campaign Activities

WASHINGTON - Charities should be careful that their efforts to educate voters stay within the Internal Revenue Service guidelines for political campaign activities.

Organizations exempt from federal income tax under section 501(c)(3) of the Internal Revenue Code are prohibited from participating or intervening, directly or indirectly, in any political campaign on behalf of or in opposition to any candidate for public office. Charities, educational institutions and religious organizations, including churches, are among those tax exempt under this code section.

"These organizations cannot endorse any candidates, make donations to their campaigns, engage in fund raising, distribute statements, or become involved in any other activities that may be beneficial or detrimental to any candidate," said John E. Burke, assistant commissioner, employee plans and exempt organizations.

Whether an organization is engaging in prohibited political campaign activity depends upon all the facts and circumstances in each case. For example, organizations may sponsor debates or forums to educate voters. But if the forum or debate shows a preference for or against a certain candidate, it becomes a prohibited activity.

The Second Circuit Court of Appeals held that the "voter education activities" of the Association of the Bar of the City of New York constituted prohibited campaign activities. The association rates and publishes the ratings of candidates for elective judicial office. The association had been tax-exempt under 501(c)(6) and had requested reclassification under 501(c)(3). The Service denied the reclassification because the association's rating of candidates violates the political campaign prohibition, and the Second Circuit upheld the action.

If IRS finds an organization engaged in prohibited political campaign activity, the organization could lose its exempt status and be subject to an excise tax on the amount of money spent on that activity. In cases of flagrant violation of the law, IRS has the authority to make an immediate determination and assessment of tax. Also, IRS can seek an injunction from a federal district court to prohibit the organization from making further political expenditures.

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