February 26, 1997
Political Activity by Exempt Organizations
- Charities exempt from tax under section 501(c)(3) and eligible to receive tax deductible charitable contributions are prohibited from intervening in political campaigns.
- Charities exempt from tax under section 501(c)(3) and
eligible to receive tax deductible charitable contributions may devote no more than an insubstantial amount of their overall activities attempting to influence legislation (lobbying).
- While the IRS has published guidance on political campaign
intervention, the final decision on whether a charity has intervened in a political
campaign requires an analysis of the facts and circumstances of that individual case.
- Whether a charity has engaged in substantial lobbying
depends on the facts and circumstances of each case, but many charities may make an
election under section 501(h) to have bright line rules apply in determining the
permissible amount of lobbying.
- Many section 501(c) organizations that are not eligible to receive tax deductible contributions, such as section 501(c)(4) social welfare organizations, section 501(c)(5) labor unions and section 501(c)(6) trade associations, are allowed to engage in extensive lobbying as well as significant political campaign activity.
- During the examination process, the organization under examination does have significant administrative appeal rights.
- If IRS concludes that a charity intervened in a political campaign, or engaged in substantial lobbying, the organization could: 1) have its exempt status revoked, or 2) be subject to excise taxes.
- If IRS revokes a charity's exempt status, section 7428 provides that the charity may file an action in court that protects the tax deductibility of certain contributions until the court decides the issue.
- Judicial remedies are also available to donors denied charitable deductions and to charities that are assessed an excise tax based on lobbying or political campaign intervention activities.
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