Be Vigilant in Maintaining Your 501(c)(3) Status This Election Year

August 12, 2020 | Article

What Nonprofits Need to Watch Out For to Keep Their 501(C)(3) Status

As the political season starts to gear up, important issues like healthcare, trade and immigration have us talking. If you’re leading a nonprofit organization, it’s reasonable to be passionate about issues important to your organization, and therefore, passionate about the political candidates that support or oppose those issues. However, as an organization exempt under 501(c)(3), there are specific rules and regulations you and your team need to adhere to in order to protect your tax-exempt status. Note: Other types of exempt organizations, like trade associations and advocacy organizations, are not subject to the same prohibitions on political activities.

Organizations exempt under 501(c)(3) are prohibited from engaging in any type of political activities. The main political restriction applies to offering support for a particular candidate or electioneering. It should be noted there is no de minimis rule (de minimis is a Latin expression meaning"about minimal things") related to partisan political activity. The IRS has the authority to respond to even a single violation by revoking exemption. They don’t take infractions lightly.

What 501(c)(3)s Can Do to Inform Voters of the Issues/Candidates*:
Here are some political activities that you can do without risking your tax-exempt status:

  • Voter education (candidate forums, candidate questionnaires and voting record reports)
  • Get-out-the-vote activities (e.g., provide transportation to the polls on election day)
  • Voter registration

*These activities must be done without any stated or implied endorsement of a particular candidate or particular party.

What 501(c)(3)s Cannot Do:

  • Make political contributions
  • Endorse a candidate
  • Speak in favor of, or against, a candidate for political office
  • Use the 501(c)(3)s property (computers, phones, faxes, office supplies, etc.) in support of, or against, a campaign
  • Lease space to campaigns
  • Provide volunteers to work on a campaign
  • Use the 501(c)(3)s mailing lists, email lists or other lists of members or activists for a campaign
  • Write letters to the editor or other public communications in support of or against a candidate during an election period

A 501(c)(3) organization can engage in election-related activities as long as the organization isn't seen as supporting one candidate over the other. Be sure to remain neutral. For example, a hospital could host a candidate forum where viable candidates are invited to speak on health-related issues.

Contributions to Political Campaigns
Contributions to political campaign funds or public statements of position (verbal or written) made on behalf of the organization in favor of or in opposition to any candidate for public office violates the prohibition against political campaign activity. This may result in denial or revocation of tax-exempt status and subject the organization to excise taxes.

Activities that are done in a non-partisan manner do not constitute prohibited political campaign activity. However, any activity with evidence of bias that would favor one candidate over another, oppose a candidate in some manner or have the effect of favoring a candidate or group of candidates will constitute prohibited participation or intervention.

Advocacy on Ballot Initiatives
A Section 501(c)(3) can advocate for or against ballot initiatives, but it must be an insubstantial activity. Also, 501(c)(3) organizations may take positions on public policy issues, including issues that divide candidates in an election for public office, as long as the message does not in any way favor, or oppose, a candidate. Be aware that the message does not need to identify the candidate by name to be prohibited political campaign activity.

Employee Endorsement
Nonprofit organization leaders should be aware that they run the risk of jeopardizing their organization’s exemption if they are not clear when communicating a political position as their own versus that of the organization. This is extremely important. If you're making statements or supporting candidates, be sure there's no perceived endorsement from your organization.

Your nonprofit organization may also want to create rules that forbid employees to use company resources for political activities. These rules should state that political statements of employees are not attributed to the organization.

Understand the Impact of Political Activities on Your Nonprofit
To recap, organizations exempt under 501(c)(3), and their leaders, should be aware that certain political behavior could affect their tax-exempt status. Be mindful of what you say and do—and how you say and do it—in the 2020 elections and beyond.

Keep your nonprofit in compliance and navigate the complexities of tax exempt status.

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Exempt Organization Tax