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Passionate About Politics? Don't Allow it to Affect Tax Exempt Status

By   Kim Hunwardsen

October 14, 2016

Shhh! We know it's tempting.

The political season is heating up, and important issues like the fate of the Affordable Care Act and the implementation of new Medicare payment regulations have us talking.

But hospitals and their leaders need to be careful about what they say - and do - politically. Nonprofit hospitals are prohibited from engaging a substantial part of their activities in lobbying and from engaging in any direct intervention in elections for public office. Failure to follow these rules could result in loss of tax exemption.  

The political restriction applies to offering support for a particular candidate, or electioneering. Organizations exempt under 501(c)(3) are prohibited from engaging in any of these types of activities. 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 mean business.

But, a hospital can engage in election-related activities as long as the organization isn't seen as supporting one candidate over the other. Be neutral. So, a hospital could host a candidate forum where viable candidates are invited to speak on health-related issues.   

Hospital leaders should be aware they could run the risk of jeopardizing the hospital's exemption if they're unclear in communicating that political positions held are their own and are not that of the organization. Hospital leaders, are you listening? If you're making statements or supporting candidates, be sure there's no perceived endorsement from the hospital. A hospital 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. 

But, exempt organizations are allowed to engage in lobbying as long as the activity is not a significant part of their activities. Lobbying involves efforts to influence foreign, national, state or local legislation, including direct contact with legislators and grassroots lobbying via the general public. Legislation can include acts, bills and resolutions in Congress, state legislature or local council, along with public referenda or ballot initiatives. The significance of the lobbying activity is based on a facts and circumstances analysis unless the organization makes a special election. 

OK, did you get all of that? In short, hospitals and their leaders should be aware that certain political behavior could affect tax-exempt status. Be mindful of what you say and do, and how you say it and do it. Like we said, shhh. Election season will be over soon.