Political activities of nonprofits chapter 15
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Political Activities of Nonprofits: Chapter 15. Law 603 Howard Bunsis. Background. Congress and the IRS are even more worried about nonprofits getting involved in political campaigns than in lobbying.

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Political Activities of Nonprofits: Chapter 15

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Political activities of nonprofits chapter 15

Political Activities of Nonprofits: Chapter 15

Law 603

Howard Bunsis



  • Congress and the IRS are even more worried about nonprofits getting involved in political campaigns than in lobbying.

  • We saw in the last chapter how vague the rules could be – the rules here are clearer, though of course there are areas of dispute

  • The Federal Election Commission (FEC) regulates this activity

  • The textbook states that the 2003 Campaign Finance bill was upheld; however, the Citizen United case overturned some of this

What the irs says about political activity

What The IRS Says About Political Activity

  • Under the Internal Revenue Code, all section 501(c)(3) organizations are absolutely prohibited from directly or indirectly participating in, or intervening in, any political campaign on behalf of (or in opposition to) any candidate for elective public office.

  • 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 clearly violate the prohibition against political campaign activity.  Violating this prohibition may result in denial or revocation of tax-exempt status and the imposition of certain excise taxes. 

More from the irs what may be ok

More From the IRS: What May Be OK

  • Certain activities or expenditures may not be prohibited depending on the facts and circumstances. 

  • For example, certain voter education activities (including presenting public forums and publishing voter education guides) conducted in a non-partisan manner do not constitute prohibited political campaign activity.

  • In addition, other activities intended to encourage people to participate in the electoral process, such as voter registration and get-out-the-vote drives, would not be prohibited political campaign activity if conducted in a non-partisan manner.

More from the irs what is not ok

More From the IRS: What is Not OK

  • On the other hand, voter education or registration activities with evidence of bias that

    • (a) would favor one candidate over another;

    • (b) oppose a candidate in some manner; or

    • (c) have the effect of favoring a candidate or group of candidates, will constitute prohibited participation or intervention.

Political activities

Political Activities

  • An organization will not qualify for tax exemption under IRC 501(c)(3) unless it "does not participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of (or in opposition to) any candidate for public office."

  • A determination whether an organization has participated or intervened is based upon all of the relevant facts and circumstances.

Action organization

Action Organization

  • Same as lobbying; an action organization is one that participates or intervenes, directly or indirectly, in any political campaign on behalf of or in opposition to any candidate for public office.

  • Result: An action organization cannot qualify as a charitable organization

Did citizens united change the rules for charities

Did Citizens United Change the rules for Charities?

  • No. Though election law changed, the federal law that does not allow a 501(c)(3) to be involved in political campaigns is still the law.

  • These charities still cannot endorse candidates.

  • It is still the law that corporations cannot make direct monetary contributions to candidates for federal office, or to coordinate communications with candidates.

  • The case now allows corporations to make independent expenditures to candidates; specifically, issue ads are now allowed by corporations and labor unions before elections

  • http://www.scotuswiki.com/index.php?title=Citizens_United_v._Federal_Election_Commission

501c4 and 501c6 npo s can benefit

501c4 and 501c6 NPO’s can benefit

  • Citizens United now allows corporations, including 501(c)(4)s and 501(c)(6)s, to make independent expenditures containing express advocacy using the corporation’s general treasury funds to support or oppose candidates for the U.S. House, U.S. Senate, and President.

  • An independent expenditure is a communication that urges someone to vote for or against a candidate, typically using words like “support,”“oppose,”“elect,”“defeat,” or “vote for” a candidate.

  • Previously, independent expenditures that contained express advocacy needed to be made through Political Action Committees (“PACs”) using voluntary donations, rather than general treasury funds.

  • The primary purpose restriction still exists: political activities cannot be the primary purpose of a 501(c)(4), 501(c)(5), 501(c)(6)).

Electioneering communications

Electioneering Communications

  • Citizens United allows corporations to make“electioneering communications.” - a broadcast ad which refers to a federal candidate and are distributed within 30 days of a primary or convention and 60 days of a general election and are the “the “functional equivalent of express advocacy.”

  • An ad is the “functional equivalent” of an express advocacy communication when it is “susceptible of no reasonable interpretation other than as an appeal to vote for or against a clearly identified federal candidate.”

Citizen united facts

Citizen United Facts

  • At the heart of Citizens United vs. Federal Elections Commission (FEC) is a feature-length documentary created by a 501(c)(4) nonprofit corporation, Citizens United, that sharply criticized then-Senator and Presidential Candidate Hillary Clinton.

  • Although this documentary did not encourage people to vote against Senator Clinton, the depiction of Senator Clinton was the “functional equivalent” of encouraging people to vote against her, because of the way it characterized Ms. Clinton (including 40 in-depth interviews with people who personally “locked horns” with the Clintons).

  • The organization partially funded creation of this movie with corporate contributions and then sought to distribute the film as a pay-per-view show and to run ads to promoting the film during the period 30 days prior to the 2008 presidential primary election, in which then-Senator Clinton appeared on the ballot.

  • The Federal Election Commission, citing the McCain-Feingold campaign finance law, banned this documentary as an advocacy ad within 30 days of a primary.

Nonprofit community response to citizens united

Nonprofit Community Response to Citizens United

  • People for the American Way: Amend the U.S. Constitution to ensure the government has the authority to limit corporate influence in elections.

  • Common Cause also called for a constitutional amendment to overturn the decision.

  • Organizing for America has started a letter campaign to send to representatives to overturn the decision

  • Senator Schumer has proposed legislation

Can citizens united help nonprofits

Can Citizens United Help Nonprofits?

  • From Justice Kennedy’s opinion: “The purpose and effect of this [ban] is to prevent corporations, including small and nonprofit corporations, from presenting both facts and opinions to the public," and "the result is that smaller or nonprofit corporations cannot raise a voice to object when other corporations, including those with vast wealth, are cooperating with the Government.”

Citizen united decision

Citizen United Decision

  • Chilling effect on page 3

  • Although the First Amendment provides that “Congress shall make no law . . . abridging the freedom of speech,” §441b’s prohibition on corporate independent expenditures is an outright ban on speech, backed by criminal sanctions. It is a ban notwithstanding the fact that a PAC created by a corporation can still speak, for a PAC is a separate association from the corporation. Because speech is an essential mechanism of democracy—it is the means to hold officials ac- countable to the people—political speech must prevail against laws that would suppress it by design or inadvertence. Laws burdening such speech are subject to strict scrutiny, which requires the Government to prove that the restriction “furthers a compelling interest and is narrowly tailored to achieve that interest.” WRTL, 551 U. S., at 464.



  • Roberts concurrence on page 65

    • Of course this is an unconstitutional restriction on speech

    • He writes separately to address the criticism that overturning a law and a prior decision is not judicial activism from the right. In essence, this is such a bad restriction on speech that we have no choice

  • Scalia concurrence (page 79) is stark (night follows day). Corporations and groups of people have free speech rights.

    • This is political speech

    • It is made by a corporation

    • Don’t muzzle this speech

Thomas concurrence

Thomas Concurrence

  • The majority did not go far enough, because he wanted the disclosure provisions (if you contribute, the public will find out) stricken as well.

  • Televised electioneering communications funded by anyone other than a candidate must include a disclaimer that “‘_______ is responsible for the content of this advertising.” Statement must be clear and take at least 4 seconds.

  • Disclosure: If give more than 10k, must file disclosure statement with the FEC

  • People had death threats and careers ruined because the fact they gave to a cause was made public – so Thomas said overturn it.

  • The majority said these requirements do not inhibit speech

Dissent stevens page 88

Dissent (Stevens page 88)

  • This is about campaign finance, not speech

  • This nonprofit could have broadcast the movie any time other than 30 days before the election

  • The majority goes too far by expanding this case to for-profit corporations

  • Corporations are not the same as individuals in the political sphere – corporations cannot vote. Plus, a century of history treating corporate cash differently

  • He “emphatically” dissents

  • Goes after Scalia for the night/day comment, and claims you cannot tell the Framer’s intent of this law.

  • Excessive spending on campaigns is the equivalence of corruption of our electoral process, and has been the basis for all campaign finance laws (undue influence)

Examples of acceptable activities

Examples of Acceptable Activities

  • A 501c3 can prepare and disseminate a compilation of candidate voting records, as long as there is no editorial content and no approval or disapproval of the voting records is applied

  • Many charities have clearly indicated approval or disapproval of voting records, but the IRS has let this slide – as long as it is not too close to election day, and as long as it does not go to the general public

Irs regulation said this was ok

IRS Regulation Said this was ok

  • The "I'm Fed Up With Congress" communication does not clearly indicate whether [the organization] supports or opposes a specific candidate or slate of candidates. While it expresses a general dissatisfaction with Congress, it does not rise to the level expressing a position on any individual candidate or candidates.

  • This communication could be viewed as focusing attention on the perceived abuses of the Congress or as a way of sending a message of disgust to members of Congress. The fact that no statement was made on an individual's qualifications, or lack thereof, for public office supports this view. Moreover, not all members of Congress were candidates for office in the elections of [that year].

  • This communication does not clearly support or oppose any single candidate or identifiable group of candidates (such as by party or a geographic location). Additionally, there is no indication in the file that the letter was sent only to specific states or congressional districts in which congressional elections targeted by the organization were occurring.

  • Our determination with respect to this communication might be different if evidence in the file indicated that the communication was aimed at a specific candidate, specific candidates, or a specific ticket of candidates.

Not too much advocacy

Not Too Much Advocacy

  • Federal Election Commission v. American Federation of State, County and Municipal Employees1979), the issue concerned a poster that the union had published and circulated immediately prior to the 1976 Presidential election.

  • The poster contained a caricature of President Gerald Ford, wearing a button stating "Pardon Me" and embracing former President Nixon.

  • The poster also contained a quote from a speech President Ford made while he was still Vice President: "I can say from the bottom of my heart the President of the United States is innocent and he is right."

  • The court found that, although the poster did pertain to a clearly identified candidate and may have tended to influence voting, it did not contain "express advocacy"

Again not too much advocacy

Again Not Too Much Advocacy

  • FEC vs. Christian Coalition (1999)

  • Ralph Reed’s statement: Victory will be ours. It will be ours here in Montana. And it will be ours all across America. ... We're going to see Pat Williams [an incumbent member of Congress from Montana] sent bags packing back to Montana in November of this year. And I'm going to be here to help you.”

  • Court: Although the implicit message is unmistakable, in explicit terms this is prophecy rather than advocacy. Reed predicts that victory "will be" ours and that "we're going to see" Pat Williams defeated in the November election. Neither of these verbs expressly directs the audience to do anything; the speaker has announced that this will come to be without any further action. Making the issue closer is Reed's final statement that he would return "to help you." For Reed to "help" there must be some action taking place for him to assist. However, that action -- "sending" the candidate's "bags packing" -- comes just shy of referring to the campaigning and voting against Pat Williams necessary to bring that about. Though the message is clear, it requires one inferential step too many to be unequivocally considered an explicit directive.

The prohibition is absolute

The Prohibition is Absolute

  • Association of Bar of New York lost its 501c3 status because it rated judicial candidates as qualified, highly qualified, etc.

  • The Court said it would not play the substantial game as with lobbying expenditures:

  • “Had Congress intended the added exception to apply only to those organizations that devote a substantial part of their activity to participation in political campaigns, it easily could have said so. It did not.”

  • Although the present provisions of section 501(c)(3) permit some degree of influencing legislation by a section 501(c)(3) organization, it provides that no degree of support for an individual's candidacy is permitted."

Can a 501 c 3 form a pac

Can a 501(c)(3) form a PAC

  • No, an IRC 501(c)(3) organization may not establish a PAC to engage in political campaign activity.

  • When the statute governing political organizations, IRC 527, was enacted, the Senate Finance Committee's Report stated: "This provision is not intended to affect in any way the prohibition against certain exempt organizations (e.g., sec. 501(c)(3)) engaging in 'electioneering' or the application of the provisions of section 4945

Example church at pierce creek

Example: Church at Pierce Creek

  • Four days before the 1992 presidential election, The Church at Pierce Creek in Binghamton, New York took out an ad in two national newspapers urging Christians not to vote for Bill Clinton because of his positions on certain issues.

  • This was the first time in IRS history where a bona fide church’s tax-exempt status was revoked because of its involvement in politics.(1)

More from the pierce creek case

More from the Pierce Creek Case

  • The ad cited Biblical passages and concluded with the question: “How then can we vote for Bill Clinton?”

  • It included the following notice: “This advertisement was co-sponsored by The Church at Pierce Creek, Daniel J. Little, Senior Pastor, and by churches and concerned Christians nationwide. Tax deductible donations for this advertisement gladly accepted. Make donations to: The Church at Pierce Creek.”

  • When the IRS revoked the church’s exemption, it appealed claiming that revocation of its tax-exempt status violated section501(c)(3), the First Amendment, and the Religious Freedom Restoration Act. The Court of Appeals affirmed the decision on every count. Branch Ministries v. Rossotti, 341 U.S. App. D.C. 166 (2000).

Tax exemption taken away

Tax Exemption Taken Away

  • Branch Ministries v. Rossotti, 211 F.3d 137 (D.C. Cir. 2000), the court affirmed the revocation of the IRC 501(c)(3) status of a church.

  • The church had published advertisements in major newspapers four days before the 1992 presidential election urging people not to vote for then presidential-candidate Bill Clinton because of his position on certain moral issues and soliciting tax-deductible contributions for the advertisements.

  • In holding that the IRC 501(c)(3) prohibition did not violate the organization's constitutional rights, the court agreed with Branch Ministries' assertion that the church could not set up a PAC, but stated that there were other methods to achieve the political communication goals of the church that were not supported by tax-deductible contributions.

Charities and candidate invitations

Charities and Candidate Invitations

  • Depending on the facts and circumstances, an organization may invite political candidates to speak at its events without jeopardizing its tax-exempt status. Political candidates may be invited in their capacity as candidates, or in their individual capacity (not as a candidate). 

  • Candidates may also appear without an invitation at organization events that are open to the public.

Speaking as a candidate

Speaking as a Candidate

  • The charity must make sure:

    • It provides an equal opportunity to political candidates seeking the same office;

    • It does not indicate any support for or opposition to the candidate (this should be stated explicitly when the candidate is introduced and in communications concerning the candidate’s attendance); and

    • No political fundraising occurs

Equal opportunity to participate

Equal Opportunity to Participate

  • An organization that invites one candidate to speak at its well attended annual banquet, but invites the opposing candidate to speak at a sparsely attended general meeting, will likely have violated the political campaign prohibition, even if the manner of presentation for both speakers is otherwise neutral.

Public forum of candidates

Public Forum of Candidates

  • If the forum is operated to show a bias for or against any candidate, then the forum would be political campaign intervention.

  • Factors:

    • Whether questions for the candidate are prepared and presented by an independent nonpartisan panel

    • Whether the topics discussed by the candidates cover a broad range of issues that the candidates would address if elected to the office sought and are of interest to the public

    • Whether each candidate is given an equal opportunity to present his or her view on the issues discussed

    • Whether the candidates are asked to agree or disagree with positions, agendas, platforms or statements of the organization, and

    • Whether a moderator comments on the questions or otherwise implies approval or disapproval of the candidates



  • A university that provided a political science course to acquaint students with the electoral process. The course was open to all students and consisted of several weeks of classroom work followed by two weeks in which the student was required to spend between 60 and 80 hours on campaign work and write a paper evaluating the experience. The university was not participating in political campaigns - student participation in the real political process was reasonably germane to the course of instruction.

  • A university that provided office space and financial support for the publication of a student newspaper and made available several professors to serve as advisors to the staff was not participating in a political campaign within the meaning of IRC 501(c)(3) when the student newspaper published students' editorials on political matter

Penalties page 46 of irs pub 557

Penalties (page 46 of IRS Pub 557)

  • The IRS can impose a tax on a political expenditures

  • Tax on organization: 10% on the amount of the expenditure

  • Tax on managers: 2.5%$ of the expenditure, if they (officers, directors, employees) ,new it was a political expenditure, and there was no excuse based on un-willfulness.

  • Additional tax of 100% of the expenditure if the initial tax was imposed and the expenditure was not corrected

Political activity activism

Political Activity - Activism

  • So far, we have discussed political campaign activity

  • Can be in the form of writings, demonstrations, boycotts, strikes, picketing, and litigation.

  • Activism is constitutionally protected speech, and the IRS cannot touch this.

Political activity not activism

Political Activity – Not Activism

  • Example: A charitable organization testifying for or against a federal appointee or judgeship. This is not political campaign activity, and is not activism.

  • If a charitable organization engages in activity that is not political campaign activity, it will not forfeit its tax exempt status, but will pay a tax.

Summary on political activity

Summary on Political Activity

  • A nonprofit can educate the public about political issues and encourage voters to vote. It may issue position papers to the media and work with local coalitions or partnerships on issues of public importance. It can educate and register voters—so long as you do this in a non-partisan manner.

  • A nonprofit may not engage in partisan political activity. It can do nothing that advocates for or against specific candidates for public office or their political parties. This includes fundraising on behalf of candidates and donating meeting space, among other things.

  • Election-related activities such as candidate questionnaires and forums are acceptable, so long as all major candidates are invited to participate and they are fair in their presentation.

501c4 5 6 summary

501c4,5,6 Summary

  • A section 501(c)(4), (5), or (6) organization may engage in political campaigns, provided that such activities are not the organization's primary activity.

  • As a result of the Supreme Court’s decision in Citizens United v. FEC, all corporations, including 501(c)(4) corporations, may pay for independent expenditures that encourage the public to support or oppose federal and state candidates.

  • An independent expenditure is any communication that is not coordinated or made with the cooperation, consultation, or at the request of a candidate or political party. Federal election prohibits corporate entities, including 501(c)(4)s, from making cash or in-kind contributions--including coordinated communications to any federal candidates



  • An organization that is organized and operated primarily for the purpose of directly or indirectly accepting contributions or making expenditures to influence the selection, nomination, election or appointment of any individual to Federal, State, or local public office, office in political party, or Presidential electors

Summary of lobbying political rules

Summary of Lobbying/Political Rules

The irs found that the political campaign prohibition was violated in

The IRS found that the political campaign prohibition was violated in

  • 9 of the 24 alleged instances of organizations distributing printed documents supporting or opposing candidates (e.g., newsletters, church bulletins or inserts, and letters to members);

  • 12 of the 19 alleged instances of church officials supporting or opposing a candidate during a church service;

  • 9 of the 11 alleged instances of candidates speaking at an organization's function;

  • 4 of the 14 alleged instances of organizations distributing an impermissible voter guide or candidate rating (e.g., on the organization's website, through links on the website, or left at the back of a church);

More irs findings

More IRS Findings

  • 9 of the 12 alleged instances of organizations posting candidate signs on the organization's property;

  • 7 of the 15 alleged instances of organizations endorsing candidates on its website or through links on the site;

  • 6 of the 8 alleged instances of officials of non-church organizations verbally endorsing a candidate;

  • 5 of the 7 alleged instances of organizations contributing to a candidate; and

  • all 4 of the alleged instances of organizations allowing an individual to endorse a candidate during the organization's function.

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