Nonprofits must understand law to avoid political activity problems

Published in the October 3, 2008 edition of Columbus Business First

Passions rise during an election season and well-intentioned nonprofit leaders and trustees can get their organizations into trouble.  A nonprofit organization is defined by its mission, which should be passionate and oftentimes emotional.  And it is expected that a nonprofit will seek to advance its mission, making involvement in governmental affairs a potential part of that strategy. 

There is a sharp distinction, however, between seeking to influence legislation and seeking to influence an election to public office.

It is worthwhile to clarify that we are talking about 501(c)(3) organizations, which are usually referred to as nonprofits.  This group includes churches, universities, hospitals, and charitable organizations whose missions fit into a precise definition in the Internal Revenue Code. 

There are 32 other types of tax-exempt organizations for whom contributions generally are not tax deductible.  The most familiar are business (501(c)(6), labor (501(c)(5), civic (501)(c)(4), and political (527) organizations.  They have their own sets of rules. 

For 501(c)(3) organizations, lobbying to influence legislation is permitted up to a certain threshold of the nonprofit’s activity.  In sharp contrast, the IRS makes it clear that nonprofits 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.”

This prohibition can become confusing in practice, particularly with respect to voter registration, get-out-the-vote efforts, candidate forums, and the personal activities of nonprofit executives and board members.  The key determinant is whether the nonprofit activity favors, opposes, or shows any bias toward candidates for public office. 

The IRS provides 21 examples of how to interpret this prohibition at http://www.irs.gov/newsroom/article/0,,id=154712,00.html but this column will focus on three areas:

Voter education, registration, and get-out-the-vote efforts:  Nonprofits are permitted to encourage people to vote and to aid them in registering to vote.  The important factor is that the effort must not emphasize or favor a particular candidate or political party.  That means registering a person regardless of the party they choose. 

The IRS provides an example in which an environmental organization runs a telephone bank and asks voters about their views on environmental issues.  If a voter indicates he favors an environmental candidate for political office, the caller then expands the dialogue to remind the voter of the upcoming election and the importance of voting, ending the call with an offer to provide transportation to the polls.  This shift in the conversation violates the prohibition.  Before the shift in topic, the call to discuss environmental issues was permissible.

Activity by nonprofit leaders:  Nonprofit leaders can have and express opinions regarding candidates for office.  This permission requires there be no explicit or implicit association of the person’s views with the nonprofit organization. 

That means these views can’t be expressed at an official function of the nonprofit, whether it be a board meeting or a public meeting.  The view also cannot be expressed in a publication of the organization or using any official material or equipment of the organization. 

The safest way for a leader to express such views is in a forum that’s not associated with the nonprofit and with a statement the views are solely his own.

Candidate forums and appearances:  This area can be the most difficult for an organization.  Often nonprofits are logical places for group events and many routinely have speakers and public events in which acknowledging the presence of community leaders is customary.  

Acknowledging a public official is permissible if no reference is made by the nonprofit or the official to the individual’s candidacy for election.  It would be a violation, however, to urge support for the official in gratitude for the official’s support of the nonprofit. 

Similarly, in advocating issues related to its mission, the nonprofit would be prohibited from including any form of reference that could be associated with a candidate for public office, whether it’s a photo or features of a candidate’s platform or biography.

All candidates must be invited to an election forum and it must be stated who was invited and who declined the invitation.  The topics and questions should not imply any bias for or against any candidate. 

Because of the complexity of the law, many nonprofits choose to remain silent during an election campaign.  That’s unnecessary, but it is vital the organization become familiar with the rules and resources the IRS makes available.

Allen J. Proctor was formerly chief financial officer of Harvard University and is the author of Linking Mission to Money(R) Finance for Nonprofit Board Members. Subscribe to his free newsletter at www.proctorconsulting.org.

Copyright 2008. Reprinted with permission, Business First of Columbus Inc.