The 2020 presidential election is fast approaching and your not-for-profit has a stake in its outcome. But that doesn’t mean your organization is free to participate in campaign activities. In general, Section 501(c)(3)s risk losing their tax-exempt status if they participate in campaigning. However, there’s more nuance in the rules than you might suspect.
5 potential traps
Tax-exempt organizations can’t directly or indirectly act in federal, state or local campaigns either for or against a candidate or party. Here are several examples of activities that are generally off-limits:
1. Supporting a candidate or party for election. Your organization can’t get behind or oppose a declared candidate or third-party movement, engage in efforts to draft candidates, or perform advance exploratory work for a candidate or party.
2. Contributing to a campaign or endorsing a candidate. This includes direct financial support and indirect support, such as having your staff make calls on a candidate’s behalf.
3. Providing monetary support. Organizations are barred from donating funds to a candidate or party, and they can’t use another event to raise funds. Section 501(c)(3) not-for-profits are also barred from making loans to candidates or parties.
4. Offering support for support. You can’t ask for “support” from a candidate, political party or other political organization in exchange for your endorsement.
5. Distributing materials. Your nonprofit can’t distribute campaign materials or anything that tells recipient how to vote. This includes online communications.
5 acceptable activities
Of course, there are ways your nonprofit can participate in elections. For example, you can:
1. Sponsor a candidate appearance. If a candidate is invited for nonpolitical reasons — say, as a supporter of your charitable mission — make sure the appearance doesn’t turn into a campaign stop or fundraiser.
2. Hold a debate. If your nonprofit hosts a candidate forum, invite all the candidates, have an independent panel prepare the questions and provide every candidate with equal speaking opportunities. An impartial moderator should state that the views expressed within the debate don’t represent those of your organization.
3. Advocate a political issue. You can try to sway candidates to your way of thinking and encourage them to take a public stand. But you can’t endorse any of them.
4. Help build party platform planks. Your nonprofit can deliver testimony to a party’s platform committee, so long as you clarify that the testimony is strictly educational.
5. Launch a “get out the vote” drive. The drive must be designed solely to educate the public about voting and can’t promote or oppose a candidate or party.
Campaign-related offenses are punishable by revocation of tax-exempt status, but first-time offenders may be able to negotiate a less severe penalty. For example, you might agree to change procedures and stipulate that the violation won’t occur again. If your nonprofit spent funds on the banned activity, the IRS may impose excise taxes.
If you’re unsure about the acceptability of a proposed election-related activity, contact us.