It’s that time again – another election year. And if your organization is exempt under Section 501(c)(3) of the Code (“Exempt Organization” or “EO”), the EO cannot participate in, or intervene in, any political campaign on behalf of or in opposition to a candidate for public office. The EO cannot distribute partisan materials, provide or solicit financial or other forms of support for a candidate, or form a political action committee. There are some things the EO can do – it can encourage its employees to vote – so long as it expresses no opinion about who or what issues to vote for or against; it can invite all of the candidates to speak to employees or the public at its facilities; it can provide unbiased educational materials on a particular issue – although the EO needs to make sure the materials are truly unbiased.
Of course, the First Amendment always protects an individual’s right to political speech and board members and executives may actively support a candidate. However, individuals who are in a position to speak for an EO, such as Board members or executives, must be careful to make sure that their political speech is not attributed to the EO. No one may use the EO’s resources for his/her political activities. For example, the individual may not use the EO’s secretarial support services, copy or postage machines, or computer systems. Political messages should not be sent over the EO’s email system, nor should the executive use the EO’s directory, unless it is a public document. When making political statements, the individual should make it clear that those statements are his or hers alone and are not being made in his or her role with the EO. Political messages should not be posted on the EO’s paper or electronic bulletin boards.
EOs also cannot have affiliated Political Action Committees (“PACs”). A common approach is for some combination of the EO’s patients (for health care Eos), friends and relatives of patients, officers, directors, management, and employees may form a PAC for the purpose of receiving contributions from these individuals and making contributions to candidates. The EO must maintain a strict demarcation between itself, its resources, and its activities, and any “Friends of” PAC. IRS guidance in this area is somewhat limited, but, by extrapolating from various rulings and other guidance, a “Friends of” PAC should operate within the following limitations:
In addition, the registration and reporting requirements for a PAC are dependent on federal or state election law. Federal election law and many state laws prohibit corporate contributions to PACs that make contributions to candidates. One thing to keep in mind for EOs that may have made mistakes in the past and have not been caught by the IRS is they should not expect to “fly under the radar” if they violate campaign finance laws – the polarized political environment means an organization is likely to be reported to the election authorities and become subject to an investigation.
For a more comprehensive discussion of these rules the IRS has issued a training outline for its agents.