Letter to IRS on Political Activity Examination Letters
Independent Sector sent a sign-on letter to the IRS in December 2004, in response to that agency’s announced examination of 60 charitable nonprofits, including the NAACP, over concerns about “improper political activity.” The IRS conducted the examinations to determine whether the groups intervened in a political campaign in violation of their 501(c)(3) status. In the case of the NAACP, the IRS cited a speech given by NAACP Chairman of the Board Julian Bond during the organization’s convention in July 2004 that “condemned the administration policies of George W. Bush on education, the economy and the war in Iraq.”  In August 2006 the IRS ultimately concluded that political intervention did not occur in the NAACP case. See the August 9, 2006 IRS letter to NAACP.

Independent Sector’s December 13, 2004 letter to the IRS stressed the importance for charitable nonprofits to be able to speak out on issues that affect their causes and constituents, including making statements opposed to government policies. IS urged the IRS to reconsider the grounds and the process used to select organizations for examination.

In February 2005, the Treasury Inspector General for Tax Administration (TIGTA) released a report stating that the IRS Exempt Organizations (EO) office was not politically motivated in its review of potential political campaign intervention by 501(c)(3) organizations. Although the TIGTA report found no political bias in the EO's selection of 501(c)(3) organizations subject to review, it did express concern about the timing of the examination letters, which were sent only six weeks before the November elections. The report was prompted by allegations that EO's selection of organizations for review did not follow normal procedures and was politically motivated. TIGTA addressed only EO's selection and review procedures and did not look at whether any of the selected organizations actually violated the tax law's ban on intervention in political campaigns by 501(c)(3)s.

IRS Statement on tax-exempt organizations and political activity... October 2004
TIGTA Report on IRS Review of Alleged Political Campaign Intervention 

Letter Urging IRS to Review its Selection Process for Examining Tax-Exempt Organizations for Improper Political Activities

December 13, 2004

The Honorable Mark W. Everson
Commissioner
Internal Revenue Service
1111 Constitution Avenue, NW
Washington, DC 20224

Dear Commissioner Everson:

On behalf of the undersigned organizations, we are writing concerning the recent announcement by the Internal Revenue Service (“IRS”) to examine the tax-exempt status of 60 organizations, including the NAACP, because of “improper political activities.”

We are aware that by statute, nonprofit organizations classified under section 501(c)(3) may 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.” We are mindful that the prohibition is absolute and violation can result in imposition of an excise tax or revocation of the organization’s exempt status. The undersigned organizations fully support this longstanding and carefully balanced prohibition against partisan political activities by 501(c)(3) organizations.

That said, we also believe, however, that it is critical for charitable nonprofits, including both religious and secular organizations, to continue to be able to speak out on issues that affect their causes and their constituents. This right has always included speaking out on specific public policy issues and properly includes making statements opposed to government policies. Criticism of an administration's policies is clearly a legitimate and legal activity for an organization with 501(c)(3) designation as long as such expression is part of the organization’s mission and program. We are deeply concerned that the IRS may be applying a new, more restrictive interpretation of the longstanding ban on “participating in, or intervention in, any political campaign of (or in opposition to) any candidate for public office,” to evaluate the activities of 501(c)(3) organizations. We are particularly troubled that the reason given for the examination of the NAACP is a speech by its Board Chairman in which he criticized policies of the current Administration, when the positions expressed have been longstanding policy of that esteemed organization.

The "political activity" limitation imposed on 501(c)(3) organizations is not intended to include statements made by a 501(c)(3) organization that are critical of government policies. We strongly oppose any such interpretation, and believe criticism of government policies serving as reason to trigger an examination by the IRS of 501(c)(3) organizations will have a chilling effect on the vital role and right of nonprofits to petition their government.

We urge the IRS to reconsider the grounds and the process used to select organizations for such examinations.

Alliance for Children and Families
American Arts Alliance
American Association of Museums
American Diabetes Association
American Heart Association
American Legacy Foundation
American Symphony Orchestra League
Americans for the Arts
Mary Reynolds Babcock Foundation
Benton Foundation
Brain Trauma Foundation
California Association of Nonprofits
CARE USA
Center for Lobbying in the Public Interest
CompuMentor
Dance/USA
Demos
Donors Forum of Chicago
Eureka Communities
George Gund Foundation
Gilda’s Club Chicago
Evelyn and Walter Haas, Jr. Fund
Independent Sector
International Association of Jewish Vocational Services
Jewish Federation of Metropolitan Chicago
Kauffman Foundation
John S. & James L. Knight Foundation
Leadership Education for Asian Pacifics, Inc.
Lutheran Services in America
NAACP Legal Defense and Educational Fund, Inc.
Michigan Nonprofit Association
National Alliance for Choice in Giving
National Asian Pacific American Legal Consortium
National Association for Visually Handicapped
National Association of Independent Schools
National Council of La Raza
National Council of Nonprofit Associations
National Immigration Forum
National Wildlife Federation
Native American Rights Fund
Nonprofit Coordinating Committee of New York, Inc.
Opera America
Otto Bremer Foundation
Public Allies
Fannie E. Rippel Foundation
Rockefeller Brothers Fund
ShoreBank
Surdna Foundation
Szekely Family Foundation
Theatre Communications Group
Tides Foundation
UJA-Federation of New York
United Jewish Communities
United Way of America
Volunteers of America
Woods Charitable Fund, Inc.
YMCA of the USA
Youth Service America