IRS Guidance on Political Activity of 501(c)(3)Organizations

IRS Issues Memo on Political Activity of Nonprofits
The IRS has launched its Political Activities Compliance Initiative (PACI) for the 2008 political campaign season with the goal of providing guidance on prohibited political campaign intervention by 501(c)(3) organizations and maintaining enforcement in this area. According to an April 17 memo from Lois Lerner, Director of the Exempt Organizations Division of the IRS, the Service will pay additional attention this year to: issue advocacy that may be linked to a particular candidate; internet links between a 501(c)(3) organization’s website and a candidate; political contributions by 501(c)(3) organizations; and whether political activity of 501(c)(4) organizations is being appropriately taxed. The memo elaborates on areas the Service addressed last year in political activity guidance (see below for more on Revenue Ruling 2007-41).

With respect to internet links, the IRS will focus on context and the electronic proximity or number of “clicks” that separate the website from political material. The IRS will treat links to related organizations differently than links to unrelated organizations and for now will not pursue cases involving links between 510(c)(3) organizations and the home page of a related 501(c)(4). For further guidance please reference a July 28 memo issued by Marsha Ramirez, Director of Exempt Organizations Examinations

IRS plans to develop a project for 501(c)(4)s that will examine whether such organizations are paying the appropriate tax for political expenditures; ensure that they are not exceeding permissible limits on political activity; and determine whether they should be taxed as section 527 organizations.

The IRS is also considering undertaking a project for 2009 to study the flow of funds and other resources among affiliated 501(c)(3), 501(c)(4), and 527 organizations to ensure that campaign activity is not being subsidized by a 501(c)(3) organization.

The IRS has posted a new web page that consolidates a wealth of new and old resources and guidance, past rulings, and frequently asked questions on political activity on its website.

See Educating Exempt Organizations on Political Activity

Revenue Ruling 2007-41
On June 1, 2007, the IRS released guidance (PDF) in Revenue Ruling 2007-41 on facts and circumstances it considers when determining whether a charitable organization has engaged in prohibited political activities. Tax law allows 501(c)(3) organizations to engage in nonpartisan election-related activities as long as these activities do not favor or oppose a candidate for public office.

Revenue Ruling 2007-41 describes 21 different fact situations and determines whether or not they would be considered prohibited campaign intervention. The situations include:

• voter registration drives
• candidate forums or other candidate appearances
• issue advocacy campaigns
• selling or renting mailing lists or leasing offices space
• website links to candidate-related material

The new revenue ruling is essentially the same guidance issued by the IRS in February 2006 Fact Sheet 2006-17, but it may now be relied on as more official guidance.

To find out more information about what your organization can do to get involved in the upcoming elections, please visit our Election Resource Center.

Last Updated: May 5, 2008