Wednesday, May 9, 2012

Rules for Political Participation by Churches and Other Nonprofits

With the national and local elections process in full swing, political contributions and participation in the political process are regular topics on the evening news. The dramatic increase in the amount of money being donated to and spent by the national campaigns is staggering.

During the last major election, I wanted to be part of that process, so I donated ten dollars to one of the major parties. They took my ten dollars, added fifteen dollars to it from some other donor, and then spent the combined twenty-five dollars trying to get me to donate ten more dollars. That is the worst business model I have ever seen, but I guess it works on some folks.

My contribution was not tax deductible; however, it was legal. Donations to a political organization by churches and other nonprofit organizations (NPOs), on the other hand, are strictly prohibited by Internal Revenue Code Section 501 (c) 3.

The Code also prohibits churches and other NPOs 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. Any church or other nonprofit organization violating this prohibition risks losing its tax-exempt status. The Internal Revenue Service does, however, provide resources to help these organizations understand the rules.

Actions Churches and Other NPOs May NOT Take
1. Endorse political candidates.
 2. Contribute to political candidates or political action committees.

3. Participate in fund-raising projects for political candidates.

4. Distribute a candidate’s political statements.

As part of its examination program, the IRS monitors whether organizations are complying with the prohibition. When the agency finds or is made aware of instances of noncompliance it may issue a warning letter or it may revoke the entity’s tax exempt status.

While the IRS has issued hundreds of warning letters intended to stop advocacy for political candidates, it has only revoked a church’s tax exempt status twice since the tax law was amended in 1954.

Certain activities or expenditures may not be prohibited depending on the facts and circumstances.

Actions Churches and Other NPOs May Take
1. Conduct non-partisan voter registration/education drives.

2. Host forums where all candidates are invited and treated impartially.

3. Rent a church or other NPO membership list (at market value) to a candidate.

4. Make voter’s guides available to members so long as the guides do not reflect a partiality which could be misinterpreted as an endorsement of a particular party or candidate.

1. The first recorded tax exemption for churches occurred circa 312, when Constantine, Emperor of Rome granted the Christian church exemption from all taxation following his conversion to Christianity.

2. In 2010 the State of Oklahoma awarded tax-exempt status to a Satanist group called The Church of the IV Majesties.

When it comes to politics, churches and other nonprofit organizations have to walk a very fine line. While the prohibition for organizations does not apply to members, a member must be careful to inform an audience that he or she is speaking as a citizen and not on behalf of the organization.