Elaine Waterhouse Wilson ewwilson1970@gmail.com February 28, 2012, 12-1:30PM (CST)

1. Political Activity for Charitable Organizations:Protecting Your Exemption While Furthering Your Mission Elaine Waterhouse Wilson ewwilson1970@gmail.com February 28, 2012, 12-1:30PM (CST)

2. Welcome to Election Season! • With the primaries upon us and the Presidential election arriving sooner than we know it, it is especially important for Section 501(c)(3) organizations to understand the “rules of the road” with regard to political issues. • It is often said that Section 501(c)(3) organizations “can’t get involved in politics.” Whether this statement is true or false depends upon how you define “politics.” • Our goals for today: • Define “politics” for purposes of Section 501(c)(3) • Discuss some of the activities that can be permissible – or can be problematic, if done improperly • Understand the ramifications of political activity for a Section 501(3) organization

3. Section 501(c)(3) [Entities] organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes . . . no part of the net earnings of which inures to the benefit of any private shareholder or individual, no substantial part of the activities of which is carrying on propaganda, or otherwise attempting, to influence legislation . . . , and which does 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.

4. Statutory Requirements • The statutory language of Section 501(c)(3) specifically requires that the charity • Must be organized and operated exclusivelyfor tax-exempt (charitable, religious, educational, etc.) purposes; • No substantial part of its activities is influencing legislation (also known as lobbying); and • Does not participate or intervene in any political campaign for a candidate for public office (also known as electioneering). • Accordingly: • A charity MAY pursue activities that further its tax-exempt purpose; and • MAY engage in a LIMITED amount of lobbying; but • MAY NOT engage in ANY electioneering • IMPORTANT CAVEAT: the rules for private foundations are more limited – know your tax status!

5. Education Versus Lobbying • Activities that educate a charity’s constituents regarding issues that are important to its mission are permissible so long as they don’t cross the line into lobbying or electioneering. • The technical definition of lobbying requires the charity to contact, or urge its constituents to contact, a legislator regarding current or potential legislation. • Contacting a legislator on other issues is not lobbying • Contacting executive branch officials on issues that don’t involve drafting legislation is not lobbying. • Referenda and initiatives are treated as legislation with the general public acting as legislators – generally, involvement in referenda and initiatives is treated as lobbying

6. Electioneering • Statutory language: “[D]oesnot 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.” • Impermissible electioneering involves the participation or intervention in a political campaign for public office • Therefore, some things that we might think are “political” in a general sense are not electioneering in a technical sense • There is no de minimis rule for electioneering activities (compare “exclusively” for tax-exempt purposes and “no substantial part” for lobbying); therefore, in theory, even one penny of electioneering expenditure should cost an organization its exemption.

7. Does this seem vague to you? • These general rules are easy to read on paper, but can become difficult in real world application. • The IRS said that it looks at all the facts and circumstances of a situation to determine each case. Therefore, something that appears to be educational (e.g., a candidate forum or voter guides) can become electioneering if it is done improperly (e.g., only one candidate is invited or only one view point presented). • The IRS issued Revenue Ruling 2007-41, which gives 21 different common fact patterns showing the application of these general rules. • www.irs.gov/charities/charitable/article/0,,id=179750,00.html

8. Rev. Rul. 2007-41 Examples • The Revenue Ruling breaks the examples into different categories: • Voter Education, Voter Registration and Get Out the Vote • Individual Activity by Organization Leaders • Candidate Appearances • Candidate Appearances as a Non-Candidate • Issue Advocacy v. Political Campaign Intervention • Business Activity • Web Sites • In general: • Endorsements need not be explicit • Be content neutral • Provide equal opportunity • Even small expenditures and actions can be impermissible

9. Ramifications • In theory, the statutory language of Section 501(c)(3) prohibits ALL electioneering activity – as indicated, there is no de minimis exception • In practice, the IRS uses a couple of different techniques in enforcement: • Excise tax on political activities – Section 4955 • Closing Agreements • Special rules for church audits • Political Activity Compliance Initiative (PACI) in prior years • Special procedures to review political activity compliance • www.irs.gov/charities/charitable/article/0,,id=179738,00.html