Ban on Political Activities: An Election-Year Warning for Charities: CPAs Can Help Organizations Avoid Risks That Endanger Tax-Exempt Status

By Kelley, Claudia L.; Roberts, F. Douglas | Journal of Accountancy, September 2012 | Go to article overview

Ban on Political Activities: An Election-Year Warning for Charities: CPAs Can Help Organizations Avoid Risks That Endanger Tax-Exempt Status


Kelley, Claudia L., Roberts, F. Douglas, Journal of Accountancy


As the 2012 elections draw near, the IRS is once again increasing its oversight of the ban on political campaign activities by Sec. 501(c)(3) charitable organizations. An IRS work plan (Exempt Organizations 2011 Annual Report & 2012 Work Plan, available at tinyurl.com/bos7pb4) states that, in enforcing the ban this year, the IRS will use new information about organizations' activities from Form 990, Return of Organization Exempt From Income Tax, which was expanded in 2008.

While many charities speak out on issues as an integral part of carrying out their charitable purpose, these organizations are prohibited from engaging in political campaign activities. The consequences of violations can be severe, including fines and possible revocation of the organization's tax-exempt status. Understanding and communicating to organization managers the rules discussed in this article will help CPAs ensure that clients do not jeopardize their tax-exempt status.

A Sec. 501(c)(3) organization, including a church, is not permitted to be an "action" organization, as defined in any of three ways. First, an organization is an action organization if a substantial part of its activities is attempting to influence legislation, including by advocating its adoption or rejection, or by contacting federal, state, or local legislators to propose, support, or oppose legislation, or urging the public to do so (Regs. Sec. 1.501(c)(3)-1 (c)(3)(ii)). The second definition likewise involves proposed legislation: A Sec. 501(c)(3) organization is an action organization if its main or primary objective may be attained only by the passage or defeat of proposed legislation and it advocates or campaigns for the attainment of the objective, as distinguished from engaging in nonpartisan analysis, study, or research and making those results available to the public (Regs. Sec. 1.501(c)(3)-1(c)(3)(iv)) (see also "Issue Advocacy vs. Political Intervention," below).

Third--and the focus of this article--an organization is an action organization if it participates or intervenes, directly or indirectly, in any political campaign on behalf of or in opposition to any candidate for public office. Pegs. Sec. 1.501(c)(3)-1(c)(3)(iii) defines "candidate for public office" as an individual who offers himself or herself, or is proposed by others, as a contestant for an elective public office, whether the office is national, state, or local.

It is crucial for CPAs to advise their exempt-organization clients about IRS guidance on what is and is not allowed in relation to political campaigns.

A good place to start is Rev. Rul. 2007-41, in which the IRS provides examples of acceptable and unacceptable campaign involvement. The IRS website (nonprofits and charities section) has additional resources, including answers to frequently asked questions on this topic (see the "Resources" box near the end of this article for links). The following sections of this article provide an overview of what constitutes inappropriate political activity and suggest what organizations can do to avoid engaging in political intervention.

[ILLUSTRATION OMITTED]

ACTIVITY BY LEADERS AND OTHER INDIVIDUALS

The political campaign prohibition is not intended to restrict free expression of opinions on political or public policy issues by an organization's leaders, including its board members, as long as they are speaking for themselves as individuals. However, leaders may not make partisan comments in their official capacity where it appears they are speaking on behalf of the charitable organization. Partisan comments in the organization's publications and newsletters or at official functions are prohibited.

Rev. Rul. 2007-41 provides an example in which the CEO of a tax-exempt hospital endorsed a political campaign candidate, and his endorsement was made public in an ad in the local newspaper. Although the endorsement identified the individual as the CEO of the hospital, the ad also stated that "[t]itles and affiliations of each individual are provided for identification purposes only. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Ban on Political Activities: An Election-Year Warning for Charities: CPAs Can Help Organizations Avoid Risks That Endanger Tax-Exempt Status
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.