Issues for Section 501(c)(3) Organizations
Political campaigns tend to catalyze controversial legislation during an election yean In 1954, at the height of the McCarthy era, Senator Lyndon B. Johnson sought a legislative mute to silence some of his anticommunist critics. Encouraged by Johnson, the U.S. Senate passed a major tax code revision by a voice vote. Although Johnson's revision was targeted specifically at nonprofit groups that were contesting his scat, churches-which also are nonprofit organizations-fell under the new lax code provisions.
Although the ban excluded churches and other IRC section 501(c)(3) organizations from active participation in the political process, years passed without major incident. Then, in 1992, the religious organization Branch Ministries, Inc. (BMI). purchased a newspaper advertisement urging Christians to vote against presidential candidate Bill Clinton, and the IRS initiated an investigation. In January 1995, the IRS revoked BMI's status as a section 501(c)(3) tax-exempt organization. By contrast, in the 1994 New York gubernatorial campaign, the IRS chose not to initiate an investigation when Governor Cuomo received vocal support from the pulpit of a Harlem church. In the very early days of the 2004 presidential campaign, the Houses of Worship Political Speech Protection Act was proposed as a means to reverse a portion of the 1954 legislation and to return First Amendment speech protection to America's churches, synagogues, and mosyucs. That bill (HR2357) failed to pass the House in October 2002.
IRS regulations are clear that, while churches and parachurch organizations are restricted from endorsing or opposing a particular political candidate, they may educate about candidates' viewpoints. This education can take the form of sermons, forums, debates, or voter guides. Less clear, as evidenced by the contrast between the Clinton and Cuomo scenarios, is the threshold between endorsement and education. The proliferation of legislation affecting the election process has further complicated the issue.
Observing the Letter of the Law
In recent years, the IRS has attempted to clarify what is considered appropriate political activity for exempt organizations. IRS publication 1828 (Rev. 7-2002) provides guidance for tax-exempt and government entities. A digest of this publication as it pertains to church and religious organizations serves as a guide for keeping entities "within the letter of the law."
Lobbying activity. While campaigning for a candidate is prohibited, some amount of effort to influence legislation is permitted. Efforts to influence legislation come under the heading of lobbying activities. A nonprofit organization, including a church, may not engage in "substantial" lobbying without endangering its tax-exempt status under IRC Section 501(c)(3). Two important questions surface:
* What is considered legislation? This definition is important because it determines allowable lobbying activities.
* What is "substantial"?
Congress, state legislatures, and local governing bodies, such as city councils and commissions, take action on legislation. "Legislation," broadly defined, includes action by a governing body on acts, bills, resolutions, and confirmations of appointed officers. Legislation also includes actions by the public on referenda, ballot initiatives, constitutional amendments, and similar procedures. The term does not include actions of executive, judicial, or administrative bodies.
If a church or religious organization contacts or encourages others (members or nonmembers) to contact legislators or legislative employees in an effort to propose, support, or defeat legislation, the religious entity is deemed to be attempting to influence legislation. On the other hand, activities such as marching in front of the Supreme Court or organizing mass mailings to the SEC are not a violation, because these are judicial and enforcement entities rather than legislative bodies. …