The Ban on Election Intervention:
What Charities Should Know
Since the 2004 election, the Internal Revenue Service (IRS) has
increased enforcement of the ban on partisan electoral activity by
charities and religious organizations. With stepped up enforcement, the
IRS has provided new and helpful guidance to nonprofits on what is and
is not campaign intervention. Unfortunately, increased enforcement has
also resulted in controversial audits, questions about the standards
and procedures used by the IRS, and greater concern and confusion among
nonprofits.
This article provides information on the prohibition and IRS enforcement, as well as links to more information.
Basics of the ban
Charities, educational institutions and religious organizations,
including churches, are among tax-exempt organizations described in
section 501(c)(3) of the Internal Revenue Code. They are prohibited
from participating or intervening in any political campaign on behalf
of, or in opposition to, any candidate for public office.
These organizations cannot endorse any candidates, make
donations to their campaigns, engage in fund raising, distribute
statements, or become involved in any other activities that, directly
or indirectly, may be beneficial or detrimental to any particular
candidate. Activities that encourage people to vote for or against a
particular candidate on the basis of nonpartisan criteria also violate
the political campaign prohibition of section 501(c)(3).
Political Activities Compliance Initiative (PACI)
In 2004, the IRS created new procedures to review and fast-track
enforcement action on allegations of improper political activities by
501(c)(3)s. This program is now referred to as the Political Activities
Compliance Initiative (PACI).
On Feb. 24, 2006 the IRS released its first assessment of PACI. The
report found that nearly 75 percent of organizations investigated had
violated the ban.
The same day the IRS released Fact Sheet 2006-17,
which summarizes the IRS interpretation of the ban on intervention in
elections in a variety of fact situations, covering voter mobilization
and education, individual activity by leaders, candidate appearances,
issue advocacy vs. political campaign intervention, voter guides,
websites, business activity, and multiple or combined activities.
The IRS also announced that it would step up enforcement for the
2006 election cycle, releasing new procedures for expedited handling of
referrals alleging violations, in an effort to end any ongoing
violations.
Current Status
On June 8, 2007 the IRS released a report on the initial results
of its 2006 enforcement program. The results of the 2006 enforcement
program show a low level of violations among the nonprofit community.
While only 40 of the 100 cases selected for examination have been
closed, the report provides a useful picture of the PACI program, as
well as updated information on the IRS' 2004 enforcement cases. The
2006 report also details a new program that matches state campaign
finance reports to the IRS database of 501(c)(3) organizations. See our
Initial Findings on 2006 IRS Political Activities Enforcement Efforts Released and IRS Reports on 2006 Political Activities Enforcement Program, Releases Guidance.
New!List of Known PACI Complaints
On the same day that the IRS released the report describe above, the agency also issued Revenue Ruling 2007-41.
The revenue ruling provides guidance in the form of 21 example
situations of nonprofits engaging in election activities. For each
example, the IRS comments on whether the activities represent a
violation of the ban on partisan intervention. The revenue ruling is a
helpful step toward providing clearer definitions of allowable and
unallowable activities, but does not establish any safe harbors or
bright line rules. For more information, see our Summary and Analysis
of Revenue Ruling 2007-41.
Questions and Concerns
Although the Treasury Inspector General for Tax Administration
(TIGTA) has published a report on the IRS' process for reviewing
referrals alleging political campaign intervention by charities, it did
not address a number of issues of concern to charities. The report did
not address the following issues:
- Whether the IRS has the authority to "fast track" investigations, absent a flagrant violation of the prohibition
- Why the IRS currently lacks a clear set of rules defining
prohibited intervention in elections, instead relying on the "facts and
circumstances" of each individual case
- Whether a charity's right to criticize elected officials —
which is at the core of our free speech rights — is suspended because
an election is taking place
- How the IRS distinguishes between partisan interference and legitimate issue advocacy
For more information on the issues charities face as a result of IRS enforcement of the ban, see OMB Watch Report: The IRS Political Activities Enforcement Program for Nonprofits: Questions and Concerns.
IRS investigations, audits, and resolutions are secret — by law, the IRS cannot publicly comment on specific cases. Therefore, we have little details about the current examinations resulting from PACI. The organizations under investigation may and, sometimes do, publicly disclose their audits. Below are examples of investigations as made public by the organizations.