Summary and Analysis: IRS Revenue Ruling on Charities and Election Activity

On June 1, 2007 the Internal Revenue Service (IRS) released Rev. Rul. 2007-41 which provides guidance to help charities and religious organizations avoid violating the prohibition on partisan intervention for or against candidates in elections. The ruling includes 21 examples and explanations charities and religious organizations can rely on in planning their get out the vote, voter education and mobilization activities. It is helpful step toward providing clearer definitions of allowable and unallowable activities, but does not establish any safe harbors or bright line rules. This summary and analysis highlights the key points the IRS makes about the law and six categories of activities: voter education, registration and participation efforts, activities of individuals, candidate appearances, issue advocacy, renting facilities, mailing lists and other business activities, and web sites.

Rev. Rul. 2007-41's Background on the Law

Under current law organizations exempt under Sec. 501(c)(3) of the Internal Revenue Code cannot intervene in elections for candidates for public office. The IRS uses "all the facts and circumstances of each case' to determine whether prohibited intervention has occurred. The ruling's background section on the law states that partisan intervention can be either direct or indirect, and is "not limited to the publication or distribution of written statements or the making of oral statements on behalf of or in opposition to candidates." A candidate is defined as anyone "who offers himself, or is proposed by others, as a contestant for an elective public office, whether such office be national, State, or local."
OMB Watch note: 501(c)(3) organizations are allowed to campaign for or against referendums or ballot initiatives, since the IRS considers this activity to be direict lobbying.

The ruling summarizes past guidance issued by the IRS in this area, covering two topics:

• Voter guides and education materials
  Preparation and distribution of voter guides and other educational materials are permissible if "conducted in a non-partisan manner." Rev. Rul. 78-248 covers candidate questionnaires and voter guides, focusing on content and structure, and Rev. Rul. 80-282 addresses factors that indicate bias in timing and distribution.
• Candidate debates and forums
  Rev. Rul. 66-256 and Rev. Rul 74-574 make it clear that sponsoring debates and forums is permissible when "held for the purpose of educating and informing voters, which provides fair and impartial treatment of candidates, and which does not promote or advance one candidate over another…" Rev. Rul. 86-95 says a series of forums are permissible if the content and form are neutral.

Summary and Analysis of 21 Fact Situations

Each of the six categories of examples is preceded by a short introduction that sums up the IRS's interpretation of what constitutes either prohibited or allowable activities around elections. The scenarios are simple, and each one illustrates only one type activity. When different activities are combined the IRS says "the interaction among the activities may affect the determination of whether or not the organization is engaged in political campaign intervention." For both combined and more complex situations 501(c)(3)s must use their best judgment about what will maintain neutrality. Additional assistance can come form legal advice, or from technical assistance programs like the Alliance for Justice's .

Voter Education, Voter Registration and Get Out the Vote Drives

The example of a permissible voter registration effort is a state fair booth with no references to candidates or political parties, other than what is on the registration form.
OMB Watch note: This example does not mean that no references to candidates or political parties can be made in a nonpartisan voter mobilization effort. As long as all candidates and parties are given equal prominence and the presentation of information is neutral, 501(c)(3)s can provide a useful service to voters by disseminating information that refers to candidates and parties.

The example of an impermissible phone bank involves a script that provides more information on the logistics of election day to people who agree with the viewpoint of the organization on an issue that divides the candidates in the upcoming election.

Activities of Individuals

The Revenue Ruling notes that the ban on partisan activity for charities and religious organizations "is not intended to restrict free expression on political matters by leaders of organizations speaking for themselves, as individuals." It also notes that this does not give leaders the right to express personal views at organizational functions or in its publications.

There are four examples that illustrate the following principles:

• Individuals that endorse candidates can be identified as leaders of a 501(c)(3) in a newspaper ad or other public announcement, as long as the ad states that "Titles and affiliations of each individual are provided for identification purposes only."
• A 501(c)(3) will not be held responsible for newspaper reports about endorsements that identify a speaker in their organizational capacity if no organizational resources were used and the speaker did not identify him or herself as a representative of the organizations.
  OMB Watch note: Since some complaints about partisan activity sent to the IRS are based on news reports, a leader of a 501(c)(3) that endorses a candidate in his or her individual capacity can protect the organization by making a specific disclaimer.
• A column in a 501(c)(3)s newsletter that endorses a candidate violates the prohibition, even if the write is speaking as an individual and/or pays for the space.
• A board member should not make statements supporting or opposing candidates at organizational meetings.

Candidate Appearances

The IRS reports on its 2004 and 2006 Political Activities Compliance Initiative indicate that a significant percent of cases where violations were found involved candidate appearances or speeches at events sponsored by 501(c)(3) organizations. This makes it important to pay attention to details when someone running for office participates in an event. The Revenue Ruling states that "Political candidates may be invited in their capacity as candidates, or in their individual capacity (not as a candidate). Candidates may also appear without an invitation at organization events that are open to the public."

Participating as a Candidate

The IRS lists three major factors to consider when inviting candidates to appear at meetings or other events. These are whether the group:

• provides an equal opportunity for all candidates seeking the same office. The IRS says it will consider "the nature of the event" and the "manner of presentation" in determining whether the same opportunity is available to each candidate.
• indicates support or opposition to the candidate at the event or in public statements about it
• allows political fundraising.
  OMB Watch note: DO NOT allow candidates to raise funds at your events.

Factors that indicate a nonpartisan debate or forum are:

• questions "are prepared and presented by an independent nonpartisan panel"
• topics cover a "broad range of issues that the candidates would address if elected to the office sought and are of interest to the public"
• all candidates have an equal chance to present their views
• candidates are not asked to "agree or disagree with positions, agendas, platforms or statements of the organization, and
• comments by the moderator are impartial.

The three examples illustrate a neutral forum and suggest a debate can go forward when one candidate declines to attend where there is an announcement that one candidate declined the invitation. The order candidates speak should be randomly determined and that fact shared with the audience. The last example illustrates partisan intervention when a candidate appears and asks for votes, but no other candidates are invited.

Participating as a Non-Candidate

The IRS acknowledges that candidates may appear at public events because "he or she: (a) currently holds, or formerly held, public office; (b) is considered an expert in a non political field: or (c) is a celebrity or has lead a distinguished military, legal, or public service career." The IRS says factors to consider "if the candidate is publicly recognized by the organization, or if the candidate is invited to speak" are whether:

• he or she is asked to speak "solely for reasons other than candidacy for public office"
• there is any mention of the candidacy or election
• any campaign activity occurs
• there is a nonpartisan atmosphere and
• the sponsoring organization "clearly indicates the capacity in which the candidate is appearing and does not mention the individual's candidacy"

Four examples illustrate permissible and impermissible appearances. They indicate that a 501(c)(3) can acknowledge the presence of an elected official at events or invite him or her for a facility or program tour if the election is not mentioned. But when in indirect reference is made to the need to re-elect an official to continue funding for a 501(c)(3)s program the ban on partisan intervention has been violated.

Issue Advocacy vs. Political Campaign Intervention

The Revenue Ruling makes this very helpful affirmative statement: "Section 501(c)(3) organizations may take positions on public policy issues, including issues that divide candidates in an election for public office." However, the IRS cautions that issue advocacy can turn into prohibited campaign intervention if the message favors or opposes a candidate. Candidates can be identified by name or by reference. In the end the IRS notes it will consider "all the facts and circumstances" to determine "if the advocacy is political campaign intervention."

The IRS lists seven factors that determine whether issue advocacy results in partisan intervention in an election. These are whether:

• one or more candidates for public office is identified
• the statement is made close to election day
• there is or is not a reference to an upcoming election or voting
• the issue "has been raised as an issue distinguishing candidates for a given office"
• the communication "is part of an ongoing series of communications by the organization on the same issue that are made independent of the timing of the election"
• the timing is "related to a non-electoral event."

A warning states that an issue advocacy communication "is particularly at risk of political campaign intervention when it makes reference to candidates or voting in a specific upcoming election."

OMB Watch note: This is one of the most difficult areas for nonprofits, since the IRS is vague about what it considers support or opposition of a candidate, especially when there is criticism of an elected official's action or policy positions when he or she is also running for office. However, in addition to considering the factors listed by the IRS, it might also be helpful to refer the Revenue Ruling's section on candidate appearances. It illustrates what factors the IRS believes indicate references to an elected official in their capacity as an officeholder and when they are discussed as candidates. The IRS clearly acknowledges that the capacity in which the candidate/officeholder appears makes a difference.

There are three examples. The first two illustrate the extremes between ways the seven factors above combine to indicate permissible or impermissible activity. The facts are similar. In each situation there is:

• an elected official who is in a position to act on pending legislation (by vote or veto)
• the elected official is running for re-election
• a pending bill
• shortly before the election a 501(c)(3) makes a public communication (runs an advertisement) about the bill that takes a position on the bill and refers to the elected official in a position to act
• the ad does not mention the election, a political party or another candidate
• the ad has a call to action urging the public to contact the elected official
• the public official's position on the issue differs from that of the 501(c)(3).

The IRS factors that distinguish permissible from the impermissible issue advocacy are combinations of all positive and all negative factors, and do not indicate how a change in any factor would affect the permissibility of the public communication. The factors are whether:

• the ad states the elected official's position on the issue
• the issue distinguishes the candidates in the campaign
• a vote on the bill has been scheduled
• the ad is part of "an ongoing series of substantially similar advocacy communications" about the same issue

OMB Watch comment: While these examples help illustrate the factors the IRS considers, they do not address many common situations faced by 501(c)(3) organizations that are engaged in genuine issue advocacy campaigns, including grassroots lobbying. For example, often votes on bills are not officially scheduled until the last minute, so the fact that an ad addresses a bill not yet set for vote should not tip the balance from grassroots lobbying to prohibited intervention in an election. Similar problems arise when any one of these factors change. This leaves a gray area for charities and religious organizations to navigate the best they can. In any case, the IRS guidance should not be used to discourage such genuine issue advocacy communications. This illustrates the inherent problems charities and religious groups face when trying to comply with the ban on partisan intervention.

The third example is helpful by indicating three factors that constitute a violation. It discusses how the executive director's speech at a 501(c)(3)'s annual dinner impermissibly combines these factors:

• the issue distinguishes the candidates in the campaign
• there is a reference to the election, and
• the speech refers to the organization's position on the issue.

Business Activity

The IRS uses two examples to illustrate how 501(c)(3)s can ensure any goods, services or facilities they rent or sell are "available to candidates in the same election on an equal basis." The three factors the IRS says it will consider are whether:

• the asset is only available to candidates
• the "customary and usual rates" are charged to candidates
• the activity is ongoing or "conducted only for a particular candidate"

Web Sites

The IRS's primary point about organizational web postings is that they will be treated the same way as printed or oral material that is distributed to the public. Treatment of links is more complex. That means a 501(c)(3)s could be held responsible for the content of webpages they link to, "even if the organization does not have control over the content of the linked site." The burden is on the 501(c)(3) to monitor the linked content and "adjusting the links accordingly,"

This does not mean than a 501(c)(3) cannot link to candidate's websites or materials. The IRS says it will consider:

• the context for the link
• "whether all candidates are represented"
• if the link serves an exempt purpose (such as voter education)
• the "directness of the links between the organization's web site and the web page that contains material favoring or opposing a candidate for public office."

The IRS uses an example to address the issue of links to partisan material provided on the linked-to site, and whether that content may be attributed to the site with the primary link. The factual situation involves links to partisan material that does not appear in the template around the linked-to article, but is elsewhere on the linked to site. The IRS said there is no violation where the context of the link, the relationship between the 501(c)(3) and the linked to site and the arrangement of the links do not indicate any candidate preferences.