Tax-Exempt Organizations and Political Activity

Tax-Exempt Organizations and Political Activity

As the 2024 election nears, now is a good time for your tax-exempt organization to review the rules and regulations regarding political activity. 

A 501(c)(3) tax-exempt organization can engage in limited amounts of political activity so long as it remains nonpartisan, and it may also engage in legislative lobbying provided it is not a substantial amount of activity. These limitations also extend to grantee organizations that receive grant money from a 501(c)(3) organization, including 501(c)(4) organizations and fiscal sponsors. 

501(c)(3) Grants and Fiscal Sponsors

When a 501(c)(3) makes grants or fiscally sponsors another organization, the funds dispersed are restricted for use to exclusively engage in the specific charitable, education, or other permissible activities under Section 501(c)(3) of the Internal Revenue Code (the “Code”.) Once the 501(c)(3) disburses any funds, it must receive reports or other documentation showing that this requirement has been honored so it does not jeopardize its tax-exempt status. 

Political Activity

Under section 501(c)(3) of the Code, a tax-exempt organization must NOT participate in or intervene in any political campaign on behalf of (or in opposition to) a candidate for public office, nor publishing or distributing statements of the kind. A 501(c)(3) organization may, however, take positions on public policy issues, which include issues that divide candidates, so long as the organization avoids any advocacy issues that function as a political campaign intervention. Any “political” agitation either director or indirect is enough to revoke an organization’s tax-exempt status because that would cause the organization’s activity to fall outside it’s exclusively charitable purposes.

It is important that a 501(c)(3) organization take extra caution in their communication because even if a statement does not expressly tell an audience to vote for or against a specific candidate, a tax-exempt organization delivering the statement is at risk of violating political campaign intervention prohibited activity if there is any message factoring a candidate. 

A 501(c)(3) organization can participate in specific voter education political activity so long as it remains neutral and nonpartisan. 

If an organization posts something on its website that favors or opposes a candid for public office, the organization will be treated the same as if it is distributing printed materials or oral statements. A tax-exempt organization is responsible for the links that are on its website. When an organization establishes a link to another website, the organization is responsible for the consequences of establishing and maintaining that link, even if that organization does not have control over the content of the linked site. Be mindful of any links on your website that may may lead to prohibited political activity. 

Lobbying Activity

A 501(c)(3) may engage in lobbying, which includes carrying out propaganda or otherwise attempting to influence legislation, so long as it does not constitute a substantial amount of the organization’s activity. Despite this limitation, the following activities are allowed and not counted toward the organization’s lobbying limits:

• making available the results of a nonpartisan analysis, 
• providing technical advice or assistance to a governmental body, appearances before, or communication to a legislative body with respect to a possible decision which might affect the existence of the organization, 
• communication between tax-exempt organization and its bona fide members with respect to legislation or proposed legislation, and 
• any communication with a government official or employees other than the attempt to influence legislation. 

There are two types of lobbying recognized by the law: direct lobbying and grassroots lobbying. Direct lobbying is an attempt to influence legislation by communicating directly with government officials, and grassroots lobbying is an attempt to influence legislation by communicating with the general public. If an organization engages in grassroots lobbying, it is limited to twenty-five percent (25%) of the organization’s total lobbying allowance. 

Learn How an Experienced Attorney Can Assist with Any Questions Regarding Political Activity or Lobbying for a Tax-Exempt Organization

Ensuring that your organization is complying with the rules and regulations regarding political activity or lobbying is essential to maintaining its tax-exempt status. Even if it’s not an election year, a tax-exempt organization must still adhere to the rules and restrictions. At Abelaj Law, PC, we are committed to assisting tax-exempt organizations with all of their legal needs so they can focus on achieving their mission and purpose. Contact our experienced legal team today at 212-328-9568 to learn more.