IRS Releases Guidance on Political Activity of 501(c)(3) Organizations
June 1, 2007
With election season here, the Internal Revenue Service (IRS) recently released guidance in Revenue Ruling 2007-41 outlining the facts and circumstances it considers when determining whether a charitable organization has engaged in illicit political activities. Tax law allows 501(c)(3) organizations to engage in nonpartisan, election-related activities as long as these activities are not on behalf of or in opposition to any candidate for public office.
Revenue Ruling 2007-41 evaluates 21 different political activities--three of which are directly related to colleges and universities--and determines whether or not they would be considered "prohibited campaign intervention." The situations include:
- voter registration drives,
- candidate forums or other candidate appearances,
- issue advocacy campaigns,
- the sale or rental of mailing lists,
- leasing of office space, and
- Web site links to candidate-related material.
The ruling formalizes similar guidance included in Fact Sheet 2006-17, issued by the IRS in February 2006.
Political Activity Compliance Initiative
The IRS also released a report on its Political Activity Compliance Initiative for the 2006 election cycle, which summarizes cases of alleged political intervention by 501(c)(3) organizations during the past federal election. A similar report released after the 2004 election cycle indicated that the IRS received 166 referrals of possible campaign intervention and subsequently examined 110 organizations. In 2006, the number of referrals increased to 237, but the number of examinations dropped to 100. The higher number in 2006 is in part due to a nine-month collection period in 2006, compared to a six-month period in 2004. At the time the report was issued, 60 of the examinations from 2006 remained open.
In addition to following up on referrals of alleged violations, such as endorsing candidates, distributing campaign materials, or using organization facilities for a political campaign, the IRS also initiated a project in 2006 to use Internet research to identify campaign contributions made by 501(c)(3) organizations. This project initially identified 269 possible violations over three years, with contributions totaling $343,963. Approximately $121,000 has already been refunded to charities. Of the 92 cases that have been closed, 21 were dismissed.
The 2006 report also notes that the IRS is researching various state campaign finance report databases, looking for inappropriate campaign contributions from charities.
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