Limitations on Political Activities of 501(c)(3) Organizations

Tax Professionals' Resource
August 9, 2012 — 1,214 views  
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A 501(c)(3) organization, also referred to as a 501(c) or a nonprofit organization, should be aware of the limitations when it comes to political activities. As an executive director or board member, understanding your role in political activity while lobbying can keep you and your organization in compliance with the law.

According to the Internal Revenue Service (IRS) of the Treasury Department, under the Internal Revenue Code, all section 501(c)(3) organizations are absolutely prohibited from directly or indirectly participating in or intervening in any political campaign. This goes for both those participating on the behalf of or in opposition to any candidate for elective public office.

Federal tax law begins with the Internal Revenue Code (IRC), enacted by Congress in Title 25 of the United States Code (26 U.S.C.). The IRC allows non-profit organizations to be tax-exempt, however, a group must be organized and operate exclusively for exempt purposes set forth in section 501(c)(3). This means your charitable organization must not allow any of its earnings to go toward any private shareholder or individual, attempt to influence legislation as a substantial part of its activities or participate in any campaign activity for or against political candidates.

For many years there was concern about the extent of tax-exempt organization lobbying and if limitations should be imposed. For this reason, the Lobbying Disclosure Act of 1995 was enacted and became effective January 1, 1996. This Act required that a nonprofit organization involved in lobbying must register and report on all of their activities, and stipulated that those engaged in lobbying are also not eligible to receive Federal funds as a loan, grant or award.

Political and lobbying activities, or legislative activities, are very different and the IRS states they are subject to two different sets of rules and consequences of exceeding the limitations. The rules for each of these activities are dependent on aspects such as the type of tax-exempt organization, the type of activity, political or legislative, and the scope or amount of activity conducted. Different rules apply to private foundations than to other nonprofit organizations under 501(c)(3).

The best thing you can do as a board director or member of a nonprofit group would be to contact a representative from the IRS or reference the sources provided on the IRS website to better understand the prohibitions surrounding political activity and lobbying.

Tax Professionals' Resource