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Nonprofits Beware: Protect Tax-Exempt Status During Election Year

By: David Leipnik

Many nonprofit organizations have a vested interest in political issues and their outcomes. But it’s important that nonprofit organizations, board members and leaders clearly understand how their campaign-related activities could attract unwelcome IRS scrutiny.

Churches, charities and schools — 501(c)(3) nonprofit organizations that are tax exempt — are prohibited by the IRS from being directly or indirectly involved in campaigns of political candidates. The prohibition applies to federal, state or local elections. If the IRS finds that a nonprofit organization has illegal involvement in an election, the organization could be subject to an excise tax or, worse, loss of its tax-exempt status. 

Organizations, particularly churches, often invite political candidates to appear at their events. To avoid violating the IRS’s ban against political campaign participation, the nonprofit organization must provide an equal opportunity for other candidates to appear at the same, or a similar event. In addition, the nonprofit must not show support for or opposition to a particular candidate, and must not engage in any fundraising that is related to that event.

Nonprofit organizations are certainly allowed to take positions on public policy issues, such as gambling, abortion, the death penalty and same-sex marriages. However, the organization must do so without tying its position to a specific candidate, regardless of whether that candidate is for or against the issue at hand. Another factor that the IRS considers in determining the legality of an organization’s advocacy is the timing of it with respect to the election cycle.

Nonprofit organizations must not show preferential treatment to certain candidates. An organization that rents its mailing list, leases office space or accepts paid political advertising, for example, must make such opportunities available to all candidates at customary rates, and ensure these activities are part of ongoing business activity. 

Nonprofits that post information about a candidate on a website may be subject to IRS scrutiny. Likewise, organizations should be careful about posting links that might take someone to a website that focuses on a political campaign. 

Despite all of the limitations imposed by the IRS, there are a number of campaign-related activities that are permissible. 

IRS restrictions are not intended to infringe upon the free speech of leaders of nonprofit organizations, as long as it is clear that they are speaking for themselves as individuals. If they appear as representatives of their organizations or at official organization functions, then their statements will be attributed to their organization and fall under the prohibition. 

Just as nonprofits can advocate for or against issues, they can also provide education about the voting process and encourage individuals to exercise their voting rights, as long as it is done in a non-partisan manner. 

Leaders of nonprofit organizations should take extra care to ensure that their organization's political activities fall within the allowable provisions of the tax laws. As always, nonprofit leaders should talk with their advisors to ensure compliance and avoid possible conflicts with these restrictions.

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This article was originally published in 2014 and was updated in 2024.

Published June 12, 2024

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