Many non-profit organizations, churches, and religious organizations enjoy tax-exempt status under §501(c)(3) of the Internal Revenue Code (IRC). Along with the benefits of that tax-exempt status come specific rules and responsibilities that organizations must follow, including a prohibition on political activity. Having an Arizona church and non-profit lawyer available to advise you on maintaining your tax-exempt status, whether related to political activity or other issues, is the best means of avoiding legal problems and endangering your tax-exempt status.
501(c)(3) Organizations and Tax-Exempt Status
Under §501(c)(3), tax-exempt organizations may not directly or indirectly engage or intervene in any partisan political activity or political campaigns on behalf of or in opposition to any candidate for public office. As a result, tax-exempt organizations, including churches and religious organizations, may not engage in any of the following activities:
- Endorsing or opposing candidates for public office;
- Making any communication—either from the pulpit, in a newsletter, or church bulletin—which expressly advocates for the election or defeat of a candidate for public office;
- Making expenditures on behalf of a candidate for public office or allowing any of their resources to be used indirectly for political purposes (e.g., using their phones for a phone bank);
- Asking a candidate for public office to sign a pledge or other promise to support a particular issue;
- Distributing partisan campaign literature;
- Organizing volunteers to prepare a mailing for a campaign;
- Soliciting donations for a campaign; or
- Displaying political campaign signs on church property.
Performing or affiliating themselves with any of these activities could jeopardize their tax-exempt status. As a result, these organizations and churches must take care to avoid these activities or any activities that have the appearance of partisan political activities.
Furthermore, while church leaders may express political opinions or endorse candidates for public office individually, they may not do so as part of a Sunday sermon, in a church newsletter, in any official communication coming from the church, or at any official church functions.
Nonpartisan Political Activities
Despite the clear prohibition on political activity, tax-exempt organizations may still engage in nonpartisan campaign activities without endangering their tax-exempt status. Some examples of the types of permissible nonpartisan campaign activities in which churches and other non-profit organizations may engage include the following:
- Voter education initiatives, including those on issues of public interest;
- Get-out-the-vote and voter registration drives;
- Nonpartisan candidate debates or forums, as long as all legally qualified candidates are invited to participate, and a wide spectrum of issues are addressed;
- Holding discussions about the relationships between church doctrine and ballot issues; and
- Creation of legislative scorecards or voter guides.
All permissible activities must be explicitly nonpartisan and not even tacitly include an expression of favor or disfavor of a particular candidate.
As §501(c)(3) organizations, non-profit organizations, including churches, may only engage in an “insubstantial” amount of lobbying. Otherwise, they risk losing their tax-exempt status. However, the exact definition of “insubstantial” remains unclear. Non-profit organizations, including religious organizations, that are not churches can take the so-called “501(h) election,” which allows them to measure their level of substantiality according to expenditures. As a result, they can spend up to 20% of their budgets on lobbying.
These organizations also can engage in an “insubstantial” amount of activity concerning ballot initiatives or referenda. The IRS considers this activity permissible lobbying rather than prohibited political activity so long as it remains “insubstantial.”
Nonetheless, §501(c)(3) organizations should ensure that their lobbying activities, including issue advocacy, do not cross the line to become political campaign intervention. Lobbying can become a political campaign activity if it becomes an indirect way to support or oppose a candidate for public office. Any message that favors or opposes a candidate can transform lobbying into a prohibited campaign activity.
We Are Here to Assist You with the Legal Needs of Your Church or Non-Profit Organization
Engaging in prohibited political activity can result in the denial or revocation of your organization’s tax-exempt status. Your organization also could face the imposition of certain excise taxes on the funds spent on impermissible political activity.
Our goal is to help you understand the legal matters your church or non-profit organization is facing and represent your interests throughout any transaction or dispute in which you are involved. Contact the offices of Provident Law today at (480) 388-3343 or online and schedule an appointment to speak with an Arizona church and non-profit organization attorney about your legal matter.