Political Activities – Walking a Fine Line

Political activities are defined by the Internal Revenue Service as “directly or indirectly participating in, or intervening in, any political campaign on behalf of (or in opposition to) any candidate for elective public office.” While that definition seems straightforward enough, so much more goes into determining what a “political activity” truly is.

The term “political activity” is narrowly defined in the exempt organization context. By simply participating in the political arena, an exempt organization is not necessarily undertaking a political activity. Organizations are permitted to “be political”, as long as they concentrate on broad issues and remain non-partisan. Organizations are permitted to educate people on political issues. Subject to certain IRS restrictions, exempt organizations are permitted to lobby (i.e. influence current legislation and acts of Congress). They are permitted to encourage people to vote, even helping people register. They are also permitted to educate voters about candidates, provided that the education is non-partisan and inclusive of all viable candidates.

From an Internal Revenue Service perspective, support of a particular candidate or groups of candidates for elective office is the core of the political activities definition. Support can come in a variety of manners. The most obvious and quantifiable is monetary support—whether direct contributions to a politician or indirectly through a Political Action Committee (PAC). Another type of support we often see are verbal or written statements supporting or opposing a particular candidate for public office. Political activities can also manifest in more indirect forms, including, but not limited to, voter education or registration activities that favor one candidate or party over another.

From an Internal Revenue Service perspective, the second prong of the definition of political activities focuses on “elective public office.” When is a candidate considered to be a candidate for elective public office? In such regard, the IRS has stated that endorsing a candidate who is appointed to office (e.g., a judge or cabinet member) would not be considered a political activity. So when does an individual become a “candidate?” The IRS has taken a very conservative stance on this, stating that the moment a person ‘throws their hat in the ring’ for an elected public position, they are a candidate. Per this definition, any individual in a party primary would be considered to be a candidate for public office.

However, the courts have taken a different stance regarding  when a person becomes a candidate for public office in respect to primary elections, stating that primaries are simply an internal mechanism for solving intra-party differences, and candidates for a primary election are not considered to be candidates for elective public office. Once an individual enters candidacy in the general election, they are considered to be a candidate for elective public office.

So which organizations can undertake political activities? Some types of exempt organizations are permitted to undertake political activities (with certain limitations), namely organizations exempted from taxation under IRC §501 (c)(4), 501(c)(5) and §501(c)(6). Conversely, public charities and private foundations (both exempt under §501(c)(3)) are strictly prohibited from any type of political activity. Violating this prohibition may result in the imposition of certain excise taxes or, even worse, the revocation of tax-exempt status.

Please do not hesitate to contact Lauren Havelock  at 310-982-2804 or at lhaverlock@yhadvisors.com if you have any questions regarding political activities or if you need any additional information whatsoever regarding the exempt organization services that YH Advisors provides in the lobbying and political area