Exempt Organizations Advisory - Charities and Churches Warned Against Political Activity by IRS

By: Catherine W. Wilkinson (cwilkinson@steptoe.com)
Suzanne Ross McDowell (smcdowell@steptoe.com)

On November 19, 2007, the IRS issued IR 2007-190, which reminds 501(c)(3) organizations that they are prohibited from engaging in political campaign activity, including direct or indirect involvement in campaigns of political candidates.  However, these organizations are not prohibited from advocating for or against issues and, to a limited extent, engaging in ballot initiatives or other legislative activities.  Violation of the law can result in imposition of an excise tax or loss of exempt status.
Steven T. Miller, Commissioner of IRS’ Tax Exempt and Government Entities Division, urged nonprofits to review the following IRS guidance:

• IRS Revenue Ruling 2007-41, which outlines a number of scenarios to help charities and churches understand the ban on political campaign activity and actions that may arise;
• IRS Publication 1828, Tax Guide for Churches and Religious Organizations, which contains a discussion of the law affecting political campaign activity by churches and religious institutions;
• Report on the Political Activity Compliance Initiative, PACI 2006, which follows the report on prohibited political campaign intervention in the 2004 election cycle; and
• Various additional information for Charities, Churches, and Educational Organizations regarding Political Campaign Intervention.