Exempt Organizations Advisory - IRS Issues Memo Regarding Internet Political Campaign Activity by Exempt Organizations

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

On July 28, 2008, Marsha A. Ramirez, Director, IRS Exempt Organizations Examinations, issued a Memorandum for all EO Revenue Agents, which describes how the IRS will analyze political campaign activity issues involving websites of 501(c)(3)s.  The directive is part of the Political Activity Compliance Initiative (PACI), as updated in April for the 2008 election cycle.  
To determine whether a 501(c)(3) organization has participated or intervened in a political campaign by way of its Internet activities, the IRS looks closely at the organization’s website links to the websites of other organizations.   According to Revenue Ruling 2007-41, 2007-25 I.R.B. 1421 (June 18, 2007), two important considerations are the context for the link on the organization’s website and the directness of the links between the 501(c)(3)’s website and a website favoring or opposing a candidate; “electronic proximity” – the number of “clicks” that separate the objectionable material from the 501(c)(3)’s website – is a significant consideration.  

According to the IRS directive, the Exempt Organizations group is to focus on analyzing the context around a link in cases involving links between unrelated organizations (whether or not exempt), but not pursue, at this time, cases involving a link between a 501(c)(3) organization’s website and the home page of a website operated by a related 501(c)(4) organization.  

Additional IRS resources regarding the ban on political campaign activity by section 501(c)(3) organizations can be found online.