Tax News

CCH (cch.taxgroup.com) reports:

With the 2008 election process going into full speed, Code Sec. 501(c)(3) organizations risk losing their tax-exempt status if they participate in impermissible political campaign activities, Richard Crom, an official with the IRS Exempt Organizations Office of Customer Education and Outreach, warned on August 29. Crom spoke during an IRS phone forum about nonprofits.
Political Campaign Intervention
All Code Sec. 501(c)(3) organizations are absolutely prohibited from directly or indirectly participating in, or intervening in, any political campaign on behalf of, or in opposition to, any candidate for public office, explained Crom, who limited his remarks to 501(c)(3)s. "The prohibition applies to all campaigns at the federal, state and local levels," he said. If an organization violates the ban, it could lose its exempt status, he cautioned.
The prohibition is absolute as to certain activities, Richard A. Newman, a partner at Arent Fox, LLP, in Washington, D.C., told CCH. Some lobbying activities are distinguishable from political campaign intervention on behalf of, or in opposition to, a candidate, he noted.
Voter Education
"Some activities look like impermissible political intervention but are not," Crom explained. A 501(c)(3)
may conduct voter education activities so long as the activities are nonpartisan. Nonpartisan voter registration and programs that encourage voter participation are generally permissible, he noted.
The IRS has stressed that the prohibition is not intended to restrict free expression by leaders of exempt organizations when they are not speaking on behalf of the organization. "It is not always clear if a priest or minister is speaking for him or herself or the entity," Newman observed. The facts and circumstances are unique to almost every situation.
Candidate Appearances
A 501(c)(3)
can invite political candidates to speak at an event, Crom said. However, "the opportunity has to be equally given to all candidates." When a 501(c)(3)
violates the ban on political campaign intervention, it is the organization and not the candidate that suffers the consequences, he warned.
Crom noted that the IRS has issued several items of guidance recently to educate 501(c)(3)
organizations about political campaign intervention. A fact sheet was published in 2006 (FS-2006-17) and includes examples of permissible and impermissible political campaign intervention. Rev. Rul. 2007-41, I.R.B. 2007-25, 1421, describes 21 scenarios.
Newman told CCH that it is unlikely that Congress will relax the rules on political activity. "We are in a period of enormous skepticism about nonprofits," he noted.
e-Postcard
In other news, Crom reminded very small 501(c)(3)s
that they also risk losing their tax-exempt status if they disregard a new annual electronic filing requirement. The Pension Protection Act of 2006 (P.L.109-280) requires very small exempt organizations, with gross receipts of $25,000 or less, to file Form 990-N (also known as the "e-Postcard"). The requirement applies to tax periods beginning after December 31, 2006. The IRS began notifying small exempt organizations of the new filing requirement in July (TAXDAY, 2007/07/13, I.8).
Form 990-N is not optional, Crom explained. "If we don't see one filed for three years, the organization will have its status revoked automatically."
By George L. Yaksick, Jr., CCH News Staff