11

PoliticalPolitical and and LegislativeLegislative

ActivitiesActivities

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Information Sources and Information Sources and Reference MaterialsReference Materials

CPE Articles:CPE Articles:““Lobbying Issues” Lobbying Issues”

FY1997FY1997““Election Year Issues” Election Year Issues”

FY2002FY2002““Political Campaign Political Campaign

and Lobbying and Lobbying Activities of IRC Activities of IRC 501(c)(4), (c)(5) and 501(c)(4), (c)(5) and (c)(6) (c)(6) Organizations” Organizations” FY2003FY2003

IRM 4.76.30IRM 4.76.30Rev. Rul. 2004-6Rev. Rul. 2004-6Rev. Rul. 2007-41Rev. Rul. 2007-41Rev. Proc. 86-43Rev. Proc. 86-43

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Outline:Outline:

I.I. ObjectivesObjectivesII.II. OverviewOverviewIII.III. Political ActivityPolitical ActivityIV.IV. Legislative ActivityLegislative Activity

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I. ObjectivesI. Objectives

What can 501(c)(3) organizations do?What can 501(c)(3) organizations do? Identify prohibitedIdentify prohibited politicalpolitical activitiesactivities Distinguish between Distinguish between legislativelegislative

activities & political activitiesactivities & political activities

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Types of Exempt Organizations Types of Exempt Organizations that engage in political and/or that engage in political and/or lobbying activities:lobbying activities:

§ 501(c)(3) Charitable Organizations § 501(c)(3) Charitable Organizations § 501(c)(4) Social Welfare Organizations§ 501(c)(4) Social Welfare Organizations§ 501(c)(5) Labor Organizations§ 501(c)(5) Labor Organizations§ 501(c)(6) Business Leagues§ 501(c)(6) Business Leagues§ 527 Political Organizations§ 527 Political Organizations

• Other types of exempt organizations may Other types of exempt organizations may engage in these activities but these are the engage in these activities but these are the most common ones. most common ones.

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Prohibition on 501(c)(3) Prohibition on 501(c)(3) organizations - Politicalorganizations - Political A 501(c)(3) organization cannot intervene in any A 501(c)(3) organization cannot intervene in any

political campaignpolitical campaign for or against a candidate. for or against a candidate.

AuthorityAuthority

IRC 501(c)(3):IRC 501(c)(3): “…“…an organization exempt from tax is one... an organization exempt from tax is one...

which does not participate in or intervene in…which does not participate in or intervene in…any POLITICAL CAMPAIGN on behalf of (or in any POLITICAL CAMPAIGN on behalf of (or in opposition to)… any candidate for public opposition to)… any candidate for public office...”office...”

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§501(c)(3) issues§501(c)(3) issues

Political activity:Political activity: AbsoluteAbsolute prohibitionprohibition Be aware of related §501(c)(4) Be aware of related §501(c)(4)

organizations with §527 fundsorganizations with §527 funds Subject to potential revocationSubject to potential revocation Subject to §4955 excise taxSubject to §4955 excise tax §6852 authority for termination §6852 authority for termination

assessments for flagrant abuseassessments for flagrant abuse §7409 authority to seek injunction for §7409 authority to seek injunction for

flagrant abuseflagrant abuse

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Prohibition on 501(c)(3) Prohibition on 501(c)(3) organizations – Legislative organizations – Legislative ActivityActivity A public charity cannot devote a A public charity cannot devote a “substantial”“substantial”

amount of its activities in attempting to amount of its activities in attempting to influence legislation.influence legislation.

AuthorityAuthority

IRC 501(c)(3):IRC 501(c)(3): “…“…an organization exempt from tax... in which an organization exempt from tax... in which

no no substantialsubstantial part of its activities is carrying on part of its activities is carrying on propaganda or otherwise attempting to propaganda or otherwise attempting to influence LEGISLATION…”influence LEGISLATION…”

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§501(c)(3) issues§501(c)(3) issues

Legislative activity:Legislative activity: May be germaneMay be germane Risk their exemption if an “action” Risk their exemption if an “action”

organizationorganization May make §501(h) electionMay make §501(h) election Subject to §4911 excise tax for excess Subject to §4911 excise tax for excess

lobbyinglobbying Subject to §4912 excise tax for Subject to §4912 excise tax for

disqualified lobbyingdisqualified lobbying Private foundations subject to §4945 Private foundations subject to §4945

excise taxexcise tax

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Excess lobbying Excess lobbying expendituresexpendituresBy filing Form 5768, most §501(c)(3) By filing Form 5768, most §501(c)(3)

organizations may make an election to be organizations may make an election to be held to the expenditure limits of §501(h), held to the expenditure limits of §501(h), in order to avoid treatment under §4912 in order to avoid treatment under §4912 for disqualifying lobbying expenditures.for disqualifying lobbying expenditures.

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Excess lobbying Excess lobbying expendituresexpenditures

ChurchesChurches Associations of Associations of

ChurchesChurches Integrated Integrated

Auxiliaries of Auxiliaries of ChurchesChurches

Organizations Organizations affiliated withaffiliated with::– ChurchesChurches,,– Associations of Associations of

Churches, Churches, – Integrated Integrated

Auxiliaries of Auxiliaries of ChurchesChurches

The following types of organizations can not make the election:

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Excess lobbying Excess lobbying expendituresexpenditures

The following types of The following types of organizations also organizations also can notcan not make the make the election:election:

§509(a)(3) organizations that §509(a)(3) organizations that support §501(c)(4), §501(c)(5), or support §501(c)(4), §501(c)(5), or §501(c)(6) organizations§501(c)(6) organizations

Private foundationsPrivate foundations

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What is participation orWhat is participation orintervention in a Political intervention in a Political Campaign?Campaign?

Publishing/distributing Publishing/distributing written/printed statements or making written/printed statements or making oral statementsoral statements

for or against a candidate for for or against a candidate for public officepublic office

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Participation and Participation and Intervention, cont.Intervention, cont.

Providing or soliciting $$ or other Providing or soliciting $$ or other support for candidates or political support for candidates or political organizationsorganizations

Establishing a political (“Establishing a political (“action”) action”) organization organization (“PAC”)(“PAC”)

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Political activitiesPolitical activities

Listed below are some common activities that Listed below are some common activities that may be political campaign intervention:may be political campaign intervention:

Radio & TV attack adsRadio & TV attack ads Partisan voter guidesPartisan voter guides Guest speakers at eventsGuest speakers at events RalliesRallies Dinner fundraisersDinner fundraisers Newspaper editorialsNewspaper editorials EndorsementsEndorsements

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Political expensesPolitical expenses

Listed below are some common expenditures Listed below are some common expenditures that may be political campaign intervention:that may be political campaign intervention:

Checks to candidates; for speeches, Checks to candidates; for speeches, material, contributions material, contributions

Checks to committeesChecks to committees Advertising & publicityAdvertising & publicity HonorariumsHonorariums Travel expensesTravel expenses Polls, Surveys, white papersPolls, Surveys, white papers FundraisersFundraisers NewslettersNewsletters Written, printed or oral statementsWritten, printed or oral statements

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What is a political What is a political campaign?campaign?

Man on the street:

“It’s a candidate running for office!”

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Who is a candidate?Who is a candidate?

Anyone who offers him/herself (or is proposed by others) as a contestant for elective public office whether it is national, state or local.

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What is public office?What is public office?

Position created by Position created by statutestatute

Position is continuousPosition is continuous Position not contractual Position not contractual Fixed term of officeFixed term of office Required oath of officeRequired oath of office

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Is this political?Is this political?

Fed up with the candidates running in the Fed up with the candidates running in the primary for the US Senate, the officers of an primary for the US Senate, the officers of an exempt organization decide to have the exempt organization decide to have the organization endorse the US Ambassador to organization endorse the US Ambassador to Japan for the position, encouraging voters to Japan for the position, encouraging voters to write in the candidate. The ambassador states write in the candidate. The ambassador states that she has no wish or intention to run for the that she has no wish or intention to run for the senate. The ambassador wins the primary.senate. The ambassador wins the primary.

Is this a political activity and/or expense? Yes Is this a political activity and/or expense? Yes or no? Why or why not?or no? Why or why not?

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Advocacy vs. Advocacy vs. PoliticalPolitical

Advocacy is generally defined as Advocacy is generally defined as the act of pleading for, supporting the act of pleading for, supporting or recommending something, such or recommending something, such as a cause, idea or policy. as a cause, idea or policy.

A public charity is not restricted A public charity is not restricted from taking a position on issues from taking a position on issues providing the position does not providing the position does not involve the participation or involve the participation or intervention in a political campaign. intervention in a political campaign.

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Advocacy vs. Advocacy vs. PoliticalPolitical, , cont.cont.

Some factors to consider whenSome factors to consider whendetermining whether a communicationdetermining whether a communication results in political campaign intervention:results in political campaign intervention:

Whether the statement identifies one or Whether the statement identifies one or more candidatesmore candidates

Whether the statement makes reference Whether the statement makes reference to voting or an electionto voting or an election

Whether the statement expresses Whether the statement expresses approval or disapproval of one or more approval or disapproval of one or more candidates’ positions and/or actions.candidates’ positions and/or actions.

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Education or Education or Political Political ParticipationParticipation??

Unsupported facts Distorted facts Inflammatory terms based on emotions Not aimed at developing audience’s

understanding

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Partisan vs. Non-Partisan vs. Non-PartisanPartisan

Everybody’s voting record

All candidates’ opinions

Opinions on certain issues

Voting record on certain issues

Political Educational

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EXAMPLES:EXAMPLES:

Situation 1Situation 1. .

BB, a section 501(c)(3) organization that promotes , a section 501(c)(3) organization that promotes community involvement, sets up a booth at the state fair community involvement, sets up a booth at the state fair where citizens can register to vote. The signs and where citizens can register to vote. The signs and banners in and around the booth give only the name of banners in and around the booth give only the name of the organization, the date of the next upcoming statewide the organization, the date of the next upcoming statewide election, and notice of the opportunity to register. No election, and notice of the opportunity to register. No reference to any candidate or political party is made by reference to any candidate or political party is made by the volunteers staffing the booth or in the materials the volunteers staffing the booth or in the materials available at the booth, other than the official voter available at the booth, other than the official voter registration forms which allow registrants to select a registration forms which allow registrants to select a party affiliation. party affiliation. BB is not engaged in political campaign is not engaged in political campaign intervention when it operates this voter registration intervention when it operates this voter registration booth.booth.

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EXAMPLES (cont.)EXAMPLES (cont.)

Situation 2Situation 2..

President President BB is the president of University is the president of University KK, a section , a section 501(c)(3) organization. University 501(c)(3) organization. University KK publishes a monthly publishes a monthly alumni newsletter that is distributed to all alumni of the alumni newsletter that is distributed to all alumni of the university. In each issue, President university. In each issue, President BB has a column titled has a column titled “My Views.” The month before the election, President “My Views.” The month before the election, President BB states in the “My Views” column, “It is my personal states in the “My Views” column, “It is my personal opinion that Candidate opinion that Candidate UU should be reelected.” For that should be reelected.” For that one issue, President one issue, President BB pays from his personal funds the pays from his personal funds the portion of the cost of the newsletter attributable to the portion of the cost of the newsletter attributable to the “My Views” column. Even though he paid part of the cost “My Views” column. Even though he paid part of the cost of the newsletter, the newsletter is an official publication of the newsletter, the newsletter is an official publication of the university. Because the endorsement appeared in of the university. Because the endorsement appeared in an official publication of University an official publication of University KK, it constitutes , it constitutes campaign intervention by University campaign intervention by University KK..

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Measuring Legislative Measuring Legislative ActivitiesActivities

Substantial Substantial

Part TestPart Test

Expenditure Expenditure TestTest

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Substantial Part TestSubstantial Part Test

Facts & Circumstances TestFacts & Circumstances Test

Activities Activities andand financial aspects of financial aspects of the organization are analyzed to the organization are analyzed to determine the substantiality of the determine the substantiality of the legislative activities legislative activities

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Expenditure TestExpenditure Test

Described in IRC section 501(h) Described in IRC section 501(h)

Applied to the Applied to the expendituresexpenditures of the of the IRC 501(c)(3) organization in order IRC 501(c)(3) organization in order to determine if a substantial part of to determine if a substantial part of the organization’s activities are the organization’s activities are conducted to influence legislation conducted to influence legislation

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What Is Legislation?What Is Legislation?

Action onAction on::ActsActsBillsBillsResolutionsResolutions

ByBy::CongressCongressState legislatureState legislatureLocal council or Local council or

similar similar

Action on:Action on:ReferendumReferendumInitiativeInitiativeConstitutional Constitutional

amendment amendment

By:By: The Public The Public

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Action includesAction includes

IntroductionIntroduction AmendmentAmendment EnactmentEnactment DefeatDefeat RepealRepeal

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Influencing Legislation = Lobbying

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Attempting to influence legislation by…Attempting to influence legislation by… Affecting the general public’s opinionAffecting the general public’s opinion Communicating with a legislative body Communicating with a legislative body

member or employeemember or employee Communicating with government Communicating with government

official or employee who can affect official or employee who can affect legislationlegislation

Definition of Definition of LobbyingLobbying

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DIRECTDIRECT LobbyingLobbying

Factors:Factors: CommunicationCommunication withwith

Member or employee of a legislative Member or employee of a legislative bodybody

A government official or employee A government official or employee who can influence legislationwho can influence legislation

CommunicationCommunication must must Refer to specific legislation andRefer to specific legislation and Reflect a view on the legislationReflect a view on the legislation

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EXAMPLE:EXAMPLE:

An organization exempt under IRC An organization exempt under IRC 501(c)(3) whose purpose is the 501(c)(3) whose purpose is the prevention of cruelty to animals prevention of cruelty to animals contacts their Legislators in the contacts their Legislators in the State of Michigan regarding State of Michigan regarding legislation to prevent greyhound legislation to prevent greyhound racing in the state.racing in the state.

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Indirect Lobbying = Grass Roots Lobbying

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INDIRECTINDIRECT LobbyingLobbying

Factors:Factors: Attempting to influence legislation byAttempting to influence legislation by

Influencing the general public’s Influencing the general public’s opinionopinion

CommunicationCommunication must must Refer to specific legislation Refer to specific legislation Reflect a view on the legislationReflect a view on the legislation Encourage reader to take actionEncourage reader to take action

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EXAMPLE:EXAMPLE:

An organization exempt under IRC An organization exempt under IRC 501(c)(3) whose purpose is the 501(c)(3) whose purpose is the prevention of cruelty to animals prevention of cruelty to animals uses TV and radio ads to ask the uses TV and radio ads to ask the general public to contact the state general public to contact the state legislators in the State of Michigan legislators in the State of Michigan regarding legislation to prevent regarding legislation to prevent greyhound racing in the state.greyhound racing in the state.

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QUESTIONS?QUESTIONS?

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The END