Nonprofit Political Donations: Legal Or Not?

Nonprofits with 501(c)(3) tax-exempt status are prohibited from engaging in political campaigning or donating to political campaigns. This includes direct or indirect participation or intervention in any political campaign on behalf of or in opposition to any candidate for public office. Violation of this prohibition could result in severe consequences, including the IRS revoking the organization's tax-exempt status or imposing excise taxes. Organizations with substantial political or lobbying objectives may be recognized as tax-exempt under Code Section 501(c)(4) and are permitted to engage in lobbying activities, although donations to these organizations are not tax-deductible.

Can 501c Tax Filers Donate to Political Campaigns?

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501(c)(3) organizations are forbidden from political campaigning

Under the Internal Revenue Code, 501(c)(3) organizations are prohibited from directly or indirectly participating in, or intervening in, any political campaign. This applies to campaigns for any candidate for elective public office, from the president of the United States to lower elected offices such as school board officials and county trustees.

This means that 501(c)(3) organizations cannot take a stand in any campaign, either supporting or opposing a candidate. They cannot make contributions to political campaign funds or make public statements of position (verbal or written) on behalf of the organization. Inviting a political candidate to speak at an organization event, even if it is for reasons other than their candidacy, could also jeopardize the organization's tax-exempt status.

However, this does not mean that 501(c)(3) organizations cannot engage in any activities related to the political or electoral process. They can engage in non-partisan activities such as non-partisan voter registration drives, non-partisan candidate debates, and non-partisan voter education, as long as these activities fulfill their exempt purposes. They can also engage in legislative advocacy and issue-related advocacy, as long as it is not related to a political campaign.

It is important to note that individuals associated with a 501(c)(3) organization are allowed to voice their opinions and participate in a political campaign, as long as they are not speaking for the organization.

501(c)(4) organizations are allowed to engage in lobbying

The IRS defines lobbying as communicating with decision-makers about existing legislation and urging a vote for or against it. 501(c)(4) organizations are permitted to engage in an unlimited amount of lobbying, but there are two critical conditions that must be met. Firstly, the lobbying activities must be "germane" or related to the organization's exempt purpose, often referred to as social welfare purposes. Secondly, these activities cannot be the organization's primary activities.

Additionally, 501(c)(4) organizations must be cautious about public disclosure requirements when engaging in lobbying. In a small number of jurisdictions, such as New York and Connecticut, these organizations may be required to publicly disclose their donors if they make political expenditures or engage in lobbying. In most cases, if a nonprofit hires a lobbyist, the lobbyist must disclose the nonprofit as their client, and the nonprofit may have to file separate client reports. This can lead to "dark money" issues if the organization contributes to an entity, like a super PAC, that is mandated to disclose its donors.

It's important to note that donations to 501(c)(4) organizations are not tax-deductible. While these organizations can legally participate in political activities in support of or opposition to candidates for office, they cannot make direct donations to a candidate or a candidate's committee. 501(c)(4) organizations have become an increasingly significant part of the political and public policy advocacy landscape, and as a result, they are subject to heightened scrutiny from the media and regulators.

Nonprofit leaders can endorse a candidate, but not via the nonprofit

Nonprofit organizations are prohibited from endorsing or opposing any candidates, political parties, or campaigns. This means that nonprofit leaders cannot use the organization's resources, such as its website, social media accounts, email lists, newsletters, or publications, to communicate their endorsement of a candidate. They must also not make any partisan comments at organization functions or publications.

However, nonprofit leaders do not lose their freedom of speech rights due to their position. They can publicly endorse a candidate in their individual capacity, as long as they do not imply that their personal political position is made on behalf of the organization. They must clearly indicate that their comments do not represent the views of the organization and that they are speaking as individuals. Nonprofit leaders should also be careful not to include any personal opinions on campaign issues in any publications by the organization, even if they pay for the article themselves.

Nonprofit leaders can invite candidates to speak at events, but they must do so in a personal capacity and not as a candidate. The nonprofit and the candidate should avoid referencing the candidacy, election, or any campaign issues. Instead, the focus should be on the non-political capacity in which the individual is appearing. Nonprofits can also engage in non-partisan election-related activities, such as voter registration, get-out-the-vote efforts, and voter education, as long as these activities do not favor one candidate over another.

While nonprofit leaders can personally endorse candidates and participate in political activities, they must be careful to maintain a clear separation between their personal views and the organization's activities. Any political activity by a leader should ideally be conducted outside the organization's property and events to avoid any confusion or perception of the organization endorsing a candidate.

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Nonprofits can invite candidates to speak, but not in their capacity as a candidate

Nonprofits play an important role in educating the public about issues that affect the community and those served, such as through voter education activities and candidates' forums. They are permitted to engage in advocacy and lobbying, which is a small subset of advocacy, but this must be kept separate from political campaign activity under the law.

Nonprofits can invite candidates to speak at their events, but they must do so in a way that does not indicate that one candidate is favoured or opposed. This means that the nonprofit and the candidate should avoid referencing the candidacy or election and instead focus on the non-political capacity in which the individual is appearing. The candidate should be chosen to speak solely for reasons other than their candidacy for public office. All candidates should be invited and given relatively equal time and opportunity to participate. If one candidate is invited to speak at a large group event, and another is invited to speak at a smaller event, this is likely not an equal opportunity to participate.

Nonprofit leaders must also be careful not to use the nonprofit to communicate their endorsement and clearly indicate their comments are not intended to represent the views of the organization. Leaders should avoid making endorsements via the organization’s website, social media accounts, email list, newsletter, bulletin, podcast, pulpit, radio and TV programs, and other organization forums.

If a nonprofit violates the political campaign activity rules, the IRS can impose substantial excise taxes and even revoke the organization’s tax-exempt status.

Nonprofits can take a political position on controversial issues, but not in a way that indicates favouritism

Nonprofits with 501(c)(3) tax-exempt status must be vigilant about the prohibition on political campaigning. Federal tax law is strict on the issue of political campaigning: 501(c)(3) organisations are forbidden from directly or indirectly participating in any political campaign or intervening on behalf of or in opposition to any candidate for elective public office. This includes any verbal or written statement made on behalf of the organisation that favours or opposes any candidate for public office.

Nonprofits may invite candidates to speak in a personal capacity, rather than in their capacity as a candidate, if they are chosen to speak for reasons other than their political candidacy. The nonprofit and the candidate should avoid referencing the election or candidacy and instead focus on the non-political capacity in which the individual is appearing. Nonprofits should maintain a non-partisan setting on the premises where the event is held and avoid any campaign activity, including fundraising.

Nonprofits may take a political position on controversial issues that divide candidates, but they must not do so in a way that indicates favouritism toward one candidate over another. They must also avoid engaging in substantial legislative activities by attempting to influence legislation (lobbying). Nonprofits should be careful not to contact or urge their members or employees to contact any federal, state, or local legislative body.

Nonprofits with substantial political or lobbying objectives may be recognised as tax-exempt under Code Section 501(c)(4). The rules that apply to 501(c)(4) organisations are different from those that pertain to 501(c)(3) organisations and permit 501(c)(4) tax-exempt organisations to engage in substantial lobbying, provided it is "germane" to the organisation's program. Donations to 501(c)(4) organisations are not tax-deductible.

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