In 1954, Congress amended the tax code to prohibit 501(c)(3) organizations from engaging in political campaign activity. Under this provision, a section 501(c)(3) organization may not participate in or intervene in any political campaign on behalf of (or in opposition to) any candidate for public office. This includes contributions to political campaigns and public statements (verbal or written). The purpose of this prohibition is to ensure that the federal government does not subsidize partisan political activity.

Certain activities may be permissible, depending on the facts and circumstances. In general, section 501(c)(3) organizations may, for example, conduct voter education activities and get-out-the-vote drives if they are carried out in a nonpartisan manner. In addition, section 501(c)(3) organizations may take positions on social or political issues so long as such issue advocacy does not constitute political campaign intervention. Whether a communication results in a political campaign intervention is based on a variety of factors, including whether the statement identifies one or more candidates for public office, whether the statement expresses approval or disapproval for one or more candidates, whether the statement is delivered close in time to an election, and whether the statement makes reference to voting or an election.

As the 2020 election season comes to a close, it is important for exempt organizations such as churches and charities to keep this rule in mind in order to preserve exempt status. Leaders of exempt organizations in particular need to be mindful not to endorse or oppose candidates while acting in their official capacity. The consequence of noncompliance could be the imposition of excise taxes or the revocation of exempt status.

For more information, please contact Julie Rhoades in our Detroit office at 313-223-3570 or any other attorney in our Tax Practice Group.