Hi all... I've lurked for a while but this is my first diary, so I would appreciate any feedback.
I am a tax lawyer and I do a lot of work with Section 501c3 organizations, including churches. There has been a lot of discussion regarding the tax exempt status of churches, so I thought I'd give you all Political Activies of Tax Exempt Organizations 101.
Section 501(c)(3) provides that any organization exempt under this Section, including a "religious" and "educational" organizations, may not "participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of (or in opposition to) any candidate for public office. In addition, "no substantial part of the activities" of the organization may be "carrying on propaganda, or otherwise attempting, to influence legislation."
More on extended entry...
So there are two prohibitions in the statute related to these issues: absolutely no involvement in political campaigns, and only limited involvement in lobbying.
Note that the prohibitions isn't against "political" activitiy--there are lots of things that we all would consider to be "political" or "partisan" that are not covered by the prohibition. If you look at the statutory language, it specifically involves campaigns for public office.
Section 501(c)(3) organizations are prohibited from endorsing or opposing any candidate, both explicitly and by engaging in certain "educational" or "religious" activities, that, when taken in context, implicitly endorse or oppose a political candidate. Contributions to political candidates clearly violate the prohibition. Unfortunately, there is difficult no "bright line" test to determine what's educational and what's political intervention.
With regard to the NC church that excommunicated its Democratic members, the question is going to be this...did this amount to participation in the next campaign on behalf of the Republican candidtate? If it didn't, then it didn't rise to the level of "political" for purposes of tax exemption analysis.
On the lobbying prohibition--note that an organization can do some "lobbying" without getting into trouble. The first question is, what is lobbying? the second question is, is the amount of lobbying they are doing "insubstantial." Lobbying for purposes of Section 501(c)(3) means contacting legislative branch officials regarding drafting or voting on actual legislation. Contact with executive branch officials doesn't count. Contact regarding issues, without a further tie to drafting or voting on actual legislation, doesn't count. So telling somone that "abortion is bad" or "gay marriage is a sin" isn't lobbying... only when you say support S. 492 to ban gay marriage does it become lobbying. Furthermore, its not political activity, until you say, vote for Bush because he opposes gay marriage and abortion.
Once you've established that lobbying has occurred, you have to deal with substantiality. There are two alternate tests. One is kind of "squishy"-- is your lobbying diverting enough of your attention away from your charitable mission as to be determined to be substantial--not just in terms of dollars spent, but also in terms of time and focus. The other alternative test is called as Section 501(h) election, whereby the charity can elect to be governed by hard cap numbers on how much they can spend.
This is a 30,000 ft. view... I'm personally curious as to whether urging someone to vote Republican in the next election is sufficient, legally, to constitute political activity. But for now I need to go do some work...if you've got specific questions, let me know, and I'll try to do a follow up with more detail later.
Cheers,
Elaine in IN