Most leaders of nonprofits organized as 501(c)(3) organizations understand that participating in partisan electoral politics can endanger their tax exemption. Even though nonprofit organizations and their members have a stake in the outcome of the 2020 presidential election, nonprofits must be careful about activities related to public policy issues. There is more nuance in the rules governing political activities by tax-exempt organizations than you might think.

The 2020 election season has been dampened by the COVID-19 crisis, but it will heat up soon and nonprofit leaders should dust off the rules and make sure everyone in their organizations knows what is allowed and what isn’t.

Potential pitfalls

Tax-exempt organizations can’t directly or indirectly act in federal, state or local campaigns either in favor of or against a candidate or party. Here are several examples of activities that are generally off-limits:

1. Supporting a candidate or party for election. Your organization can’t support or oppose a declared candidate or third-party movement, engage in efforts to draft candidates, or perform advance exploratory work for a candidate or party.

2. Contributing to a campaign or endorsing a candidate. This includes direct financial support and indirect support, such as having your staff make calls on a candidate’s behalf.

3. Providing monetary support. Organizations are barred from donating funds to a candidate or party, and they can’t use another event to raise funds. Section 501(c)(3) not-for-profits are also barred from making loans to candidates or parties.

4. Offering support for support. You can’t ask for “support” from a candidate, political party or other political organization in exchange for your endorsement.

5. Distributing materials. Your nonprofit can’t distribute campaign materials or anything that tells recipients how to vote. This includes online communications such as email and social media.

Acceptable activities

Of course, there are ways your nonprofit can participate in elections. For example, you can:

1. Sponsor a candidate appearance. If a candidate is invited for nonpolitical reasons — say, as a supporter of your charitable mission — make sure the appearance doesn’t turn into a campaign stop or fundraiser. This can be difficult and requires clear communication in advance with the candidate and his/her campaign staff. If they can’t give you a clear promise not to politicize the event, don’t do it.

2. Hold a debate. If your nonprofit hosts a candidate forum, invite all the candidates, have an independent panel prepare the questions and provide every candidate with equal speaking opportunities. An impartial moderator should state that the views expressed within the debate don’t represent those of your organization.

3. Advocate for a political issue. A discussion of issues is well within the rules, and your organization can state its strong support or opposition to public policy issues. This may sway candidates to your way of thinking and influence them to take a public stand. But you still can’t endorse a candidate, even if he/she has embraced your issue.

4. Help build party platform planks. Your nonprofit can deliver testimony to a party’s platform committee, so long as you clarify that the testimony is strictly educational.

5. Launch a “get out the vote” drive. The drive must be designed solely to educate the public about voting and can’t promote or oppose a candidate or party.

Avoid penalties

Campaign-related offenses are punishable by revocation of tax-exempt status, but first-time offenders may be able to negotiate a less severe penalty. For example, you might agree to change procedures and stipulate that the violation won’t occur again. If your nonprofit spent funds on the banned activity, the IRS may impose excise taxes.

If you’re unsure about the acceptability of a proposed election-related activity, contact us.