Political Campaign and Lobbying Activities


Public charities are generally prohibited from dedicating any substantial part of their activities to attempting to influence legislation. This is not an absolute prohibition, as these charities may engage in lobbying to an insubstantial degree. Determining what is “substantial” in this context requires a case by base analysis. Luckily, the law also provides a bright line safe harbor test, under Section 501(h) of the IRC, that public charities can use to ensure that lobbying activities will not jeopardize their tax-exempt status. In contrast, private foundations may not engage in any lobbying activities.

Notably, a public charity may lose its tax-exempt status if it is so involved in political activity that it is no longer organized for a charitable purpose.

Social welfare groups, organized under Section 501(c)(4), can engage in unlimited lobbying so long as it furthers their tax-exempt purpose. Well-known 501(c)(4)s include the Sierra Club, Americans for Prosperity and the AARP. Federal laws don’t require these groups to disclose their donors, although certain disclosures may be required under California state law.

Political organizations, organized under Section 527, may also engage in unlimited lobbying, so long as the lobbying is geared toward its primary and tax-exempt purpose of getting a candidate seated in public office. 527 entities can be affiliates of noncharitable tax-exempt groups such as social welfare groups, or for profit businesses, but not of 501(c)(3)s. In addition, federal law requires public disclosure of donors.

Further reading:

IRS Publication: Election Year Issues
IRS Publication: Lobbying

Candidate Electioneering

Federal law prohibits any 501(c)(3) organization, both public charities and private foundations, from intervening in any political campaign for or against a candidate for public office. Penalties for failure to comply include loss of tax exempt status and excise tax on electioneering expenditures.Although this is an absolute prohibition, not all election-related activites fall within its scope. It is clear that a 501(c)(3) organization cannot endorse or oppose a candidate or make contributions to a candidate or party. However, public charities can engage in voter education activities and certain “issue advocacy” if done in a nonpartisan manner. These include conducting voter registration drives, sponsoring debates, and engaging in “get out the vote” initiatives.Further, a 501(c)(3) need not refrain from any contact with politicians for fear of losing its tax-exempt status. The organization should simply avoid funding, or using its resources to assist in fundraising, for a candidate. On this flip side, candidates can endorse and fundraise for charities.

501(c)(4) social welfare groups can engage in candidate political campaigns so long as it furthers the tax-exempt purpose of the group and is secondary to the social welfare function of the group. Federal tax laws do not require the disclosure of donors for a social welfare group.

Written by Cameron Holland.