On June 1, 2007, the IRS released precedential guidance for 501(c)(3) tax-exempt organizations that describes when certain activities will constitute prohibited political campaign intervention. All 501(c)(3) organizations are subject to an absolute statutory prohibition on participating or intervening in any political campaign on behalf of (or in opposition to) any candidate for public office.
Accordingly, Revenue Ruling 2007-41 provides twenty-one factual situations that substantively mirror the examples included in the IRS’s informal Fact Sheet 2006-17 guidance released last year. No additional examples were included in the Revenue Ruling although some narrative discussion from the Fact Sheet relating to voter guides was omitted presumably because the discussion was not in an example format and was a summary of pre-existing guidance.
Revenue Ruling 2007-41 includes examples relating to voter education, voter registration, and get out the vote drives; attribution of political activity by organization leaders; candidate appearances at events sponsored by 501(c)(3) organizations; business activity such as the selling or renting of mailing lists, leasing of office space or the acceptance of paid political advertising; and use of organization web sites and web site links.
The IRS also released its 2006 Political Activity Compliance Initiative (PACI) report as a follow-up to its 2004 report and initiative, which examined political activity by 501(c)(3)s during the 2004 election cycle. Like its predecessor, the 2006 PACI utilized a “fast track” process for evaluating referrals of potential prohibited campaign activity by 501(c)(3) organizations during the 2006 election year. The IRS also initiated a sub-project referred to as PACI-PC that uses internet research to identify instances of direct campaign contributions by 501(c)(3) organizations.
The most common allegations of political campaign intervention included:
- Distributing printed materials supporting candidates
- Candidates speaking at an official organization function
- Disseminating improper voter guides or candidate ratings that were biased towards a particular candidate
- Placing signs on property endorsing a candidate
- Endorsing candidates on organization web site or through web site links
- Organization official verbally endorsing a candidate
- Allowing a non-candidate to endorse a candidate during a speech at an organization’s function
- Making cash contributions to a political campaign
- Using an organization’s facilities for political campaign intervention
Most of the 2006 PACI cases have not yet been closed out, and thus final statistics are not available. The number of referrals in 2006 increased from 166 to 237, but the number of cases selected for examination currently remains at 100 organizations. To view a copy of Revenue Ruling 2007-41 on the IRS website, please hold down the Control key and Right Click Here to open as a new document.