May nonprofits engage in political activity? The answer is yes, no, and maybe, depending on the type of nonprofit and its activities.
There is a lot of confusion about what constitutes political activity. Nonprofits often engage in advocacy, political campaigning, or lobbying. These terms are not identical.
The Difference Between Advocacy, Campaigning, and Lobbying
All nonprofits engage in advocacy, which involves explaining one's mission, discussing social issues, and fundraising for one's cause.
Political campaigning involves actively trying to get a particular candidate elected, or promoting a specific political party.
Thanks to the Johnson Amendment, passed in 1954 during the Johnson administration, campaigning for a candidate in an election was banned for 501(c)(3) charitable organizations (including churches and religious groups).
Lobbying involves trying to persuade legislators, or citizens in the case of voter initiatives, to vote yes or no on a particular piece of legislation. Charitable organizations may participate in lobbying only if it is not a "substantial" part of their activities.
The differences between lobbying and advocacy can be confusing, but advocacy communicates about issues while lobbying actively engages in trying to change laws around that issue.
The IRS strictly defines lobbying. It must include three aspects:
- contacting decision-makers,
- about a specific piece of legislation,
- and asking for a vote one way or the other.
Although both 501(c)(3) and 501(c)(4) organizations engage in advocacy, they are ruled by different standards when it comes to political activity and lobbying.
Nonprofits That Cannot Engage in Political Activity
A 501(c)(3), which encompasses the traditional charitable nonprofit and charitable foundations, cannot engage in political activity (working to elect a candidate to office) and only limited lobbying. A few prominent examples of 501(c)(3) organizations are The American Red Cross, the March of Dimes, and the National Audubon Society.
The prohibitive political activity includes donations to a political party or candidate and statements on behalf of a candidate in the name of the charity. If a staff member, officer, or board member publicly supports a candidate for office, he or she must make it clear that it is a personal endorsement, not the nonprofit's.
A 501(c)(3) organization, while prohibited from working on behalf of any candidate, may engage in general voter education about issues, even those that could affect its cause, as long as all points of view are represented.
A forum with all candidates or speakers for both sides of a ballot initiative is an example of acceptable political activity. Likewise, campaigns to promote voter turnout are acceptable Not adhering to these guidelines could result in the revocation of tax-exempt status and the imposition of excise taxes.
Nonprofits That Can Engage Politically
The 501(c)(4) nonprofit, as described by the IRS, must "...not be organized for profit and must be operated exclusively to promote social welfare."
However, the 501(c)(4) may engage in a variety of political activities, some of which are unrestricted and others that are restricted to some degree.
Lobbying for legislative change is treated liberally while advocating for a particular political candidate is more restricted.
According to the IRS, " Seeking legislation relevant to the organization's programs is a permissible means of attaining social welfare purposes. Thus, a section 501(c)(4) social welfare organization may further its exempt purposes through lobbying as its primary activity without jeopardizing its exempt status."
However, activity on behalf of or in opposition to a political candidate is limited and cannot be the primary activity of the 501(c)(4) to remain tax-exempt.
AARP is a membership-based association that advocates and lobbies on behalf of older Americans in addition to providing services and education to those citizens. AARP supports itself through membership fees and by selling products in association with other entities, such as insurance companies.
The NRA is a membership organization that provides services to gun owners and lobbies for pro-gun legislation. Its income sources are similar to those for AARP. The NRA also endorses specific political candidates to further its social purpose. However, since political campaigning is not the NRA's primary activity, some campaigning is allowed.
It is common to have 501(c)(3) organizations and 501(c)(4) organizations closely affiliated with one another. For instance, AARP is affiliated with the AARP Foundation for fundraising purposes. The Foundation, a 501(c)(3), provides a tax deduction for donors. On the other hand, the NRA accepts donations directly, and, thus, does not provide a tax deduction. Tax deductions can only be provided by 501(c)(3) organizations.
When in doubt, whether an organization is a (c)(3) or a (c)(4), look for its tax information on its website. If the organization offers a tax deduction for your donations, that is indicative of a 501(c)(3) charity.
The Bottom Line
In summary, 501(c)(3) charitable nonprofits may engage in limited lobbying to support their charitable purposes, but may not participate in support of candidates running for office. Social Welfare organizations, 501(c)(4), may engage in extensive lobbying in pursuit of their social purpose. They may also support a particular political candidate as long as that activity is not their sole activity.