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James P. Joseph
Arnold & Porter LLP
Lauren W. Bright
Bill & Melinda Gates Foundation
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Top Ten Tips for Election YearEngagement by Nonprofits
Agenda
Who does this apply to?
– Review different types of tax-exempt organizations
What is it?
– Explain IRS definition of political activity or “electioneering”
Which rules apply?
– Describe electioneering rules for each type of tax-exemptorganization
What should an organization do?
– Provide tips for avoiding campaign intervention problemsduring an election season
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Types of Tax-Exempt Organizations
IRC Section 501(c)(3)– Private foundations– Public charities
IRC Section 501(c)(4)– Social welfare organizations
IRC Section 501(c)(6)– Trade associations
IRC Section 527– 527s (not PACs)– Political action committees (PACs)– Independent-expenditure only PACs (SuperPACs)
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Types of Tax-Exempt Organizations
501(c)(3)Private Foundation
501(c)(3)Public Charity
501(c)(4)Social Welfare Org
527Political Org
Purpose • Charity, education,religion or science
• Contributions fromlimited sources
• Charity, education,religion or science
• Social welfare oradvocacy (lobbying)
• Political
Examples • Gates Foundation• Ford Foundation
• Sierra ClubFoundation
• American Red Cross• Heritage Foundation
• Sierra Club• National Rifle
Association• Crossroads GPS
• Sierra Club PoliticalCommittee
• EMILY’s LIST• American
Crossroads
Tax Benefits • Tax exemption• Contributions
deductible• Gift tax deduction
• Tax exemption• Contributions
deductible• Gift tax deduction
• Tax exemption• Gift tax exemption
• Tax exemption• Gift tax exemption
Lobbying • None • Limited • Unlimited • Rare (and usuallytaxable)
Election-RelatedActivity
• Can’t support oroppose candidates
• Nonpartisanactivities OK
• Can’t support oroppose candidates
• Nonpartisanactivities OK
• Partisan activitycannot be primaryactivity
• May be taxable
• Primary purpose ispartisan activity
4Note: 501(c)(4)s and 501(c)(6)s have the same rules for these purposes.
Election-Related Activity
Certain election-related activity does not amount tocampaign intervention if it does not support oroppose candidates
Permitted election-related activity for c3 charities,c4s and c6s (that is not electioneering):
– Educational programming
– Issue advocacy, taking positions on public policy issues
– Lobbying
– Nonpartisan voter registration or get-out-the-vote efforts
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Electioneering
Any “participat[ion] or interven[ion]…in any politicalcampaign on behalf of (or in opposition to) any candidatefor public office” is considered electioneering or politicalactivity– However, no clear statutory or regulatory definition given– Applies to US and non-US elections– Determined instead under a facts and circumstances test
• IRS has provided examples of what is or is not political, as well asfactors it will consider
• IRS guidance in Revenue Rulings 2004-6 and 2007-41
Basic inquiry– Is the organization signaling, through the content or delivery of
its communications or activities, that it favors or disfavors anycandidate or political party?
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Electioneering (cont’d)
Electioneering
Expressly support or opposecandidates
Endorse candidates Contribute to candidates Rate or score candidates on
the issues Compare organization’s
position to candidate’s Provide other assistance to
candidates (in-kindcontributions)
Support other organizations’political activity
Not Electioneering
Register voters
Educate voters aboutcandidates
Take positions on issues
Legislative scorecards
Educate candidates
Get out the vote
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But only if you do so in a fashion thatdoes not favor one candidate or
another
Electioneering (cont’d)IRS “Facts and Circumstances” Analysis
Good Facts
No reference to candidateor elections
External factor drivingtiming
Broad range of issues
History of similar work onissue
Ongoing communicationabout central issue oforganization
Bad Facts
Reference to candidate(as candidate)
Timing motivated byelection
Politically motivatedtargeting
Compare preferredcandidate to candidateposition
“Wedge issues”
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Electioneering (cont’d)
How much political activity, if any, can each type of tax-exempt organization conduct?– 501(c)(3) private foundations and 501(c)(3) public charities
• Political activity strictly prohibited
• Any amount can result in penalties or loss of tax exemption
– 501(c)(4) advocacy groups and 501(c)(6) trade associations• Political activity cannot be its primary purpose – should be some
amount less than 50% but not clear how much is too much
• May be taxable
– 527 political organizations• Primary purpose (“exempt function”) is political activity
• Non-political activity may be taxable
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Planning for Election Season
Focus on good facts/bad facts IRS electioneeringanalysis
Understand the specific political activity rules foryour tax-exempt organization (c3, c4, c6, or 527)
Plan ahead for communications and activity duringelection season, consider:– Subject: what issue is addressed?– Timing: how close in time to the election?– Audience: general public or more targeted groups?– Purpose: why is the organization saying it?
Follow “Ten Tips” for engaging during an electionseason ...
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Ten Tips on Campaign Intervention
1. Don’t support or oppose candidates whencommenting on issues raised in an election.
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Commenting on Issues/Candidates
Can comment on or take positions on publicpolicy issues, even in an election year,
But, if the organization comments on issues in away that supports or opposes candidates, evenindirectly, that is electioneering
– c3s should avoid this altogether
– For c4s and c6s, counts as political activity
Monitor website links
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Commenting on Issues/Candidates (cont’d)
Good Facts
Use opportunity to restate org’s position, notto comment on candidate’s position
Issue is central to org’s mission
Org consistently comments on similarstatements by other candidates and non-candidates
Comment does not refer to candidate’scharacteristics or qualifications for office
Candidate made statement in non-candidatecapacity
Issue is not “wedge issue”
Timing of comment motivated bynonpartisan reason (e.g. pending legislation)
Comment is response to outside inquiry ornews development
Other indicia of nonpartisanship (e.g. urgingall candidates to speak out on issue)
Bad Facts
Compares preferred position to candidate’sposition
Issue is tangential to org’s mission
No history of commenting on similarstatements
Comment refers to candidate’scharacteristics or qualifications for office
Reference to candidate or election
Candidate made statement in candidatecapacity
Issue is “wedge issue”
Timing of comment motivated by election
Comment is on the org’s own initiative
Other indicia of partisanship (e.g. languagesuch as “holding elected officialsaccountable” that may, in context, suggestelectoral intent)
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Ten Tips on Campaign Intervention
2. Purpose of candidate events and appearancesmust be clear.
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Candidate Appearances
Events that host all or most candidates and arebalanced/fair to all candidates are notelectioneering
But, only hosting one or a few candidates, orsuggesting support for or opposition tocandidates through the event, may beelectioneering
– Again, depends on all the facts and circumstances ofthe event
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Candidate Appearances (cont’d)
As Candidate
Invite all candidates– Concern if only one
candidate acceptsinvitation
No favoritism in:– Timing
– Setting
– Introduction
– Questions/Issues
– Coverage
Non-Candidate Role
Equal opportunity notrequired
Don’t hold too closeto the election
Instruct guest – nocampaigning orfundraising
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Candidate Appearances (cont’d)
Guidelines for candidate debates, forums
– Invite all candidates toparticipate (at least the majorones)
– Moderator or panel• Ask broad range of questions
• Don’t suggest the “correct”answer
• Impartial, fair to all candidates
– Candidates must be givenequal opportunity to respond
– Audience composition• Don’t distribute tickets in a way
that favors one candidate 17
Federal and somestate campaign
finance laws alsohave rules governing
candidate debates
Ten Tips on Campaign Intervention
3. Voter guide or legislative scorecard must bebroad, neutral, and inclusive.
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Voter Guides
Voter guides present candidate positions on the issues– Nonpartisan voter guides are not electioneering– c4s and c6s can produce partisan voter guides, but this counts as
electioneering
Guidelines for nonpartisan voter guides– Include all candidates (at least the major ones)– Address broad range of issues
• IRS position: cannot be limited to narrow focus
– Don’t suggest which position the 501(c)(3) favors, based on:• How questions are phrased• How candidates’ positions are displayed• Whether organization’s view is included as point of comparison
– Avoid allegations of bias• Impartial voter education purpose• Objective information sources
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Legislative Scorecards
Legislative scorecards report the votes of currentelected officials
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Do you want to … ?501(c)(3):
send toeveryone
501(c)(3):send to
members
Rate or score the legislators ortheir individual votes? Focus only on a few issues of keyimportance to your organization? Time the release of the scorecardto coincide with the election?
Safe harborbased on IRS
RevenueRulings 78-248
and 80-282.
Ten Tips on Campaign Intervention
4. Requesting a “candidate pledge” is campaignintervention (e.g., Candidate X, sign this pledgeto not raise taxes).
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Candidate Pledges
Asking candidate to pledge or promise certainposition if elected is campaign intervention– 501(c)(3) may not secure candidate pledges
– But c3 can ask candidates to state their positions oncertain issues if c3 does not suggest approval ordisapproval of candidates’ positions
Concerns– Implicit support for candidates who sign the pledge
– Implicit opposition to candidates who don’t sign thepledge
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Ten Tips on Campaign Intervention
5. 501(c)(3)s cannot conduct a voter registrationor get-out-the-vote (GOTV) effort that supportsor opposes a candidate for office.
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Voter Registration & GOTV
Voter registration or GOTV efforts are electioneering if theyfavor one or more candidates or a political party– No “screening”: using “issue screen” or targeting voters based on
partisan criteria– For 501(c)(3), must seek to encourage people, in nonpartisan
manner, to exercise their right to vote
Guidelines– Select location and audience based on nonpartisan criteria
• OK: disadvantaged or underrepresented group• OK: natural constituency of organization• Not OK: voters likely to support or oppose a particular candidate or party
– Discuss broad range of issues (or no issues)– Don’t suggest a “correct” position– Don’t connect with existing advocacy
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Voter Registration & GOTV (cont’d)
Probably OK Maybe OK Not OK
• A church registers themembers of its congregation
• A day care center drives itskids’ parents to the polls
• An environmental groupregisters voters at an EarthDay event
• A civil rights group registersAfrican American voters
• A health care group registerspeople in a district becauseit’s represented by anunchallenged senator whochairs the committeeoverseeing the state’sMedicaid program
• To demonstrate the politicalpower of its constituency, agroup registering newcitizens targets a districtexpected to be a closely,fought, high-profile primaryin which the candidates havesimilar views on immigration
• A children’s group registersparents of young children ina district because it’srepresented by a senatorwho opposes Head Startfunding
• A student group urgesregistered Democrats tovote
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Private Foundation Grants for Voter Registration
CAUTION: Section 4945(f) of the federal tax code generallyprohibits private foundations from earmarking grants for voterregistration
Foundations may make grants for voter registration to 501(c)(3)sthat meet specific requirements, notably:– Grantee operates in five or more states over more than one election period– None of the funds grantee receives from any source for voter registration
work are subject to a condition that they be used in a particular jurisdictionor in a specific election period
– Grantee can show that funding comes from diverse sources, as defined inregulations
– At least 85% of grantee’s income spent for active conduct of charitablemission
Grantees may choose to use other grants (e.g. general support) forvoter registration within discretion permitted by grant agreement
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Voter Registration and State Law
Many states (and some localities) are increasinglyregulating voter registration activities– Some of this appears to be motivated less by sound public
policy and more by deliberate, strategic efforts to limitparticipation by some segments of the electorate
Make sure your organization is aware of andcompliant with applicable laws that may govern– State laws may apply to:
• Completion and submission of voter registration forms
• Compensation for people engaged in voter registration
• Use of personal data collected in voter registration efforts
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Ten Tips on Campaign Intervention
6. Giving some candidates or one party specialbenefits or preferred access to yourorganization’s resources may amount tocampaign intervention.
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Organization Resources
501(c)(3)s cannot provide cash or in-kindsupport to candidates or parties
– Not electioneering if c3 makes resources available toall candidates; same content, on the same terms
FEC rules also prohibit corporations, includingtax-exempts, from making contributions tofederal candidates
– Applies to c4s and c6s organized as corporations
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Organization Resources (cont’d)
Permitted
501(c)(3) makes itsresources available toall candidates on thesame terms– Publicly available
– Fair market value (or free ifgenerally made availablefor free)
– Made available previously,not only after particularcandidate asks
Not Permitted
Cash to candidates
In-kind support forcandidates– Facilities (office space,
meeting rooms)
– Staff time (paying staff todo work for campaigns)
– Intangible resources (donorlists, polling data)
– “Consulting” services
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Ten Tips on Campaign Intervention
7. Supporting or opposing a ballot measurecounts against a 501(c)(3)’s lobbying limits.
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Ballot Measures
501(c)(3)s may urge people to vote for or against ballot measures(initiatives, referenda, etc.)– Private foundation rules apply– But state law may treat orgs working on ballot measures as “political
committees”
Counts against 501(c)(3)’s lobbying limits– 501(c)(3)s permitted to engage in a limited amount of lobbying will be
measured under an expenditure or facts-and-circumstances test• Lobbying is categorized as “direct” or “grassroots” lobbying• Because voters are “legislators,” 501(h)-electing charities treat activity as direct, not
grassroots, lobbying
Permits more partisan tactics– Message focuses on single issue, states position on that issue– Target communications to voters likely to vote the way the 501(c)(3) wants– Single topic event, doesn’t present both sides of the issue
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Ten Tips on Campaign Intervention
8. Special FEC rules rules apply to “electioneeringcommunications” (for c3/c4/c6s) and“independent expenditures” (for c4/c6s).
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Electioneering Communications
Defined and regulated by FEC
Definition– Broadcast, cable, or satellite communication publicly
distributed for a fee
– Clearly identifies a candidate for federal office
– 30 days before a primary election, convention, orcaucus of a political party or 60 days before a generalelection
– For House or Senate candidates, targets the voters ofthe relevant congressional district or state that thecandidate seeks to represent
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Electioneering Communications (cont’d)
Rules– Corporations (including nonprofits) cannot coordinate an
electioneering communication with a political candidate,campaign, or party
– Organizations spending more than $10,000 onelectioneering communications must report to the FEC
• Report within 24 hours of communication
• Include expenditures associated with communication anddonors who made contributions to fund that specificelectioneering communication
– Many states have enacted similar laws that may definemore broadly what communications are subject torestrictions and reporting requirements
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Independent Expenditures
Defined and regulated by the FEC
Definition
– Public communications (by c4s and c6s) that contain“express advocacy”
• Uses “magic words” (vote for or re-elect), or
• Reasonable minds could not differ as to whether thecommunication, as a whole, encourages a candidate’selection or defeat
– No “coordination” with candidate, campaign, or partypermitted
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Independent Expenditures (cont’d)
Rules
– Report expenditures/donors to FEC
– Reporting requirements depend on person or entitymaking the independent expenditure, expenditureamounts, and proximity to election
• For example, person (not registered as PAC) must report toFEC if makes more than $250 in independent expendituresfor an election in a calendar year, and disclose donorscontributing over $200 for the specific communication
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Ten Tips on Campaign Intervention
9. Don’t let your related 501(c)(4) organization, orgrantee, get your 501(c)(3) in trouble.
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501(c)(3) and Related 501(c)(4)
c4s (and c6s) can engage in a certain amount ofelectioneering that is off-limits to 501(c)(3)s– c3 cannot do indirectly what it cannot do directly, i.e., c3
cannot use related c4 to conduct non-c3-appropriateactivity
– c4 and c6 can also engage in unlimited lobbying
Need to separate c3 and c4 so that c3 does notsubsidize or support, or even appear to support, c4electioneering
Project descriptions in c3 contracts and grantsshould be clear, as explicit as possible
Be mindful of coalition activities
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501(c)(3) and Related 501(c)(4) (cont’d)Guidelines for Separating c3 and c4 Activity
Expenses– Develop cost-sharing agreement– Ensure c3 prohibits any funds transferred to c4 for electioneering purposes
Fundraising– Safest to keep c3 and c4 solicitations separate
Timing– Limit or pause c3 efforts when c4 is active in election activities
Staffing– Designate different staff for c3 and c4 programs– If same employees, keep track of time on c3 and c4 programs– Create firewall to prevent sharing of certain information
Branding– c3 materials should look different than c4 materials (emails, newsletters, websites,
etc.)– Good practice to keep charitable and political activity “two clicks” away on websites
Communication– Make clear if statement is coming from c3 or c4
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Coalition/Partnership Activities
General rule: a tax-exempt organization cannot engagein coalition activities that it could not do directly or byproviding funds/other support
Risks of coalition activity:– Activities of coalition, or individual members, may be attributed
even where a coalition member has not participated in, endorsedor provided funds or other support to the specific activity
– Attribution of coalition members with different tax statuses, anddifferent legal restrictions on permissible lobbying and politicalactivity, can result in non-compliance (e.g., a public charitywhich has already conducted lobbying activities up to itspermissible maximum or a lobbying attributed to a privatefoundation)
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Coalition Safeguards
Protective measures include – Control over use of funds or resources – segregate
contributions from coalition members that may not be used forlobbying or political activities
Control over member meetings – if meetings will involvemembers with different tax statuses, distribute agenda inadvance/adhere to agenda and enable members to leavewhen meeting content is inappropriate
Control over branding – coalition members should enter intoan agreement regarding use of any separate coalition name,as well as the names of members (e..g., only use c3’s logowith c3’s specific approval)
Control over use of coalition website – agreement regardingstructure of website, what content may be displayed
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Ten Tips on Campaign Intervention
10. Don’t let personal activities get your 501(c)(3)in trouble.
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Personal Activity
Employees, officers, and other agents of c3 canconduct personal, volunteer political activity
Make sure that personal political activity is notsubsidized by, or attributed to, the c3
– No more than de minimis time spent at the office orde minimis use of c3 resources
– Employees should not suggest they are representingthe c3 in any way
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Personal Activity (cont’d)
Permitted
Volunteer on your owntime for candidate ofyour choice
Make personalcontributions tocandidates if youchoose
Clarify that any suchpolitical activities are inyour personal capacity
Not Permitted
Use 501(c)(3) resourcesto help candidates
Display support forcandidates while working
Create the appearance ofsupport or political activityby the organization
Do anything else partisanin your capacity as anemployee
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Putting it All Together
Tax exempt organizations can conduct and fundactivities during an election period, but rulesvary if seeking to influence
Analysis of good and bad facts is essential tocompliance
Think beyond IRS rules before engaging (e.g.state and FEC rules)
Organization restrictions do not apply topersonal engagement
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James P. Joseph
Arnold & Porter LLP
202.942.5355
Lauren W. Bright
Bill & Melinda Gates Foundation
202.662.8138
47
