[EL] 501(c)(3) political activity (Was: CCP Emergency SCOTUS relief)

Sat May 16 12:09:29 PDT 2015

This discussion actually shows that the political prohibition insinuates the government into constitutionally protected activities in a way that is far removed from the IRS's primary mission of collecting money so that the government can operate. As pointed out in this law review article, the political prohibition was introduced by Lyndon Johnson as a way to stymie his political opponents in Texas and passed with almost no debate or analysis.  http://lawdigitalcommons.bc.edu/cgi/viewcontent.cgi?article=2181&context=bclr  It was not done for any reason of principle or ethics, but on the fly for purposes of raw political power. It inserts the government into determining what is political and what is policy and what statements from the pulpit are okay and what are not, and when the government has to do this it has to create and enforce subjective and often politically motivated lines.

The purpose of the Internal Revenue Code is to raise revenue, not to regulate political or religious speech.  Policy organizations, political committees, and churches are not for-profit exercises (well, most are not).  Whatever revenue can be raised from political committees and others who fall on the "taxed" side of the non profit line has to be weighed against the problems and issues created by forcing the taxman to also be the speech and religion police. And it should be done in a more thoughtful way than, "This will help Lyndon Johnson win reelection."

Bill
________________________________
From: law-election-bounces at department-lists.uci.edu [law-election-bounces at department-lists.uci.edu] on behalf of Scarberry, Mark [Mark.Scarberry at pepperdine.edu]
Sent: Saturday, May 16, 2015 10:11 AM
To: BZall at aol.com
Cc: law-election at uci.edu
Subject: Re: [EL] 501(c)(3) political activity (Was: CCP Emergency SCOTUS relief)

501(c)(3) organizations can weigh in on elections, with respect to ballot initiatives, just as they can engage in some lobbying activities with respect to other forms of legislation.

Mark S. Scarberry
Pepperdine University School of Law

Sent from my iPad

On May 16, 2015, at 6:47 AM, "BZall at aol.com<mailto:BZall at aol.com>" <BZall at aol.com<mailto:BZall at aol.com>> wrote:

Yikes! No, no, no. Misleading at best; more likely a misunderstanding of the limits of 501(c)(3) "political" activity and a conflation of lobbying and election-related activity. Here is the Alliance for Justice's 501(c)(3) election checklist, which is accurate and much more detailed: http://bolderadvocacy.org/wp-content/uploads/2012/05/Election_Checklist_for_501c3_Public_Charities.pdf.

The first paragraph of Prof. Schultz's post is correct, depending on the definition of "some types of 'political' [my quotes] activity." It would be more accurate to say that 501(c)(3)s' ISSUE-ORIENTED activity need not stop during election periods. Fed. Election Comm’n v. Wisconsin Right To Life, Inc., 551 U.S. 449, 474 (2007) (“Discussion of issues cannot be suppressed simply because the issues may also be pertinent in an election.”).

The concept is known informally as "injecting an issue into a campaign" and is widely recognized. See, e.g., the IRS's internal training manual ("CPE") for FY 2002: http://www.irs.gov/pub/irs-tege/eotopici02.pdf, at pp. 344-346:

Basically, a finding of campaign intervention in an issue advertisement requires more than just a positive or negative correspondence between an organization's position and a candidate's position. What is required is that there must be some reasonably overt indication in the communication to the reader, viewer, or listener that the organization supports or opposes a particular candidate (or slate of candidates) in an election; rather than being a message restricted to an issue. As is stated in TAM 1999-07-021 (May 20, 1998), in order to violate the political campaign prohibition, an advocacy communication "should contain some relatively clear directive that enables the recipient to know the organization's position on a specific candidate or slate of candidates." This statement was made in the context of a determination that an organization did not participate or intervene in a political campaign when, a few days before Congressional elections, it distributed an "I'm Fed Up With Congress" communication that also encouraged its recipients to vote and to assure that others voted.
Id. at 345-46. Note: this is not the same as the FEC's "express advocacy" standard.

The second paragraph is confused and wrong. There is no de minimis test for political activity by 501(c)(3) organizations, much less a "substantial part" test. From the Internal Revenue Manual (the IRS's description of policies and procedures):

4.76.3.13  (04-01-2003)

Political Activities Guidelines

There is an absolute prohibition on all IRC § 501(c)(3) organizations from participating or intervening in any political campaign. Even an insubstantial amount of political activity can lead to the revocation of the organization’s exempt status.

More to the point, courts have repeatedly rejected this analysis:

 In United States v. Dykema, 666 F.2d 1096, 1101 (7th Cir. 1981), the Seventh Circuit stated: "It should be noted that exemption is lost . . . by participation in any political campaign on behalf of any candidate for public office. It need not form a substantial part of the organization's activities." The Second Circuit agreed with this position when it held that an organization did not qualify as an IRC 501(c)(3) organization because it rated judicial candidates as a very minor part of its total activities. Association of the Bar of the City of New York v. Commissioner, 858 F.2d 876 (2d Cir. 1988), cert. denied, 490 U.S. 1030 (1989). The court rejected the organization's contention that the substantiality requirement from the lobbying activity limitations be applied to the political campaign activity prohibition. Citing United States v. Naftalin, 441 U.S. 768, 773 (1979), the court stated: "The short answer [to this argument] is that Congress did not write the statute that way." Id. at 881. The court noted that the IRC 501(c)(3) prohibition against participation or intervention in political campaigns was added some twenty years after the statutory restriction on lobbying. Therefore, the court concluded: "Had Congress intended the added exception to apply only to those organizations that devote a substantial part of their activity to participation in political campaigns, it easily could have said so. It did not." Id. at 881.

2002 CPE, supra, at p. 352.

As the IRS CPE excerpt shows, the lobbying test is quite different, and shouldn't be combined with the political analysis. 501(c)(3)s CAN lobby, but only to a limited extent, determined by whether the organization elects the "mechanical test" of IRC sections 501(h)/4911 or uses the "default", non-electing test.

While Prof. Schultz may be well-meaning and his beliefs heartfelt, his description is not accurate. His statement that "those of us who are not naive suspect ..." is, therefore, itself suspect.

Barnaby Zall
Of Counsel
Weinberg, Jacobs & Tolani, LLP
10411 Motor City Drive, Suite 500
Bethesda, MD 20817
301-231-6943 (direct dial)
bzall at aol.com<mailto:bzall at aol.com>

In a message dated 5/16/2015 8:29:36 A.M. Eastern Daylight Time, dschultz at hamline.edu<mailto:dschultz at hamline.edu> writes:
501 c 3 are barred from engaging in partisan politics but they are not prevented in toto from engaging in some types of political advocacy or activity either at the state or federal level.

501 c 3 groups are allowed to do a certain amount of political advocacy or lobbying so long as these activities are not a substantial part of the organization.  The nature and amount of these activities are determined by law or IRS rules and often these groups elect  for the expenditure test under 501 (h) to address any uncertainty in determining what is a substantial part.

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