As the signs go up in yards, the mailers increase, and the political commercials intensify, you know it is almost time to vote. We have less than 30 days until we go to the ballot on November 4th.
This year’s ballot will contain 4 proposed constitutional amendments. Amendment 1 empowers the legislature to enact, amend or repeal statutes regarding abortion. Amendment 2 empowers the governor to appoint judges subject to confirmation by the general assembly. Amendment 3 prohibits the legislature from levying or permitting any tax upon payroll or earned personal income. Amendment 4 empowers the legislature to permit lotteries for events that benefit 501(c)(19) organizations (veteran organizations).
Each of these ballot measures addresses a social issue or concern. The role of nonprofit organizations, particularly churches, in addressing these issues from a ballot perspective can be tricky. I.R.C. §501(c)(3) states that a tax-exempt organization (which includes churches) must “not participate in, or intervene in (including the publishing or distribution of statement), any political campaign on behalf of (or in opposition to) any candidate for public office.” In simple terms, this means that a nonprofit cannot get involved in any political campaign for or against a candidate running for office. However, nonprofit organizations have been permitted to conduct public forums, such as debates and lectures, on social and political questions involving candidates. Nonprofits have also been permitted to prepare and disseminate voting records of candidates on a wide variety of subjects, so long as all of the candidates were included. In order to avoid being labeled political campaign intervention, these types of voter guides must avoid any editorial comment, including any implied approval or disapproval. The IRS’ basic position is that organizations must present a sufficiently full and fair exposition of pertinent facts so as to permit the public to form its own opinion or conclusion independent of that presented by the organization.
It is important that nonprofits not cross the line into political campaign intervention because the penalty for campaign intervention can be the revocation of tax exempt status, penalty taxes or both. The IRS can assess aninitial tax, payable by the organization equal to 10% of the amount of the campaign expenditure. An initial taxof 2.5% of the expenditure can also be imposed on each of the organization’s directors and officers, if he or she knew it was a political expenditure (unless the agreement to make the expenditure was not willful and was due to a reasonable cause). If the expenditure is not timely corrected, then the IRS can impose an additional tax on the organization equal to 100% of the amount of the expenditure. An additional tax of 50% of the expenditure can also be imposed on each of the organization’s directors and officers, where he or she refuses to correct part or all of the expenditure.
That said, political campaign activity is different from political activity. Political activity includes attempting to influence legislation, as well as the nomination of an individual to a public office. It is the position of the IRS that the function of influencing or attempting to influence the appointment of an individual to a public office, where confirmation by the legislative branch is involved, constitutes influencing or attempting to influence legislation. A nonprofit’s tax-exempt status is conditioned on the requirement that no substantial part of the activities of the nonprofit can constitute “carrying on propaganda, or otherwise attempting to influence legislation.” The key phrase here is “substantial part of the activities.” Some political activity is acceptable, it just cannot be a substantial part of the activities. The issue of “substantiality” is a question of facts and circumstances.
Undoubtedly, many nonprofits in Tennessee will be involved in the campaigns surrounding the proposed constitutional amendments. It is important that those nonprofits and churches know the differences between political campaign activity and political activity, and that the organizations conduct their activities with a full understanding of the restrictions and possible consequences.