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Survey Suggests Many U.S. Nonprofits May Be Engaged in Political Activity

(Feb. 25, 2006) A new report by the Internal Revenue Service (IRS) suggests that a large percentage of nonprofit organizations in the United States, including churches, may be engaged in some sort of prohibited political activity.

The report, which examined 82 organizations, found that nearly three-quarters of them had engaged in some type of prohibited behavior. Most instances were one-time isolated occurrences of prohibited campaign activities, which the IRS addressed through written advisors to the groups. In three cases, all of which involved tax-exempt organizations that were not churches, the abuses were egregious enough to warrant the IRS proposing the revocation of the nonprofits’ tax-exempt status.

“The law does not allow charities to participate in political campaigns,” said IRS Commissioner Mark W. Everson in a press release about the report. “While the vast majority of charities, including churches, did not engage in politicking, our examinations substantiated a disturbing amount of political intervention in the 2004 electoral cycle. As the 2006 electoral season approaches, we are going to provide more and better guidance and move quickly to address prohibited activities.”

Report Finds All Types of Activity

Some of the specific instances of prohibited activity include:

  • Charities, including churches, distributing diverse printed materials that encouraged their members to vote for a particular candidate (24 alleged; 9 determined)
  • Religious leaders using the pulpit to endorse or oppose a particular candidate (19 alleged; 12 determined)
  • Charities, including churches, endorsing or opposing a candidate on their website or through links to another website (15 alleged; 7 determined)
  • Charities, including churches, disseminating voter guides or candidate ratings that encourage readers to vote for particular candidates (14 alleged; 4 determined)
  • Charities, including churches, placing signs on their property that show they support a particular candidate (12 alleged; 9 determined)
  • Charities, including churches, giving improper preferential treatment to certain candidates by permitting them to speak at functions (11 alleged; 9 determined)
  • Charities, including churches, making cash contributions to a candidate’s political campaign (7 alleged; 5 determined)

The report covered allegations and cases during the 2004 election cycle, beginning on July 30, 2004, and running through Nov. 30, 2004. The IRS contacted 110 tax-exempt organizations—many of them churches—and found some violation of the prohibition on political activity in 59 of the 82 cases closed so far. The cases covered the full spectrum of political viewpoints.

Educating the Sector for 2006

The report also outlines new procedures for the 2006 election period that will ensure that all cases the IRS investigates are reviewed expeditiously and treated consistently and fairly.

In addition, the IRS has released a new fact sheet that provides information to help 501(c)(3) organizations stay in compliance with the federal tax law. The fact sheet provides detailed examples of the types of activities the IRS investigated during the 2004 election cycle. The examples and related commentary are intended to help tax-exempt organizations, including churches, better understand what activity constitutes prohibited political intervention.

Both the report, Project 302 – Political Activities Compliance Initiative, and the fact sheet are available on the IRS website.

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