Sunday, May 7, 2017

501(c)(3) Tax Code or You Can't Have Your Cake and Eat It Too

When an organization sets itself up as a 501(c)(3) it is accepting some constraints as a tax exempt organization. 

The Restriction of Political Campaign Intervention by Section 501(c)(3) Tax-Exempt Organizations

Under the Internal Revenue Code, all section 501(c)(3) organizations are absolutely prohibited from directly or indirectly participating in, or intervening in, any political campaign on behalf of (or in opposition to) any candidate for elective public office. Contributions to political campaign funds or public statements of position (verbal or written) made on behalf of the organization in favor of or in opposition to any candidate for public office clearly violate the prohibition against political campaign activity.  Violating this prohibition may result in denial or revocation of tax-exempt status and the imposition of certain excise taxes. 
Certain activities or expenditures may not be prohibited depending on the facts and circumstances.  For example, certain voter education activities (including presenting public forums and publishing voter education guides) conducted in a non-partisan manner do not constitute prohibited political campaign activity. In addition, other activities intended to encourage people to participate in the electoral process, such as voter registration and get-out-the-vote drives, would not be prohibited political campaign activity if conducted in a non-partisan manner.
On the other hand, voter education or registration activities with evidence of bias that (a) would favor one candidate over another; (b) oppose a candidate in some manner; or (c) have the effect of favoring a candidate or group of candidates, will constitute prohibited participation or intervention.

Trump apparently didn't like that this restriction to endorse a candidate prevented some churches to endorse his presidential bid. So he wants to amend this restriction.
I don't think this is a good move. An organization can give up it tax-exempt status if it would prefer to use its time and effort supporting political candidates.  This law isn't forbidding free speech, it merely is saying that if you want to organize as a tax-exempt institution there are rules that must be followed.

Be careful, changing this rule just because Trump didn't like that churches couldn't endorse him, should not be the basis for change. If the church felt endorsements were more important they could give up their tax-exempt status.

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