Tuesday, December 18, 2012

Non-profit organizations and political campaigns

I recently read an article in the September edition of the Journal of Accountancy called “Ban on political activities: An election-year warning for charities” by Claudia L. Kelly, CPA, PH.D., and F. Douglas Roberts, CPA, PH.D. (http://journalofaccountancy.com/Issues/2012/Sep/20125671).  The article addresses non-profit organizations and political campaign activities. 
Non-profit organizations continue to catch the attention and scrutiny of the IRS.  With it being an election year, the IRS is looking for political campaign activities of 501( c)(3) tax exempt organizations.  The article provides links to resources providing guidance and examples concerning political campaign activities.  The article states that a good place to start is Rev. Rul 2007-41 which provides examples of acceptable and unacceptable activities.   The article noted above discusses non-profit organizations and the effect of:
    1. its leaders and other individuals activities, 
    2. candidate speakers and forums, 
    3. issue advocacy vs. political intervention, 
    4. printed materials, websites and social media, 
    5. business activity, 
    6. consequences or political campaign activity, 
    7. advising the organization and its members.  

The article describes multiple tips for non-profits to prevent activities from being classified as political.  Organizations should have a written policy that prohibits political activities and describes what activities are unacceptable.  In addition, organizations should issue disclaimers in any printed material or in any public speeches by members of their organization so it is not misconstrued that the member is acting on behalf of the organization.  The organization should not use or allow the use of its facilities to sponsor political campaign activities.  Any activities involving political candidates should be presented as educational and should not promote the candidate. 

Auditors and tax preparers of non-profit organizations should be on the look-out for disallowed political campaign activities.  Certain types of activity could lead to fines and/or loss of the organization’s tax exempt status.  Political campaign activities are required disclosures on the Form 990 and if such activities could result in a loss of exempt status, auditors of an organization may need to consider disclosure in the financial statements.

Megan Schuler, CPA