This example illustrates a political activities problem. How bad are the nonprofit's problems? What other issues may be present? Some of the issues are reviewed at Discussion.
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This example illustrates a political activities problem. How bad are the nonprofit's problems? What other issues may be present? Some of the issues are reviewed at Discussion. |
Example
Jim: How was Juneau?
Barbara: Just as bad as ever. Our flight was three days late getting out.
Jim: You were down there lobbying for the organization?
Barbara: No, actually, we went down to lobby for the Alliance. If they don't get their appropriation, we'll never be able to manage the additional workload.
Jim: The Alliance paid you to go down?
Barbara: No, our board decided it was important enough that the organization should pay our travel expenses.
Jim: I'll bet that didn't come cheap.
Barbara: I guess it was about $10,000 for the six of us. But the Alliance's work is critical. They've got to get that appropriation.
Jim: Do you think it will work?
Barbara: It looks pretty good. The organization gave $1,000 each to the chairs of the House and Senate's re-election campaign.
Congress has determined that nonprofit corporations, and particularly charitable corporations, should not involve themselves in politics. You might want criticize the Congressional policy, but it is still the law.
In the case of contributions to political candidates, the answer is easy. Charitable corporations are absolutely forbidden to make contributions to political candidates. If you violate the prohibition, your charitable corporation will lose its tax exempt status. There are fines, penalties and excise taxes associated with violations. The I.R.S. takes an absolute position on this rule.
The other kind of political activity is lobbying, attempting to influence legislation as opposed to candidates, has very complex rules. The folks involved in this little skit are also under the impression that it is okay lobby on behalf of your organization. That's not true; it is a distortion of one of five narrow rules that if a charitable corporation has elected the "expenditure test" on lobbying activities then expenses incurred in defense of the existence of the nonprofit corporation are excluded from "expenses" for purposes of calculating whether you are within the expense limit. Despite popular myths, there is no rule that a charitable corporation can expend monies without any limit if the lobbying is on behalf the charitable corporation's mission.
There are different rules that are available to charitable corporations, but all of them limit the amounts that can be incurred, and impose a steep tax on charitable corporations that exceed those limits, ultimately resulting in potential loss of the exempt status of the charitable corporation.
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