Religion, Politics, and the Tax Code

Religious organizations often hear about IRS threats to strip churches of their nonprofit exemption due to the ministry’s position on political issues. While the Internal Revenue Service does have the power to take such action, partial truth clouds the understanding of rules governing political activities and non-profits. Even less clear are the rules themselves. They’re often characterized as a “facts and circumstances” standard, meaning “We know it when we see it.”

The U. S. Tax Code allows donor tax deductions to certain non-profit organizations. This deduction comes with several conditions that require the non-profit to limit its political activities. The best known condition is the rule against partisan involvement in political campaigns.

In May 2017, President Trump signed an executive order addressing a religious organization’s ability to speak on political issues and the effect it may have on an organization’s tax-exempt status. Through this executive order, President Trump stated the IRS should not take any adverse action against religious organizations on the basis of speaking about “moral or political issues from a religious perspective” which falls short of promoting or endorsing a political candidate. While this executive order may symbolize the administration’s intentions to protect religious liberty, basically it reflects the current approach of the IRS. It does not change the law or the IRS’s ability to take action against a religious organization acting contrary to the law.

Churches and other ministries need to clearly understand the risks involved if they choose to become involved in political activities. The seven topics that follow summarize how participation in certain political activities can jeopardize the tax status of churches, ministries, and other non-profits.

Voter Education and Get-Out-the-Vote

The tax code allows exempt organizations to sponsor public forums, publish voter guides, and encourage people to vote by helping voters register and get to the polls. In all cases, the effort must be educational and cannot unfairly benefit one candidate or party. The IRS prohibits any voter education and registration effort that specifically favors one candidate or party.

Individual Activity by Leaders

As individuals, leaders of exempt organizations can freely express their political opinions. The tax code also permits church and ministry leaders to speak about important public policy issues. However, the tax code prohibits leaders of exempt organizations from making political comments in publications and at functions sponsored by their organizations.

Official Candidate Appearances

When an exempt organization invites a candidate to speak, the IRS will ask three questions to determine if the event is allowed within the rules of the tax code:

• Did the organization provide all candidates for the same position the same opportunity to participate?
• Did the organization indicate its support or opposition of any of the candidates in any way?
• Did any political fundraising occur?

When an exempt organization invites several candidates for the same office to speak at a public event, the IRS will ask other questions to determine if the event is allowed:

• Did the questions for the candidates come from an unbiased panel? 
• Did the topics discussed by the candidates cover a broad range of issues of interest to the public?
• Was each candidate given an equal opportunity to present his or her view on each of the issues discussed?
• Were the candidates asked to agree or disagree with specific positions or statements of the organization?
• Did a moderator comment on the questions or imply approval or disapproval of any candidate?

Unofficial Candidate Appearances

Exempt organizations may invite a political candidate to speak in certain situations. A good example is when those who hold a public office are experts in a non-political field, are celebrities, or have led notable military, legal, or public service careers.

A candidate may personally choose to attend an event that is open to the public, such as a lecture, concert, or worship service. On the other hand, if the exempt organization introduces the candidate or invites the candidate to speak, the IRS will again pose several questions to determine if the activity is permitted:

• Was the individual asked to speak solely for reasons other than the campaign? 
• Did the candidate speak only as an individual and not as a candidate?
• Was any mention made of the campaign or the election?
• Did any campaigning occur?
• Did the organization support or oppose any candidate or party during the event?
• Was the candidate's campaign or the upcoming election mentioned at the event?

Public Policy Positions

IRS regulations permit exempt organizations to take positions on public policy issues that divide candidates in an election for public office. However, they must avoid taking a position that favors or opposes a candidate or party. A church or other non-profit can violate the regulations simply by showing a picture of the candidate, referring to a political party, or using facts unique to the candidate's platform or biography.

Several questions help the IRS determine if an exempt organization’s issue advocacy is prohibited:

• Were one or more candidates for a given public office identified? 
• Did a statement support or oppose a candidate or party? 
• Was a statement delivered close in time to an election?
• Did a statement mention voting or an election? 
• Did a statement address an issue that divides candidates? 
• Did the organization issue a series of statements on the same issue not linked to the timing of any election?

Business Activity

The IRS also may prohibit non-profits from participating in certain business activities that the tax code considers political in nature. For example, an organization may not sell or rent mailing lists, lease office space, or accept paid political advertising in a way that the tax code prohibits.

The IRS will ask several questions to decide if a business activity is a permissible or not:

• Were the goods, services or facilities made available to all candidates on an equal basis?
• Were the goods, services, or facilities made available to the general public?
• Were the fees charged to candidates the usual rates charged?

Websites

In the realm of tax exemptions, the IRS treats a website as a statement. When a ministry or other non-profit posts something on a website that favors or opposes a candidate, the IRS considers it is the same as any other political statement an organization may make.

Any organization also has control over the links on its website. When a non-profit allows a link to another website, the IRS may hold the organization responsible for the statements others make on the linked site. Links to candidate-related material, by themselves, do not necessarily constitute involvement in a political campaign.

Several questions can help you determine if a link is prohibited:

• What is the context for the link?
• Are all candidates in the same race linked?
• Are there direct links between the organization's web site and any web page that favors or opposes a candidate?

The information in this article is intended to be helpful, but it does not constitute legal advice and is not a substitute for the advice from a licensed attorney in your area. We strongly encourage you to regularly consult with a local attorney as part of your risk management program.