NOT EVERYTHING IS A POLITICAL ISSUE: A REFRESHER FOR CHURCHES AND NONPROFITS ON LOBBYING AND POLITICAL CAMPAIGNING
By: Justin R. Coleman, Esq. and Robert Showers, Esq.
For the last few years, it seems that every topic or issue has devolved into a political debate. Even those matters that were once thought collectively agreed-upon have resulted in shouting matches, even between Christians and other people of faith. With the 2018 mid-term elections this November, churches and non-profit organizations may need a refresher on what they can say and do in the lobbying and political arenas.
Pursuant to 26 Internal Revenue Code (IRC) § 501(c)(3), a tax-exempt entity may be any “[c]orporation … or foundation [which is] organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes [where] no part of the net earnings of which inures to the benefit of any private shareholder or individual, no substantial part of the activities of which is carrying on propaganda, or otherwise attempting, to influence legislation …, and which does not participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of (or in opposition to) any candidate for public office.” (emphasis added)
Although they are not required to apply for a formal determination, churches, associations of churches, and their integrated auxiliaries are granted §501(c)(3) tax-exempt status due to their inherent religious, charitable, and educational purposes. Thus, they must comply with these restrictions.
I. POLITICAL CAMPAIGNING
A. Partisan Campaigning
Adopted in 1954 and known as the Johnson Amendment (after then-Senator Lyndon B. Johnson), all §501(c)(3) entities are completely forbidden from participating in any political campaigns. This means that the entity cannot directly or indirectly campaign in support of, or opposition to, a candidate for local, state, or federal office. This bar on participation also includes the entity making contributions to a candidate’s campaign.
While this rule appears straightforward, where nonprofits and particularly churches often have difficulty and potentially run afoul of the rule is when their top employees (President/CEO or Pastor) are asked to make a statement on behalf of a candidate, or have the candidate speak or be recognized at the church. Although the Johnson Amendment does not bar a person, in his/her individual capacity, from campaigning for or against a candidate or contributing to one’s election, publicly known figures, like pastors and nonprofit leaders, need to be intentional when engaging in politics.
As with previous recent general elections, several well-known pastors and religious leaders made public statements supporting or opposing the 2016 Presidential candidates. News outlets reporting these statements often reference the church or non-profit organization these individuals represent. However, these leaders clearly and unequivocally state that their support for their identified candidate is a personal endorsement and not an endorsement by the organization they lead. Unfortunately, that statement often gets lost in the social media and political debate.
B. Non-Partisan Activities
While churches and non-profit organizations cannot participate in partisan politics, they may participate in non-partisan activities which can educate and inform its members and the local community about the candidates running and issues on the ballot at an upcoming election. Such activities are not considered political campaigning under the Internal Revenue Code (IRC), provided that they are non-partisan and educational. Some examples of non-partisan activities include, but are not limited to:
- Non-partisan voter registration drives;
- “Get out the vote” drives to encourage voting;
- Hosting candidate forums for all candidates are invited and allowed to speak; or
- Discussing doctrine as it applies to politics, legislative matters, or candidate positions.
Example: Entity A, a section 501(c)(3) organization that promotes community involvement, sets up a booth at the county fair where citizens can register to vote. The signs and banners in and around the booth give only the name of the organization, the date of the next upcoming statewide election, and notice of the opportunity to register. No reference to any candidate or political party is made by the volunteers staffing the booth or in the materials available at the booth, other than the official voter registration forms which allow registrants to select a party affiliation. Entity A is not engaging in political campaign intervention when it operates this voter registration booth.
Churches, in particular, run into problems when non-partisan activities shift (sometimes unintentionally) into partisan activities. In an election year, a pastor may preach on what kind of attributes congregation members should look for in a candidate for office. If the attributes identified could easily identify an actual candidate running for public office to a reasonable person, then that pastor and the church may be viewed as engaging in political campaigning for or against that candidate. Thus, while these types of non-partisan activities are permitted, the authors often caution churches on engaging in them because they can easily shift from non-partisan to partisan activity.
If your organization or church has been approached by any political candidate or his/her campaigns or would like to engage in non-partisan educational activities, we would strongly recommend contacting legal counsel knowledgeable in non-profit and church law to seek advice on whether the organization or church is in a position to engage in such activity.
Lobbying is the attempt to influence pending legislation or specific legislative proposals at federal, state, or local governmental levels through (1) communications with legislators and government officials and/or (2) creating or affecting public opinion, coupled with a “call to action.” This definition embraces the two types of lobbying: “direct” and “grassroots.” Unlike political campaigning, non-profits and churches may engage in an insubstantial amount of lobbying activities without negatively impacting its §501(c)(3) tax-exempt status.
A. Direct and Grassroots Lobbying
Direct lobbying is when individuals or organizations contact members of Congress (or their staff) and urge them to vote for or against a pending piece of legislation. Such communications specifically state the individual’s/organization’s position on the specific legislation being created or to be voted on.
Grassroots lobbying occurs when an individual or organization uses various communication tools to raise public awareness of pending legislation and encourage its members and the general public to contact their legislators to either vote for or against it. Historically, this was typically done through public rallies or posting advertisements in local newspapers. With the advent of social media (i.e. Facebook®, Twitter®, Instagram®), grassroots lobbying has become easier and more far-reaching but simultaneously less impactful due to scrutiny from opponents and the plethora of other organizations using the same medium for their causes.
B. Insubstantial Lobbying
As stated above, non-profit organizations and churches may participate in lobbying activities without losing its §501(c)(3) status as long as it is an insubstantial part of its total activities. The IRS has established two tests to determine whether lobbying is a substantial or insubstantial activity by a non-profit or church.
The first is the “substantial part” test. Under this test, the IRS considers the total facts and circumstances of the entity and its activities to determine if it has participated in substantial lobbying activity. Typically, those factors considered by the IRS include the financial resources and the time devoted (by both paid staff and volunteers) to the lobbying activities. Unfortunately, because the IRS applies this test on a case-by-case basis, there is no clear line on where and when lobbying activity changes from insubstantial to substantial.
The second test is the “expenditure” test. The expenditure test is an alternative for certain tax-exempt public charities who desire to engage in lobbying but do not want to be subject to the uncertainty of the substantial part test. For those public charities that choose the expenditure test, the IRS permits a public charity to spend a specific amount on lobbying activity in a given fiscal year, based on the charity’s total expenditures for its tax-exempt activities in that same year. Unfortunately, the expenditure test is not available to churches in regard to lobbying activities.
C. Section 501h and Section 4911 elections and concerns
The 501h election replaces the uncertainty of “no substantial part” with a solid mathematical calculation, but it involves more administrative and record-keeping for the nonprofit. Once the election is made, then the formula comes under Section 4911 as follows:
If exempt purpose expenditures are: ——–The lobbying nontaxable amount is:
Not over $500,000————– 20% of the exempt purposes expenditures
Over $500,000 but not over $1 million——-$100,000 plus 15 % of excess over $1.5 million
Over $1million but not over $1.5 million—-$175,000 plus 10% of excess over $1million
Over $1.5 million ———-$225,000 plus 5% of excess over $1,5 million
While there are definitions in the Sections cited they are essentially like the definitions of grass roots and direct lobbying discussed above. However, if your organization is at all concerned with the bookkeeping and details then you may not want to choose Section 501h for certainty. Some organizations act as if they are 501h for internal bookkeeping and lobbying expenses but do not choose it to allow for flexibility of the insubstantial lobbying test and bookkeeping challenges.
If your organization or church is considering participating in lobbying activities, we would strongly recommend contacting knowledgeable legal counsel to discuss how your organization desires to conduct the lobbying activities, the above risks of engaging in lobbying activities, and the potential internal methods and procedures to develop, install, and monitor such lobbying activities to reduce the likelihood that the activity would be considered “substantial” in your organization’s overall tax-exempt activities. You should also speak with legal counsel if you choose 501h to make sure you are within its strict guidelines.
III. ISSUE ADVOCACY
While this article’s primary focus is on a non-profit organization or church’s ability (or inability) to engage in political activity, the authors would be providing a disservice to you, the reader, by not highlighting the difference between political activity and issue advocacy.
Issue advocacy encompasses those activities which promote, highlight, and call for public support of matters, thoughts, and ideals which are not tied to any specific piece of legislation or a candidate running for public office. In short, issue advocacy is the purpose for which your organization or church was established. As such, non-profit organizations and churches may engage in an unlimited amount of issue advocacy.
For non-profit organizations that have a focus on particular issues (i.e. homeschool education, adoption, pro-life advocacy, veterans, etc.), issue advocacy encompasses all of your programs which seek to educate and inform the public on those issues. However, these organizations and their representatives must be intentional in their interactions with lawmakers. If the organization is presenting information meant to provide general information and educational materials on a specific issue, this will typically be considered issue advocacy. However, if the organization is presenting the material because a piece of legislation is being developed or voted on to support or oppose the legislation, then the organization would very likely be viewed as engaging in direct lobbying.
For a church and its leadership, the issues of society and individual interactions from the viewpoint of the relationship between God, Christ, and the individual should always be the focus (Acts 5:29). In this regard, the Scripture and doctrine should be the starting point for any discussion of societal issues and Christians should speak truth in love and not antagonize or degrade one another when discussing them (1 Peter 2:17; Titus 3:9).
In summary, non-profits and churches should not shy away from the public debate on issues facing our country. However, because of their unique status, non-profits and churches need to be aware of how the public may view the presentation of the organization’s point of view on the issues, as it may result in unintentional scrutiny.
As we have discussed, the line between issue advocacy and lobbying or political campaign activity is very thin and only one or two facts may result in your organization or church from crossing that line. Thus, before participating in any potential advocacy or activity which may appear to have political leanings, your non-profit organization or church should consult with knowledgeable legal counsel to determine the level of potential risk and what methods or internal procedures may need to be implemented before engaging in such activities.
Disclaimer: This memorandum is provided for general information purposes only and is not a substitute for legal advice particular to your situation. No recipients of this memo should act or refrain from acting solely on the basis of this memorandum without seeking professional legal counsel. Simms Showers, LLP expressly disclaims all liability relating to actions taken or not taken based solely on the content of this memorandum. Please contact Justin R. Coleman, Esq. at firstname.lastname@example.org or H. Robert Showers, Esq. at email@example.com for legal advice that will meet your specific need or to set up a consultation.
 IRS Publication 1828.