Nonprofits walk fine line on political activity

Group helps nonprofits register voters
The group is helping nonprofits to register voters and has voter education and get-out-the-vote toolboxes on its Web site. It also is encouraging nonprofits to create listservs and other digital ways to mobilize voters sympathetic to their causes.

In addition, there is a growing trend by some nonprofits to split themselves into various subgroups, just to be able to have more of an influence over policy debates. MoveOn.org, for example, is actually two different entities. MoveOn.org Civic Action is a 501(c)(4) organization that uses the Internet to connect millions of like-minded Americans to coordinate issues campaigns, whether to back measures to repeal the estate tax or to get U.S. troops out of Iraq. Its other arm, MoveOn.org Political Action, is a registered PAC under Section 527 of the IRS Code, and last year its members contributed $9 million to candidates and campaigns around the country.

But woe to those nonprofits that go too far. Indeed, the difference between issue advocacy and political intervention can get pretty murky sometimes — and there’s a need for clarity that has become especially urgent in this era of instant communication.

Just ask the NAACP. After the contentious 2004 elections, the IRS threatened to revoke the NAACP’s tax-exempt status because its chairman, Julian Bond, had trashed the administration policies of President George W. Bush in a speech. The issue was whether Bond’s statements — about race, the economy, and Iraq — meant the 501(c)(3) had crossed the line for a nonprofit.

In the same way, last September, the pastor of the All Saints Episcopal Church in Pasadena, Calif., in a Sunday sermon, criticized the Bush Administration on its policies to eradicate poverty, improve race relations and bring about both war and peace. And while the IRS concluded that the NAACP did not intervene in the 2004 elections, it said that All Saints did. Eventually, both cases were closed after the Department of Justice declined to back the IRS in court. But the IRS actions sent a stringent — albeit mixed -- message to the nonprofit community. “In view of the broad, subjective definition of political speech, the chilling effect on groups such as the NAACP and All Saints Church is real,” says Marcus Owens, an attorney with Caplin and Drysdale in Washington, D.C., which represented the NAACP in 2004.

Owens, also a former director of the IRS’s charity division, says the NAACP believes “that it cannot undertake its core mission without being able to talk about government policy.” In spite of that, the NAACP has been especially careful in this presidential election not to endorse Obama, despite the fact that a majority of its members support him.

IRS cites 75 charities
The IRS also cited 75 charities, including churches, for engaging in prohibited political activities during the 2004 presidential election, such as handing out leaflets encouraging members to vote for a particular candidate, endorsing candidates from the pulpit or endorsing or opposing candidates on their Web sites or through links to other Web sites. Churches were an instrumental force in galvanizing voters on such issues as abortion and gay marriage. But three charities, which the IRS did not name publicly, engaged in such “egregious” levels of prohibited political activities that their tax-exempt status was revoked.

While the Internal Revenue Code is clear in general categories of what political activity is allowed for nonprofits, many nonprofit advocates feel the IRS needs to offer more detailed guidelines — especially some that would take into account the Internet and nonprofits’ online advocacy and fundraising activities. “I think that the ambiguity of not knowing where that line is, until the IRS comes knocking at your door, heightens the chilling effect for nonprofits,” says Owens, who spent 25 years with the IRS.

Late last year, in anticipation of the 2008 presidential election, the IRS released a plan that calls for more thorough and aggressive enforcement of campaign intervention. But Owens says the rules remain ill-defined. It’s still not clear, he says, when a nonprofit could be accused of political intervention.

Nonprofits, he says, have no choice but to self-censor. Says Owens: “The First Amendment implications are tremendous and I feel the IRS would do best in erring on the side of permitting speech in gray zone as they’ve done in the past.”

Is more clarity forthcoming? Maybe so. But don’t hold your breath. It will depend on which side does better in November. Policy, like history, tends to be written by the winners. Stay tuned.

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