Permissible Advocacy Activities by Public Charities

STRENGTHENING THE NONPROFIT VOICE:
PERMISSIBLE ADVOCACY ACTIVITIES BY SECTION 501(C)(3) PUBLIC CHARITIES 1
Presentation as Part of 21st Annual Florida Nonprofit Conference
October 30, 2012
Julian H. Spirer
Spirer Law Firm, P.C.
301-654-3300
jspirer@spirerlaw.com

I.     Introduction: Dr. Sherry, former President of the United Church of Christ and a leading
American theologian, said about advocacy by public charities: “The primary role of voluntary
associations in American life is not service delivery but to continually shape and reshape the
vision of a just social order . . ., to argue for that vision with other contenders in the public
arena, and to press for its adoption and implementation. For voluntary associations to do less
than that is to abdicate their civic responsibility.”

II.   Summary: There are many reasons that a social service organization might be reluctant to
engage in lobbying:

A.   It might be concerned about offending some donors.
B.   It might feel that it does not have the expertise or that, of other reasons, its
advocacy might not make a difference.
C.   A major basis for concern is also that, as section 501(c)(3) public charity, it is
barred by the tax laws from public advocacy. Engaging in advocacy will
jeopardize its tax-exempt status. This concern is often overstated.

III.  Basic Rule: Of the three main components of advocacy–public education as to the issues,
lobbying of the public and legislators as to legislative solutions, and participation in
campaigns for public office–a public charity may engage in an unlimited amount of the
first, at least an insubstantial amount of the second, and even some election-related
activities, although no activity that might represent participation in a political campaign.

IV.  Fundamental Prohibition: A public charity, under IRS regulation, may not be what is
called “action” organization. This an organization that devotes “a substantial part of its
activities to attempting to influence legislation, or participates or intervenes, directly or
indirectly, in any political campaign.” 26 C.F.R. § 1.501(c)(3)-1(c)(3); American
Campaign Academy v. Commissioner, 92 T.C. 1053, 1064-65 (1989).

V.    Educational vs. Limited Lobbying Activities

A.   Basic Regime for Public Charities: The IRS regulations make it clear that
“[a]n organization will not fail to meet the [requirements for tax exemption]
merely because it advocates, as an insubstantial part of its activities, the adoption
or rejection of legislation.” 26 C.F.R. § 1.501(c)(3)-1(c)(3)(ii).

1.  Advocacy accordingly is unrestricted unless it relates to the adoption or
rejection of litigation.
2.  Even then, it is not prohibited until it becomes “substantial.”

B.  Public Education as Opposed to Lobbying

1. Education about Issues Not Legislation. Public charity may engage in
unlimited “nonpartisan analysis, study, or research and making the results
thereof available to the public.” 26 C.F.R. § 1.501(c)(3)-1(c)(3)(iv).

a.  Nonpartisan analysis, study, or research means an independent and
objective exposition of a particular subject matter, including
activity that is considered “educational” for purposes of section
501(c)(3). It may advocate a particular position as long as the
exposition is sufficiently fair and full to permit the public to reach
an independent opinion or conclusion. 26 C.F.R. § 56.4911-2(c)(1)(ii).
b.  Any suitable means may be chosen to distribute the analysis, study,
or research, except that the communication cannot be distributed or
directed solely to persons with an interest in one side of an issue.
c.  If a presentation is done as part of a series, the series as a whole
will be judged for qualification for the exception.

2.  Publicly Discussing Legislation but Omitting a “Call to Action”

a.  Definition of “lobbying” includes “grassroots lobbying” consisting
of “attempts to influence legislation through an attempt to affect
the opinions of the general public or any segment of the public.”
26 C.F.R. §56.4911(d)(1)(A).
b.  It is only grassroots lobbying if it meets each of three requirements:

(1)  The communication refers to specific legislation;

(2) The communication reflects a view on such legislation; and

(3) The communication encourages the recipient of
the communication to take action with respect to such
legislation. This element is commonly referred to as the
“call to action” requirement. Essentially, what this
requirement means is that one can criticize a legislative
proposal to the public, but that is not grassroots lobbying
unless it encourages the recipient to take action, meaning it
meets one of the following requirements:

(a) The communication states that the recipient should
contact a person who might affect the legislation;
(b) The communication states the address, telephone
number, or similar information of such a person;
(c) The communication provides a petition, tear-off
postcard, or similar material for the recipient to
communicate with such a person; or
(d) The communication specifically identifies one or
more legislators who will vote on the legislation as:
opposing the organization’s view with respect to the
legislation; being undecided with respect to the
legislation; being the recipient’s representative in
the legislature; or being a member of the legislative
committee or subcommittee that will consider the
legislation. Merely naming the main sponsor(s) of
the legislation for purposes of identifying the
legislation will not constitute encouraging the
recipient to take action.

(4) A communication that contains a call to action on the basis
of any one of the first three of the criteria above cannot
qualify for the exception from lobbying for nonpartisan
analysis, study, or research.

(5) Certain advocacy communications or research materials
that are not initially lobbying communications may become
grassroots lobbying communications if they come to be
used to encourage recipients to take action with respect to
specific legislation, unless the primary purpose of their
preparation was not for use in lobbying.

(6) Certain mass media advertisements that would not
otherwise be grassroots lobbying can be considered
grassroots lobbying if they appear two weeks before a vote
and concern themselves with a highly publicized piece of
legislation, even if they do not contain a call to action.

C. Only Influencing “Legislation” is Limited: “[A]n organization will be regarded as
attempting to influence legislation if the organization: (a) Contacts, or urges the
public to contact, members of a legislative body for the purpose of proposing,
supporting, or opposing legislation; or (b) Advocates the adoption or rejection of
legislation. “ 26 C.F.R. 1.501(c)(3)-1(c)(3)(ii).

1. Meaning of “legislation”: the term “legislation” includes “action by the
Congress, by any State legislature, by any local council or similar
governing body, or by the public in a referendum, initiative, constitutional
amendment, or similar procedure.”

2. Legislation does not include actions by executive, judicial, or
administrative bodies. 26 C.F.R. § 56.4911-2(d)(3). The term
“administrative bodies” includes school boards, housing authorities, sewer
and water districts, zoning boards, and other similar Federal, State, or local
special purpose bodies, whether elective or appointive. Requesting
executive bodies to support or oppose legislation is, however, included in
the purview of attempting to influence legislation. 26 C.F.R. § 56.4911-
2(d)(4).

a. The consideration of zoning matters varies from jurisdiction to
jurisdiction. Where zoning issues are under the jurisdiction of
legislators, who express their will by a vote, the matter is within
the purview of the term “legislation.”
b. The term “legislation” encompasses foreign as well as domestic
laws. It also may include actions by American Indian tribal
governments.
c. It is not necessary that legislation be pending in order for lobbying
influence to be brought to bear. It is sufficient that the proposal
being promoted be put forward as an appropriate subject for
legislation.
d. Legislation may be identified by its formal name or by a term that
has been widely used in connection with specific pending
legislation.
e. Appearance before a legislative committee: If an organization
appears before a legislative committee to discuss legislation,
that action will be an attempt to influence legislation. unless
the appearance is in response to official requests for testimony.
f. Technical advice: Under section 56.4911-2(c)(3) of the
regulations, a communication will not be considered lobbying if it
consists of technical advice or assistance to a governmental body
or committee in response to a written request, provided that the
response is available to every member of the body or committee.
g. Self-defense: A communication is not lobbying if it pertains to a
possible action by a legislative body that might affect the existence
of the organization, its powers and duties, its tax-exempt status, or
the deductibility of contributions to the organization. The self-defense
exemption is not available, however, to protect the
organization’s future work, such as lobbying to preserve a
government contract.

D. Communications to members: Communications to members will not be
considered lobbying if they meet the following four criteria:

1. The communication is directed only to members of the organization;
2. The specific legislation the communication refers to, and reflects a view
on, is of direct interest to the organization and its members;
3. The communication does not directly encourage the member to engage in
direct lobbying (whether individually or through the organization); and
4. The communication does not directly encourage the member to engage in
grassroots lobbying (whether individually or through the organization).

E. When are attempts to influence legislation considered substantial?

1. Reliance on Facts and Circumstances

a. One court decision has held that 5% of total activities was
insubstantial while 16.6% to 20.5 % was substantial.
b. The IRS rejects reliance on a percentage of activities test due to the
asserted need to consider other factors such as “the amount of
volunteer time devoted to the activity, the amount of publicity the
organization assigns to the activity, and the continuous or
intermittent nature of the organization’s attention to it.” G.C.M.
36148 (Jan. 28, 1975).
c. Also to be considered is the time spent in supporting activities,
such as discussing public issues, formulating and agreeing upon
positions, and studying them preparatory to adopting a position.
d. Consequence of violation of substantial part test: In addition to
revocation of exempt status, a non-electing public charity may
be subject to a 5% excise tax imposed by section 4912 on its
“lobbying expenditures,” for the year of loss of the exemption.
“Lobbying expenditure” is defined in section 4912(d)(1) as any
amount paid or incurred by a charitable organization in carrying on
propaganda or otherwise attempting to influence legislation. IRC
4912 also imposes a similar tax at the same rate on any manager of
the organization who wilfully and without reasonable cause
consented to making the lobbying expenditures knowing the
expenditures would likely result in the organization’s no longer
qualifying under section 501(c)(3). There is no limit on the
amount of this tax that may be imposed against either the
organization or its managers.

2. Lobbying Election Regime for Public Charities: With the enactment of
section 501(h) as part of the Tax Reform Act of 1976, certain public
charities (principally those other than religious organizations) may make
an election and have their lobbying activities governed by expenditure
tests in lieu of being subject to the section 501(c)(3) “substantial part” test.
Should the expenditure limits be exceeded, a tax under section 4911 will
be imposed or, if the limits are exceeded by 150% over a defined period,
then the organization’s exempt status may be lost.

a. Purpose: The safe harbor was created, according to a
Congressional committee report, due to “uncertainty in the
meaning of the terms ‘substantial part’ and ‘activities.’”
b. Sliding scale: Section 501(h) creates a sliding scale of permissible
“lobbying nontaxable amounts.” These nontaxable amounts
are separately computed for total lobbying and for grassroots
lobbying. Any amounts expended in excess of these nontaxable
amounts are considered “excess lobbying expenditures” and are
subject to a tax under section 4911 equal to 25% of the excess.
If both total lobbying and grassroots permissible amounts are
exceeded, then the tax is imposed on whichever excess is the
greater.
c. Eligibility to make section 501(h) election: Substantially all
501(c)(3) entities are eligible to be subject to the safe harbor other
than religious organizations, supporting organizations other than
those that support 501(c)(3) organizations, organizations engaged
in public safety, and private foundations. Religious organizations
sought the exclusion because they did not want to allow it to
appear that they recognized any limitation on their lobbying
abilities.
d. Manner of making election:

(1) A Form 5768 is filed with the appropriate Internal Revenue
Service Center.
(2) An election is effective beginning with the first day of the
taxable year in which the Form 5768 is filed. It may be
filed at the same time as an organization submits its Form
1023 seeking recognition of exemption.
(3) Once filed, the election remains effective for all taxable
years up to the taxable year next following the year in
which a notice of revocation on Form 5768 is filed.
(4) An organization that revokes may elect again, but only as
long as there is at least one year between during which the
organization is not subject to the safe harbor.

e. Scale: The nontaxable amount is the lesser of $1 million or
the amount determined under section 501(h) as a percentage of
the organization’s exempt purpose expenditures. The highest
percentage, for exempt purpose expenditures up to $500,000, is
20% for total lobbying expenditures of which 5% can be for
grassroots lobbying.
f. Denial of exemption: An electing organization cannot be denied
exemption unless its lobbying or grassroots expenditures exceed
150% of the lobbying nontaxable amounts for the base years,
meaning the determination year and the three immediately
preceding taxable years.
g. Exempt purpose expenditures: The denominator of the fraction
consists of an organization’s exempt purpose expenditures
consisting of the categories of expenditure set out in section
56.4911-4(b) of the regulations. Categories of expense that
are excluded include fundraising activities done by other than
employees or affiliated organizations, amounts paid or chargeable
to a capital account, and amounts paid or incurred for the
production of income.
h. Determining lobbying expenditures: Any costs incurred by
volunteers in carrying on a lobbying activity are not lobbying
expenditures. (These expenses are also not deductible by the
volunteers.) The organization’s costs in soliciting the help of
and training the volunteers, however, are lobbying expenditures.

F. Lobbying by Private Foundations: Any lobbying expenditures are deemed to be
taxable expenditures under section 4945(d)(1) and subject to the excise tax
imposed by section 4945(a). The tax is equal to 10% of the taxable expenditure,
with an additional 100% tax on taxable expenditures that are not corrected within
the taxable period. In addition, an initial tax equal to 2.5% of the taxable
expenditure is imposed on foundation managers who knowingly agreed to the
making of the taxable expenditure. Any foundation managers who refuse to agree
to all or part of the correction are subject to a tax equal to 50% of the taxable
expenditure.

1. With some exceptions, the definition of lobbying for foundations is the
same as for public charities.
2. A grant by a private foundation to fund a specific project of a public
charity is not a taxable expenditure, even if the public charity engages in
lobbying activities as part of the project, if the following requirements are
met:

a. The grant is not earmarked to be used in an attempt to influence
legislation; and
b. The sum of all grants made by the private foundation for the same
project for the same year does not exceed the amount budgeted for
the year of the grant by the grantee organization for activities of the
project that are not attempts to influence legislation. In other
words, the grants are assumed to be expended first on nonlobbying
activities and, only after the grant is exhausted on nonlobbying
expenditures, is the grant deemed to fund lobbying expenditures.

VI. Educational vs. Impermissible Political Activities

A. Basic rule: The Code describes a 501(c)(3) organization, in part, as one that
“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.” 26 U.S.C. § 501(c)(3).
B. It has been determined that this rule is violated “by participation in any political
campaign on behalf of any candidate for public office. It need not form a
substantial part of the organization’s activities.” United States v. Dykema, 666
F.2d 1096, 1101 (7th Cir. 1981). The premise behind the prohibition is “that the
U.S. Treasury should be neutral in political affairs.” H.R. Rep. No. 391, 100th
Cong., 1st Sess. 1621, 1625 (1987), reprinted in 1987 U.S. Code Cong. & Admin.
News 2313–1, 2313–1201, 2313–1205.

1. Special rule for private foundations: Under section 4945, private
foundations may not directly or indirectly carry on any voter registration
drive, unless certain requirements are met. 26 U.S.C. § 4945(d)(2).
2. Candidate for public office: The regulations recite that “the term
candidate for public office means an individual who offers himself, or is
proposed by others, as a contestant for an elective public office, whether
such office be national, State, or local.” 26 C.F.R. § 1.501(c)(3)-
1(c)(3)(iii).

a. Neither the statute nor regulation define the term “public office”
and the IRS will consider all of the applicable facts and
circumstances. The IRS, however, has provided guidance. Thus,
in G.C.M. 39811 (June 30, 1989), the IRS addressed the issue of
whether an office or position in a political party, specifically a
precinct committeeman position, is a public office. In concluding
that it was a public office, the IRS relied on five characteristics
of the office under state law: The office was (1) created by statute,
(2) continuing; (3) not occasional or contractual; (4) had a fixed
term; and (5) occasioned the taking of an oath by the occupant.
b. Candidates for public office must be engaged in election
campaigns. Thus, the provision would not bar an attempt to
influence the Senate confirmation of an individual nominated
for a federal judgeship. IRS Notice 88-76, 1988-2 C.B. 392.
c. Offers himself or is proposed by others: An individual who has
publicly announced an intention to seek election to public office
has clearly offered himself. The publication by an unannounced
candidate’s campaign committee of material regarding the
individual’s “prospective candidacy” may also make the individual
a candidate for public office. TAM 91-30-008 (April 16, 1991).
Indeed, an individual may be a candidate for public office even
when he has announced an intention of not seeking election to the
office, provided that some action towards election, more than
speculation, has occurred, e.g., the existence of a draft committee.
d. FEC rules cannot be used. Senator Proxmire did not accept
contributions in his last Senatorial campaign and would not have
been a candidate under FEC regulations. A 501(c)(3) would none
the less have been prohibited from supporting or opposing him.

3. Participation or Intervention: Under the regulations, “[a]ctivities which
constitute participation or intervention in a political campaign on behalf
of or in opposition to a candidate include, but are not limited to, the
publication or distribution of written or printed statements or the making
of oral statements on behalf of or in opposition to such a candidate.” 26
C.F.R. § 1.501(c)(3)-1(c)(3)(iii).

a. A written or oral endorsement is clearly prohibited.
b. The rating of candidates, even on a non-partisan basis, is barred.
Association of the Bar of the City of New York v. Commissioner,
858 F.2d 876 (2d Cir. 1988), cert. denied, 490 U.S. 1030 (1989).
c. Can an organization disseminate an issue-oriented message during
an election campaign? Coded language in such a message, such as
“conservative,” “liberal,” “pro-choice,” “pro-life,” substituting for
a candidate’s name, would be objectionable. In TAM 1999-07-
021, the IRS determined that an organization did not, however,
participate or intervene in a political campaign when, a few days
before Congressional elections, it distributed an “I’m Fed Up With
Congress” piece that urged voter participation in the election. The
IRS emphasized that there was no evidence that the material was
sent to targeted states or Congressional districts.
d. It is clear that the conduct that is prohibited goes well beyond the
express advocacy standard applied by the FEC. Kindell and Reilly,
“Election Year Issues,” 2002 EO CPE Text, at 349.
e. Material that qualifies as “educational” for purposes of determining
whether an organization should be considered to be tax-exempt
under section 501(c)(3) can be prohibited electioneering. Thus,
Rev. Rul. 67-71, 1967-1 C.B. 125, finds that an organization that
undertakes an ostensibly unbiased and objective review of school
board members and intended to educate the public in evaluating the
candidates had violated the electioneering prohibition when it
supported a particular slate of candidates.
f. The motivation, either good or bad, is irrelevant. An organization
that was involved in upgrading the ethics of political campaigning
intervened in a political campaign when it solicited candidates to
sign a code of fair campaign practices and released the names of
those who signed and those who refused to sign. Rev. Rul. 76-456,
1976-2 C.B. 151. In Association of the Bar of the City of New
York v. Commissioner, the court confirmed that an organization
was not eligible for tax-exempt status under section 501(c)(3)
when it distributed ratings of candidates for elective judgeships as
“approved,” “non-approved,” and “approved as highly qualified.”
g. An organization may not distribute voter education material
prepared by a candidate, political party, or PAC.
h. Voters’ guides may be permissible if they either support solely the
lobbying activities of the organization or are intended to encourage
participation in the electoral process.

(1) Voter guide. Several factors indicate that a voter guide is
educational. Rev. Rul 78-248, 1978-1 C.B. 154.

(a) The publication reports on a neutral group of elected
officials or candidates such as all members of
Congress or all candidates for a particular office.
(b) The publication reports elected officials’ or
candidates’ views or their voting records on a wide
range of subjects.
(c) The publication includes no editorial opinion on the
elected officials or candidates, or on their views.
(d) The publication does not indicate approval of
elected officials or candidates in the contents or
structure of the publication.
(e) The organization makes the publication generally
available to the public.

(2) Legislative Scorecard. In Rev. Rul. 80-282, 1980-2 C.B.
178, the IRS determined that a legislative scorecard did not
represent political intervention, relying on a variety of
factors.

(a) Voting records of all incumbents were presented.
(b) Candidates for reelection were not identified.
(c) No comment was made on an individual’s overall
qualifications for public office.
(d) No statements expressly or impliedly endorsed or
rejected any incumbent as a candidate for public
office.
(e) No comparison of incumbents with other candidates
was made.
(f) The organization pointed out the inherent
limitations of judging the qualifications of an
incumbent on the basis of the selected votes by
stating the need to consider other unrecorded
matters.
(g) No attempt was made to time the date of publication
to coincide with an election.
(h) The organization did not distribute the voting
records widely.

i. News Coverage. Publications of an organization can include news
coverage but not articles that promote or oppose a particular
candidate. The IRS will ask certain questions in making the
distinction.

(1) What does the publication normally do when it covers news
stories?
(2) Does it have a policy of covering only particular candidates
or does it in fact only cover particular candidates?
(3) Is any coverage slanted to show any particular candidate in
a favorable or unfavorable light?

j. Voter questionnaires may qualify as educational. The following
factors will support the educational character of the questionnaires.

(1) The questionnaires are sent to all candidates.
(2) All responses are published.
(3) The questions cover a variety of issues.
(4) The questions do not indicate a bias toward the
organization’s preferred answer.
(5) The responses are not compared to the organization’s
positions on the issues.
(6) The responses are not edited prior to publication.

k. Public Forums. Public forums may be educational.

(1) In Rev. Rul. 86-95, 1986-2 C.B. 73, the IRS approved as
educational a forum of Congressional candidates with the
following characteristics.

(a) The organization invited all legally qualified
candidates. (The IRS has elsewhere indicated that
this might not be necessary where inviting all
candidates may be impractical, the organization
applies reasonable and objective criteria in making
a selection, such as the results of a reliable poll
of public support, the criteria are applied in
nondiscriminatory fashion, and all other indicia
of neutrality are present.)
(b) An independent nonpartisan panel prepared and
presented all questions.
(c) The questions covered a range of issues of interest
to the public.
(d) Each candidate had an equal opportunity to present
the candidate’s views.

(2) Candidates should not be permitted to distribute literature
unless all candidates appear.

(3) The moderator gave no indication of any approval or
disapproval of a response.

l. Voter Registration Drives. Voter registration drives are
permissible as long as they are conducted in a nonpartisan manner.

(1) The following factors suggest a permissible purpose.

(a) No candidate is named or depicted or favored over
another
(b) Political parties are mentioned only for candidate
identification purposes
(c) The communication is limited to encouragement of
voting and registration.
(d) The voters’ preferences are not a factor.

(2) Private foundations, with limited exceptions set forth
in section 4945(f) of the Code, cannot carry out a
voter registration drive without the expenditures
being considered taxable under section 4945.

m. Summary of Favorable Factors. Certain factors tend to show an
educational rather than a political purpose.

(1) The organization has manifested a preexisting commitment
to promote awareness of the applicable issues outside of an
election context.
(2) The organization’s officers and directors, by board
resolution and otherwise, emphasize the non-electoral
purpose of the activity.
(3) The organization can demonstrate a need for public
awareness of the issues.
(4) The organization, as appropriate, disclaims any purpose of
endorsing any candidate.
(5) The organization limits its communications to the
substance of the issues without regard to the persons who
might be favoring or opposing the organization’s positions
on the issues.

C. Potential Consequences of Impermissible Political Activity

1. Private parties may have standing to challenge the continued tax-exempt
status of a 501(c)(3) that violates the limitations on electioneering and
lobbying. Fulani v. League of Women Voters Educ. Fund, 882 F.2d 621,
628 (2d Cir. 1989) (third party candidate could trace injury from debates
exclusion to tax-exempt status of organization which status alone allowed
conduct of debate under federal election rules).
2. Tax on electioneering expenditures: Sections 4945 and 4955 impose an
initial tax of 10% on each political expenditure and an additional 100% tax
on each taxable expenditure previously taxed and not corrected within the
taxable period.

a. A tax of 2 1/2% of the political expenditure is also imposed on any
organization manager who agreed to the making of the
expenditure. Organization managers who refused to agree to all or
part of the correction are subject to a tax of 50% of the political
expenditure. The first tier tax is capped at $5,000 and the second
tier tax at $10,000 of each expenditure.
b. A tax on managers will only be imposed when three conditions
exist.

(1) A tax is also being imposed on the organization.
(2) The organization manager knew the expenditure that he
sanctioned is a political expenditure.
(3) The expenditure was wilful and not due to reasonable
cause, i.e., the manager did not exercise ordinary business
care and prudence.
(4) An organization manager will not be liable if he or she
relied on the advice of counsel contained in a reasoned
written legal opinion that an expenditure is not a political
expenditure. (Such an opinion would not, however, protect
the organization itself from liability.)

c. Section 6852 authorizes an immediate audit to determine the
amount of money that might be owed under these sections, and
section 7409 permits the IRS to seek an injunction to prevent
further political expenditures. The tax may be imposed in lieu of
revocation where the political expenditure is unintentional and
small in amount and where the organization has adopted
procedures

VII. Can individuals or related entities associated with the organization engage in political
activity without attribution of that activity to the organization?

A. The prohibition against political campaign activity does not preclude officials of
the organization from engaging in political activity, but only if they do so in a way
that does not utilize the organization’s financial resources, facilities, or personnel.
Thus, officials may not electioneer at official functions or through official
publications. The test is a facts and circumstances test.

1. In general the principals of agency will be applied, including those of
apparent authority, in making the determination. An organization may
also explicitly or implicitly ratify the action of the official.
2. The goodwill of the organization may also not be used so that any actions
taken or statements made by the official must be identified as being done
by the official in his personal capacity. An IRS training piece suggests the
following disclaimer language: “Organization shown for identification
purposes only; no endorsement by the organization is implied.” The
actions of students are generally not to be attributed to the institution.

B. Will actions of other entities be attributed to the organization?

1. A 501(c)(3) organization may not establish a PAC. S. Rep. No. 93-1374,
93d Cong., 2d Sess. 30 (1974); 26 C.F.R. § 1.527-6(g); Branch Ministries
v. Rossotti, 211 F.3d 137 (D.C. Cir. 2000). But the establishment and
operation of a voluntary payroll deduction plan for employees to
contribute to a PAC will not constitute intervention in a political
campaign. See PLR 201127013 (July 08, 2011).
2. The activities of an affiliated 501(c)(4) organization may be attributed to
the 501(c)(3) if it can be established that the former is a sham or is acting
for the other. However, so long as the organizations are kept separate
through appropriate record-keeping and fair market reimbursement by the
(c)(4) for facilities and services, the activities of the (c)(4) or any related
PAC will not be deemed to be those of the (c)(3). See Center on
Corporate Responsibility, Inc. v. Schultz, 368 F. Supp. 863 (D.D.C. 1973)
(similar names, purposes, and board members are not enough to require
attribution).
3. Any joint fundraising between the 501(c)(3) and a non-501(c)(3)
organization will be closely scrutinized because of the risk that
the 501(c)(3)’s goodwill is being used to attract moneys for other
organization.Educational vs. Limited Lobbying Activities.

VIII. Advocacy by a Section 501(c)(4) (Social Welfare) Organization

A. Qualification: “Social welfare” generally means the promotion of social
improvements and civic betterment. Any organization that will qualify as a (c)(3)
should also qualify as a (c)(4). The reverse is not the case, e.g., economic
development agencies that do not address community deterioration issues.
B. Educational activities: A social welfare organization can engage in limitless
educational activities. It may not be as attractive a vehicle as a (c)(3) organization
for this purpose, since contributions to a (c)(4) organization are not tax deductible
and may indeed be subject to gift tax (the latter being under current review by the
Service).
C. Lobbying activities: A social welfare organization may engage in unlimited
lobbying activities. Indeed, lobbying may be its only activity. Rev. Rul. 71-530,
1971-2 C.B.
D. Political activities: It may conduct political campaign activities and may establish
a political organization described in section 527(e), as long as political campaign
activity is not the primary activity of the section 501(c)(4) organization. 26 C.F.R.
§ 1.501(c)(4)-1(a)(2)(ii); PLR 201127013 (July 08, 2011)Relation to section
501(c)(3) organization: A 501(c)(3) organization can have a related section
501(c)(4) organization so long as the organizations are kept separate (with
appropriate record-keeping and fair market reimbursement for facilities and
services used). The 501(c)(4) should err in supporting the 501(c)(3) and not
vice versa.

1 The structure, content, and language of this presentation owe a great deal to two
excellent continuing professional education texts prepared by the Internal Revenue Service:
Lobbying Issues, Kindell and Reilly, 1997 EO CPE Text, and Election Year Issues, Kindell and
Reilly, 2002 EO CPE Text.

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