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2007 IRS Ruling: As detailed below, tax-exempts face loss of their exempt status and excise taxes if they engage in certain prohibited political activities. As the 2008 Presidential election season begins to heat up, a new revenue ruling illustrates permissible and prohibited political activity in the context of 21 examples.

Background. Under Code Sec. 501(c)(3), tax-exempt organizations are prohibited from directly or indirectly participating in, or intervening in, any political campaign on behalf of (or in opposition to) any candidate for federal, state or local public office. Violation of this prohibition may result in denial or revocation of tax-exempt status and imposition of excise taxes.

Political campaign intervention explained. In Rev Rul 2007-41, IRS provides 21 examples to illustrate when a Code Sec. 501(c)(3) organization participated or intervened in a political campaign on behalf of (or in opposition to) any candidate for public office under Code Sec. 501(c)(3). This article explains the rules, as discussed in the revenue ruling that the examples illustrate.

Voter education, voter registration and get out the vote drives. Code Sec. 501(c)(3) organizations may conduct certain voter education activities (including the presentation of public forums and the publication of voter education guides) if they are carried out in a non-partisan manner. They may encourage people to participate in the electoral process through voter registration and get-out-the-vote drives, conducted in a non-partisan manner. But voter education or registration activities conducted in a biased manner that favors (or opposes) one or more candidates is prohibited.

Individual activity by organization leaders. The bar on political campaign intervention isn't intended to restrict free expression on political matters by leaders of organizations speaking for themselves, as individuals. Leaders aren't prohibited from speaking about important issues of public policy. But, for their organizations to remain tax exempt, leaders cannot make partisan comments in official organization publications or at official functions of the organization.

Candidate appearances. An organization may invite political candidates (in their capacity as candidates or in their individual capacity) to speak at its events. Candidates may also appear without an invitation at organization events. When a candidate is invited to speak as a political candidate, factors in determining if there is political campaign intervention by the tax-exempt organization include whether: (1) it provides an equal opportunity to other political candidates seeking the same office; (2) it doesn't indicate any support for or opposition to the candidate (including when he is introduced and in communications concerning his attendance); and (3) any political fund-raising occurs. In determining whether candidates are given an equal opportunity to participate, a tax-exempt should consider the nature of the event to which each candidate is invited (e.g., not inviting one candidate to a well attended annual banquet, and another to a sparsely attended general meeting), as well as the manner of presentation.

When an organization invites several candidates for the same office to speak at a forum, it should consider whether: (1) questions for the candidates are prepared and presented by an independent nonpartisan panel; (2) the topics discussed by the candidates cover a broad range of issues that they would address if elected to the office sought and are of interest to the public; (3) each candidate is given an equal opportunity to present his view on the issues discussed; (4) the candidates are asked to agree or disagree with the organization's positions, agendas, platforms or statements, and (5) a moderator comments on the questions or otherwise implies approval or disapproval of the candidates.

Candidate appearances where speaking or participating as a non-candidate. Candidates may also appear or speak at organization events in a non-candidate capacity. For example, a political candidate may be a public figure who is invited to speak because he or she: (a) currently holds, or formerly held, public office; (b) is considered an expert in a non-political field; or (c) is a celebrity or has led a distinguished military, legal, or public service career. The candidate's presence does not, by itself, cause the organization to be engaged in political campaign intervention. But, a number of factors must be assessed to determine if the candidate's appearance results in political campaign intervention.

Issue advocacy vs. political campaign intervention. A tax-exempt may take positions on public policy issues, including issues that divide candidates in an election. But a statement by a tax-exempt is at risk of violating the political campaign prohibition if there is any message favoring or opposing a candidate, even it doesn't expressly tell an audience to vote for or against a candidate. A statement can identify a candidate not only by his name but by showing his picture, referring to his political party, or other distinctive features of his platform or biography.

Business activity. Whether an activity constitutes participation or intervention in a political campaign may also arise in the context of a business activity of the tax-exempt, including the selling or renting of mailing lists, the leasing of office space, or the acceptance of paid political advertising.

Web sites. A web site is a form of communication, and if a tax-exempt posts something on its web site that favors or opposes a candidate for public office, it will be treated as if it distributed printed material, oral statements or broadcasts that favored or opposed a candidate. Links to candidate-related material, by themselves, do not necessarily constitute political campaign intervention. All facts and circumstances must be taken into account to assess whether a link produces that result.