Issue link: http://read.dmtmag.com/i/144441
Restrictions on Political Campaign Intervention By: Charles Lindsay, CPA and Kimberly Hardy, CPA/CFF CHARLES LINDSAY, CPA KIMBERLY HARDY, CPA/CFF If you have been watching the news lately, you are well aware of the investigation involving the IRS and its practices related to granting tax exempt status. An important issue that has come to light during these recent investigations is the restrictions on Political Campaign Intervention under the Internal Revenue Code (IRC). The IRC prohibits 501(c)(3) organizations from directly or indirectly participating in, or intervening in, any political campaign on behalf of (or in opposition to) any candidate for elective public office. Contributions to political campaign funds or public statements of position (verbal or written) made on behalf of the organization in favor of or in opposition to any candidate for public office clearly violate the prohibition against political campaign activity. Violating this prohibition may result in denial or revocation of tax-exempt status and the imposition of certain excise taxes. However, 501(c)(3) organizations are allowed to have lobbying activities, within certain restrictive limits. The IRC allows for 501(c)(6) organizations (Trade Associations) to establish separate segregated funds to be used for political campaign activity. Funds from members may be routed to a Political Action Committee for the purpose of pooling political campaign funds in support of a particular candidate. Also, 501(c)(6) organizations may engage in lobbying activities. The organization is responsible for notifying members of the percent of dues that is attributed to lobbying activities and therefore nondeductible. As an option, the organization can forgo this notification and pay a proxy tax on lobbying expenditures. However, the IRC is not as specific related to activities of 501(c)(4) organizations. It states that the promotion of social welfare does not include direct or indirect participation or intervention in political campaigns on behalf of or in opposition to any candidate for public office. However, a section 501(c)(4) social welfare organization may engage in some political activities, so long as that is not its primary activity. Many 501(c) (4) organizations are formed with the intent to devote funds to lobbying activities. Please stay tuned. This has been a hot topic lately, and it will be interesting to see if Congress makes any changes to the IRC related to this. Charles Lindsay and Kimberly Hardy are Certified Public Accountants with Matthews, Cutrer & Lindsay, PA in Ridgeland, MS. They both are involved in the firm's Nonprofit Practice. You can contact Charles and Kimberly at clindsay@mclcpa.net or khardy@mclcpa.net. 8 CONNECTIONS | SUMMER 2013