An Administrator's Guide to California Private School Law

Chapter 18 – Political Activity

3. P ENALTIES F OR V IOLATING L IMITS If an organization fails the Substantial Part test, it is considered not to be operated exclusively for exempt purposes. 2445 In addition to possibly having its tax-exempt status revoked, the offending organization may also be subject to an excise tax equal to 5% of its lobbying expenditures for the year that it lost its status. 2446

C ANDIDATE E LECTIONEERING

Section 3

A. W HAT I S E LECTIONEERING ? Organizations that are tax exempt under IRC 501(c)(3) may not “participate in, or intervene in (including the publishing or distributing of statement), any political campaign on behalf of (or opposition to) any candidate for public office.” 2447 This means that not only is any direct endorsement of or opposition to a specific candidate in an election completely prohibited, but also that other related activities may be barred as well. Unlike lobbying, there is no amount of candidate electioneering an organization may do and still remain tax-exempt under section 501(c)(3). 2448 B. P ENALTIES F OR V IOLATION An organization in violation of this law risks having its tax-exempt status revoked, as well as its eligibility to receive tax-deductible donations. The organization may also be subject to an excise tax on its political expenditures. 2449 LCW Practice Advisor On May 4, 2017, President Trump signed an Executive Order entitled “Promoting Free Speech and Religious Liberty.” This Order gave the IRS discretion with

respect to pursuing sanctions against religious leaders or organizations that engage in political speech. The Order, however, did not change the actual law in any way and does not impact the underlying prohibition against electioneering by non-profit organizations.

C. P ERMISSIBLE E LECTION -R ELATED A CTIVITIES Despite the strict prohibition on political campaign intervention, there are many election-related activities in which 501(c)(3) organizations may participate.

An Administrator’s Guide to California Private School Law ©2019 Liebert Cassidy Whitmore 595