Imagine there is a law that mandates you cannot drive fast, but the speed limit is not posted: You have been given no definition of what it means to go fast. This is the situation charities face when it comes to political activity. The Internal Revenue Service (IRS) has failed to define what constitutes political activity, relying on the “facts and circumstances” of each case to decide whether an organization is participating in political activities.
This “facts and circumstances” approach has too often resulted in wildly different interpretations of what political activity is allowed, leaving charities confused and uncertain.
This confusion and uncertainty must end. Our democracy is under strain from political polarization, voting irregularities, gerrymandered state and federal districts, and more, making now the perfect time for the nonprofit sector to bring all its resources to bear. Our strength as political nonpartisans can help renew civic engagement and repair our political and economic systems. To enable this civic renewal, the IRS rules guiding what is permissible need to be clear and precise.
Most charities know that electioneering, supporting or opposing a candidate running for office, is off limits. However, charities are unclear on whether or not many non-electioneering activities, such as encouraging people to vote and educating the public about candidates for office, are permitted. Advocates on various sides of policy debates find themselves on an uneven playing field, where the more aggressive groups take advantage of uncertainty to promote their agenda via avenues not open to their risk-averse (or more carefully-advised) counterparts.
Adding to the problem is uneven IRS enforcement. In the rare cases in which the details of an IRS enforcement action become known, it is often possible to find similar activities conducted by other nonprofits that did not elicit IRS enforcement. There are groups that can afford to incur the legal fees necessary to vigorously defend questionable conduct, while others similarly situated are forced to agree to a settlement, unable to invest the resources needed to defend their choices or to understand the infraction of which they have been accused.
Even when charities are not subject to the expense and inconvenience of an IRS audit, the vague and complex legal standards they must follow means that they expend more resources on legal advice and compliance and less on actually pursuing their mission. A prudent charity is forced by the ambiguity of the rules and the uncertainty of the enforcement process to have experts vet every move that is arguably related to any candidate or election for public office. Not only does this consume significant financial resources for in-house or outside legal services, it also slows action by the charity, often making it less effective.
Fortunately, there is a solution. The Bright Lines Project (BLP) has developed a regulatory framework that provides bright lines defining political activity and creates a list of activities that are permissible for charities, called “safe harbors.” These rules offer predictability, simplicity, and ease of understanding in what constitutes political activity. The proposal protects free speech and encourages civic engagement while still preventing abuse of the system.
The regulatory framework was developed during the past several years by a team of nine preeminent nonprofit tax lawyers. The framework has been reviewed by hundreds of nonprofits around the country and the feedback was used to improve the proposal. In the wake of allegations that the IRS improperly scrutinized selected applicants for tax-exempt status based on perceived political affiliation, the Bright Lines Project proposal gained national attention and was further refined. The allegations highlighted the absence of workable guidelines defining “political” activity and how much of it a nonprofit group can do.
Now we need your help. We need to tell the IRS that nonprofits support a proposal like the one from the BLP. To get ready for this effort, a group of roughly 20 nonprofits, including Independent Sector, National Alliance of Children and Families, National Association of Community Health Centers, Minnesota Council of Nonprofits, The Arc, and the California Political Attorneys Association, have already signed-on to signal the diversity of groups that care about this issue.
We need you to join these other nonprofit leaders to endorse the BLP proposal. And we will need you to spread the word that our sector deserves clear, fair definitions of political activity.
We are starting the outreach efforts with a briefing in Washington, DC at Independent Sector on Dec. 3. For those you in Washington, feel free to join us. You can get details from Tom Halloran at firstname.lastname@example.org.
The nonprofit sector faced a similar situation before 1990 when the IRS had no definition for lobbying. The ambiguity in the rules led to the Sierra Club losing its charitable status and becoming a 501(c)(4) social welfare group. In fact, it took four years in the 1980s of nonprofits throughout the country working together to win fair IRS rules on lobbying. The rules we won set the standard for the BLP proposal in providing clear definitions and safe harbors.
We won that fight and we can win this one – with your help.
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