The Evangelical Council for Financial Accountability (ECFA) in Winchester, Va. has submitted comments to the U.S. Department of the Treasury and the Internal Revenue Service (IRS) encouraging more freedom and greater clarity in the rules governing political activity by tax-exempt organizations.
The comments come on the heels of proposed guidance issued by the Treasury and the IRS this past November, following intense scrutiny regarding the IRS’s mishandling of tax-exempt applications from 501(c)(4) social welfare organizations. While the guidance was aimed primarily at addressing the controversy of 501(c)(4) organizations, the Treasury and the IRS specifically requested comments on whether the proposed definition of “candidate-related political activity” should also be applied to 501(c)(3) public charities, such as churches and other religious nonprofits.
ECFA based its comments on recommendations from the national Commission on Accountability and Policy for Religious Organizations, a collaborative effort involving the input of a diverse group of leaders from across the religious and broader nonprofit sector, formed by ECFA in 2011 at the request of Sen. Charles Grassley (R-Iowa).
While the Treasury and the IRS seek greater clarity by further restricting the types of permissible political activity of tax-exempt organizations, the commission would achieve greater clarity by allowing more freedom for tax-exempt organizations to engage in political speech – while simultaneously preserving the long-held public policy of not allowing tax-exempt funds to be expended for political purposes.
Dan Busby, president of ECFA, offered four key comments on the proposed guidance:
- The Treasury and the IRS should proceed with great caution in applying the proposed “candidate-related political activity” test to 501(c)(3) organizations.
- Replacing the “facts and circumstances” approach with a clear-cut definition of political activity would benefit charities and the IRS.
- The proposed “candidate-related political activity” test would silence charities from speaking out on issues with political significance.
- The Commission’s recommendations strike a necessary balance of permitting charities to engage in communications that are relevant to their exempt purposes while ensuring that they expend funds in a manner consistent with their tax-exempt purposes.
Most concerning to ECFA is the further chilling effect that the proposed “candidate-related political activity” test would have on issue-oriented communications from churches and nonprofits. While this has been a problem for some time even under existing rules and the IRS’s approach to administering the law, the proposed regulations would compound the concern.
After illustrating the practical and constitutional concerns with the government’s latest proposal, Busby wrote, “This approach is unacceptable. The freedom of tax-exempt organizations to engage in public discourse on issues of interest and importance to their missions must not be cast aside simply for the sake of the ease of administration of the law for the government.”
Click here to read ECFA’s full comments on the proposed political activity guidance.