Abby Levine

Legal Inaccuracies in Independent Sector Report

UPDATE: Independent Sector will be revising the report with the correct information.

Independent Sector recently published a wide-ranging report, Beyond the Cause: The Art and Science of Advocacy. In its discussion of advocacy, the report highlights the importance of the legal rules and how they are perceived and understood by organizations.  Some aspects of the law are subject to legal interpretation and experienced tax and election lawyers may disagree on the interpretation.  While we may not agree with how all the statements of law and policy in the report are characterized, there are some significant legal inaccuracies we want to correct.

Appendix A, a chart describing Rules Governing Nonprofit Lobbying and Political Activity, contains some factual errors.  In particular,

  • The chart says mistakenly says that Electioneering Communications are prohibited for 501(c)(3) organizations.  In fact, 501(c)(3) organizations can engage in electioneering communications.  The prohibition on corporations—including 501(c)(3)s, 501(c)(4)s, 501(c)(5)s, and 501(c)(6)s– engaging in electioneering communications was struck down by FEC v. Wisconsin Right to Life, 551 U.S. 449 (2007).  An electioneering communication is defined as:  “any broadcast, cable, or satellite communication that refers to a clearly identified candidate for Federal office and is made within 30 days of a primary or 60 days of a general election.”  Electioneering communications could include grassroots lobbying ads or even public service announcements that refer to a policymaker who happens to be up for re-election.
  • The definition of “Electioneering Activity,” gives the confusing impression that 501(c)(3) organizations may not participate in a number of activities that are actually allowable.  For example, footnote 3 states that electioneering activity is “[d]efined broadly by the IRS as political activity designed to influence the selection of any individual to federal, state, or local office, including issue advocacy, ads, polling, get-out-the-vote activities, etc.”  This definition is simply inaccurate.  While 501(c)(3) organizations cannot support or oppose candidates for public office, they may indeed weigh in on executive branch nominations, as well as nonpartisan polling, get-out-the-vote activities, and issue advocacy, all subject to certain rules.
  • The chart states that, regarding 501(c)(4)s, 501(c)(5)s, and 501(c)(6)s, “Expenditures for electioneering activities are tax-exempt.”  However, Section 527(f) of the Internal Revenue Code specifically imposes a tax on expenditures by exempt organizations for an “exempt function,” which is defined as “influencing or attempting to influence the selection, nomination, election, or appointment of any individual to any Federal, State, or local public office or office in a political organization, or the election of Presidential or Vice-Presidential electors, whether or not such individual or electors are selected, nominated, elected, or appointed.”  527(e)(2).  The definition of “exempt function” is more narrow than how the report defines “electioneering activities.”
  • As to express advocacy for 501(c)(4)s, 501(c)(5)s, and 501(c)(6)s, the chart says it is “Permitted, but must be registered as limited ‘independent expenditures….’”    Under federal tax law, express advocacy cannot be the organization’s primary purpose and under federal election law, express advocacy must be conducted independently of a candidate or campaign (with some exceptions).  There is no registration requirement, although organizations engaging in express advocacy must comply with reporting and disclaimer rules.
  • As to electioneering communications for 501(c)(4)s, 501(c)(5)s, and 501(c)(6)s, the chart says they are “Permitted, but must be registered as limited ‘electioneering communications….’”  There is no registration requirement, although organizations engaging in express advocacy must comply with reporting and disclaimer rules.

In addition to the errors in Appendix A, we wanted to highlight several other misleading comments:

  • The report omits that private foundations may attempt to influence legislation through technical advice or assistance to a governmental body or nonpartisan analysis, study, or research.  4945(e).  These exceptions to the definition of lobbying apply along with the self-defense exception mentioned in the report.
  • The report (on page 165) perpetuates the misconception about the holding of Citizens United.  The report states that ‘the Supreme Court decision in Citizens United v. Federal Election Commission, which gave for-profit corporations, individuals, and unions the ability to make unlimited contributions to Super PACs and 501(c)(4) social welfare organizations for partisan political activity.”  At the time of the decisions, Super PACs hadn’t yet been created and more importantly, the decision also gave all corporations—for-profit and nonprofit—the ability to make unlimited independent expenditures.  In fact, Citizens United, the plaintiff in the case, is a c4.  And, the decision itself had no impact on the rules for individuals.