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The Wall Street Journal is the latest to report on the various issues related to churches and politicking… I was happy to see that it noted that there have only been two revocations since 1954. One of them (the more recent… 1992) was a church in Binghamton that took out full page ads telling readers to vote for Bob Dole. Good old Branch Ministries… I don’t know if they had any inkling how badly they violated tax law, but they didn’t jsut cross the line… they jumped over it!

Nonprofit Law Podcast #34 covers the murky world of IRS audit procedures (now less murky!).

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Sen. Obama’s speech at last summer’s United Church of Christ conference has managed to pull an IRS investigation according to the AP. Here’s some interesting analysis from two sources:

John Wilson’s IRS Probe Of Obama’s Church Underscores Anxieties For Nonprofits underscores the difficulty charities and other nonprofits are facing with these subjective rules… something I’ve blogged about before.

Over at the Nonprofit Law Prof blog, there’s a a great pointer to Jack Siegel’s take on the situation. Quoting their quote of him:

We do think Congress must step in and write a prohibition on political campaign activity that addresses the reality of how churches and other Section 501(c)(3) organizations interact with political candidates. In addressing this problem, we would like to see Congress take an approach akin to that taken by the intermediate sanctions in Section 4958. That is, rather than penalizing the innocent entity or the entity that can’t control a speaker once the speech has begun, the sanctions should focus on the speaker’s conduct, penalizing the speaker. Many will argue that this raises First Amendment issues. We recognize that possibility, but are not convinced. Obviously, the speaker has a right to speak, but the speech in question is by invitation. Consequently, this is not silencing the speaker in terms of access to the public square.

A safe harbor for the charity in case the speaker slips into campaign mode would probably face a lot less resistance compared to the flip side: penalizing the speaker. I’d be very surprised if that idea ever got off the ground.

A North Carolina state representative is being accused of using her charity’s resources to aid in her election efforts. Rep. Mary McAllister helped found Operation Sickle Cell in 1972 and has found herself the target of a state auditor’s investigation. More on this from the Fayetteville Observer.

Interesting to see that it is a state investigation… it’s conceivable that the IRS could look into this as well.

Memo to all 501(c)(3)s (especially churches)… yes, the head of your organization can endorse a candidate. Just be sure to not use the organization letterhead when you do it… it matters (apparently) to the IRS.

As I write this, I’m thinking about the paradox in IRS rules at times… in what I like to call the “hang a lantern on your problem” rule, the IRS has no problem when an endorsing person is listed with their organizational affiliation along with an asterisk that leads the reader to a disclaimer stating “organizational affiliation listed for identification purposes only.” (IRS FS-2006-17) Contrast that with this instance where clear organizational identification (the letterhead) seems to be leading this church into an investigation even though the pastor is suggesting that the letter underscored a personal endorsement. I think you can distinguish the two endorsement scenarios, but it underscores a continuing problem for all 501(c)(3)s out there: the facts and circumstances analysis is so subjective that it’s sometimes difficult to know where the line is between legal and illegal activity.

BoardSource has just released a new article by my former boss, John Pomeranz entitled
Staying Legal While Engaging in Election-Related Activities. It’s free for BoardSource members, but you can check out a free portion of the article here.

Since it’s a timely subject, be sure to check out the latest in the Nonprofit Law Podcast’s Beyond the Podcast series… Nonprofits and Elections: Balancing Personal Versus Organizational Activity. It’s an on-demand video you can get through the NLP site here.

Nonprofit Law Podcast #31 is live, covering whether your organization needs to file a Form 990 this year.

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The IRS recently released Fact Sheet 2008-14, in which it spelled out when your nonprofit might be considered for an examination of its activities:

To determine which organizations should be targeted, experienced specialists analyze information from Forms 990 and other sources. This analysis will usually result in the selection of a group of returns for examination or compliance check. EO also reviews media reports and receives complaints from the general public and Congress about potential non-compliance by exempt organizations. After confirming the information, and when appropriate, these organizations may be selected for examination or to receive a compliance check.

This isn’t terribly earth-shattering news… basically the IRS says that it looks at 990s, media reports and complaints, which most in the community already assumed. It’s good to have it documented officially, however.

Nonprofit Law Podcast #30 dives into election waters again – can a candidate use your nonprofit’s space?

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Nonprofit Law Podcast #29 looks at one of the rare times nonprofits face a tax… unrelated business income.

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