Nonprofit Law Blog

In a test of federal tax law, a conservative legal group is encouraging pastors to preach about election candidates in September, reports The Wall Street Journal.

The Alliance Defense Fund hopes a court case will result from this open defiance of tax rules, which bar churches from engaging in partisan politics, and that the restrictions will be struck down by the courts.

On April 17, 2008, the IRS Tax Exempt and Government Entities Division issued a letter providing guidance on how they will treat certain activity in the 2008 political campaign season. The letter stated the goals of the Political Activities Compliance Initiative (PACI) task force in the 2008 election season and provided limited guidance on PACI's enforcement of 501(c)(3)s engaging in election-related activity in two specific areas: 501(c)(3)-501(c)(4) websites and issue advocacy.

The new business entity is to be called a low-profit limited liability company, or L3C, and Vermont’s governor is expected to sign into law at the end of the month the bill creating the designation.

An L3C, a variation of a limited-liability company, would operate like a for-profit business generating at least modest profits, but its primary aim would be to offer significant social benefits, such providing jobs in an economically depressed area. Such business models already exist: The Vermont law would give them a name, and, its advocates hope, both encourage the creation of more socially conscious businesses and attract more money to them.

Tax regulators are hinting at an imminent crackdown of outside political outfits masquerading as nonprofit organizations, groups that already are making a splash in the 2008 Congressional primaries.