By Vanessa Dick
Many of the more than 1 million organizations that have 501(c)3 tax exemption choose to flex their civic muscles during the election season, abiding by rules that prohibit them from supporting or opposing any candidate for public office.
Last February, the Internal Revenue Service released its Political Activities Compliance Initiative Final Report, detailing its investigations into the political activities of 501(c)3s during the 2004 election cycle.
The report says 59 organizations were found to have engaged in prohibited political activities.
That means the IRS found only 59 “bad actors” out of 1 million organizations – a negligible rate of non-compliance.
Unfortunately, some individuals have chosen to deceptively market the IRS report as indicative of rampant partisan political violations by 501(c)3s.
These critics state that “nearly 75 percent” or “three-quarters” of the groups audited illegally intervened in elections, but this conclusion is wrong.
The IRS initially opened 132 cases for investigation. Before releasing its final report, the IRS dropped 22 cases, citing no need for further investigation, and closed 82 of the remaining cases.
Of the 82 closed cases, the IRS found 59 violations — that’s the “nearly 75 percent” – and only three of those were serious enough to recommend tax-status revocation.
The other 56 cases were isolated violations, with steps taken to correct the infringement or to prevent future infractions.
The “nearly 75 percent” characterization does not account for the dropped cases and inflates the isolated violations.
In addition, 28 cases are still open and, until the IRS reports their outcome, the percentage of political intervention in the pool of 132 cases is unclear.
Further, it is not totally clear that all 59 IRS-substantiated violations were cases where a 501(c)3 actually broke the law.
In the much reported All Saints Episcopal Church case, for example, the church publicized an IRS offer to settle the investigation in exchange for a church admission of wrongdoing and a promise to not carry on the same activity in the future.
This is troubling, for it implies that at least some of the 501(c)3s investigated may have admitted wrongdoing simply to make the IRS go away.
Despite the chilling rhetoric, 501(c)3s must not forfeit their vital civic engagement projects.
Instead, nonprofits should demand better guidance from the IRS on permissible election activities to encourage better compliance.
501(c)3s have a valuable role in the electoral process: They register neglected voters, empower the voiceless to act, and broaden the public debate beyond candidate-chosen issues.
These positive contributions of legally compliant nonprofits should not be overshadowed by the violations of a handful of 501(c)3s charged with political intervention.
Vanessa Dick is nonprofit advocacy fellow at the Alliance for Justice in Washington, D.C.