Nonprofits Making Political Contributions

For many political candidates, the support or endorsement of a particular group is an important part of gaining visibility and gaining voter support (it is also where association management software can help!). Although frequently groups or clubs tout their support for a candidate, nonprofit organizations are required to stay out of this realm. Political campaigning for or against a candidate or financial support is strictly forbidden by the IRS tax code for all organizations registered as section 501(c)(3).

This code states that nonprofit organizations are prohibited from participation in campaigning for or against a candidate, which includes both written and verbal activities that favor or disfavor a political candidate. However, many nonprofits do take a stance on issues that may be central to the campaign rhetoric of a particular candidate and then one could logically deduce with which candidate they would be more likely to align. This type of political activity is permitted. However, it should not be confused with direct support or endorsement of a particular candidate as this would find the organization in violation of their tax-code agreement.

There are some political activities that are permitted for nonprofits. Activities that are intended to encourage voter registration or reminders to vote, public forums or voter education guides are all allowed, provided that they are non-partisan.

What can make this confusing is that there are nonprofit organizations that focus entirely on political activity and on supporting and/or influencing the election of a politician through campaign contributions. These nonprofits are called Political Action Committees (PAC’s) and are categorized as section 527 by IRS tax code. These PAC’s are usually formed in relation to an existing organization, for example the American Medical Association (AMA) has a PAC. The Board of Directors of the PAC will decide which candidates and Congressional members to support based on their voting history on legislation that impacts their cause or areas of concern, their presence on key committees, and their reputation within their political party. These PAC’s want to help elect officials that support legislative issues that are important to their members and their profession(s).

Unlike 501 (c)(3) nonprofits, these donations are not tax-deductible although they are exempted from the federal gift tax. There are limits to these contributions, which include:

• No one contributor may give more than $5,000 a year (this includes both individuals and groups, as well as other PAC’s)
• There is a $50 maximum per anonymous contributor

These rules are set up to prohibit the undue influence of the wealthy and powerful on the political process through the support and campaign materials that are funded through the PAC.

Although the distinctions between the two types of nonprofits are clear, the reasons behind the distinctions are more theoretical. A 501 (c)(3) nonprofit is expected to use it’s funding to serve its clients and it’s stated mission. Using funding to support individual political candidates would be outside of the scope of an organizations programming, research, education or advocacy and thus, it would be a mis-use of funds. Even though you could reason that supporting a particular candidate ultimately could strengthen or enhance the work of the nonprofit it does not fall directly within the confines of the purpose of nonprofit organizations. These organizations provide public services through state, federal, local and individual donations and are required to use that money within strict tax-code guidelines. PAC’s, although they are nonprofits, are created to allow groups of individuals to collectively support a political candidate in a way that enhances the democratic process and allows the masses to voice their opinion and support for legislative issues. The PAC’s mission clearly articulates this as a goal and spends donations accordingly.

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