Printable Version Email to a Friend |
Private Foundations and Policymaking: A Note About Electioneering
|
This material is excerpted from Private Foundations and Policymaking: Latitude Under Federal Tax Law (May 2002), by Thomas A. Troyer and Douglas Varley of Caplin & Drysdale, Chartered. The original research paper was commissioned by The Center on Philanthropy and Public Policy (CPPP) at the University of Southern California for its 2002 Forum, "Leveraging Philanthropic Assets For Public Problem Solving," under its Foundations and Public Policymaking project, funded by The David and Lucile Packard Foundation. The materials are made available here by kind permission of the authors and publisher. |
Federal law prohibits all organizations exempt under section 501(c)(3), including private foundations, from intervening in any political campaign on behalf of (or in opposition to) any candidate for public office.* The rules in this area contrast markedly from those that apply to lobbying. Most important, where the lobbying analysis is informed by brightline definitions that clearly distinguish lobbying from permitted advocacy, the prohibition against campaign intervention involves a vaguer "facts and circumstances" analysis. There is no "magic words" test here.
Consequently, planning advocacy activities that will involve, or merely occur proximate in time to, an election frequently calls for the careful exercise of informed judgment. This difficulty is compounded by the seriousness of the potential penalties for violating the electioneering ban. In contrast to lobbying, where foundations face only a small penalty tax for activities that are "insubstantial," the penalty for any electioneering is, theoretically at least, loss of the foundation's tax exemption. Hence, foundations generally should seek advice of experienced tax counsel before conducting or funding activities associated with an election.
Although due caution is appropriate, the electioneering ban does not mean that foundations are prohibited from conducting advocacy and voter education activities simply because an election is near. In fact, foundations both fund and conduct a range of activities that take place around elections. For example, foundations have funded or conducted national voter education programs distributing information about candidates - the Markle Foundation's Web White and Blue site being a notable example - paid for research into how election campaigns are financed, and supported advocacy activities designed to call attention to particular policy issues during the election season. The touchstone for distinguishing these permissible activities from prohibited electioneering is that all the foundation's efforts must be strictly nonpartisan in both form and substance.
In determining whether an activity meets this standard, the IRS will consider any evidence that the organization had a partisan motive in conducting the activity as well as whether the organization should reasonably have foreseen that its efforts would benefit one candidate over another. Hence, an activity may be characterized as partisan even though it does not involve an explicit endorsement of a particular candidate or party. In this way, the campaign prohibition is broader than the "express advocacy" standard that the Supreme Court has applied under the federal election laws.**
Nonetheless, the IRS has stated explicitly that the law does not require organizations to refrain from the activities they regularly carry on simply because an election is near.*** In particular, the IRS does not expect charities to stop advocating for policy positions they support close to an election, provided their efforts serve a legitimate nonpartisan purpose and are not being carried out to benefit a particular candidate. Moreover, the IRS recognizes that electioneering requires more than just a positive or negative correspondence between the charity's position on an issue and a candidate's position. Rather, a charity violates the prohibition only if its issue ads contain an overt indication that the organization supports or opposes a particular candidate or slate of candidates. That is, the IRS is concerned about ads that use issue labels like "conservative" or "prochoice" as code words to describe a candidate. Hence, as long as a foundation or its grantee does not link its position on issues with a particular candidate or party, its issue advocacy should not run afoul of the electioneering ban.
In addition to nonpartisan issue advocacy, the IRS has identified a number of voter education activities that foundations may safely support or conduct themselves. Specifically, charitable organizations, including foundations, can sponsor candidate debates, publish candidates' responses to questionnaires, and distribute candidate voting records. Detailed restrictions apply to each of these activities, intended to ensure that the event or publication is strictly neutral among the candidates. Finally, private foundations can fund nonpartisan "get out the vote drives" and, under more stringent requirements, voter registration drives. A detailed recounting of the legal requirements for those activities is beyond the scope of this paper.
* IRC § 501(c)(3). For private foundations, this prohibition is backed up by the same penalty tax as applies to lobbying expenditures [See: IRC § 4945(d)(2)].
**Foundations conducting issue advocacy around elections will want to consult their advisors about the election law reforms dealing with this topic that Congress recently enacted as part of the Bipartisan Campaign Reform Act of 2002 (effective only after the date of the November 2002 congressional elections).
***Judith Kindell and John Reilly, Election Year Issues, Exempt Organizations Technical Instruction Program for FY 2002 (334, 345), IRS.