Q: I read a news article that said a nonprofit 501(c)(3) group is sharing office space with Ralph Nader's presidential campaign. Isn't this illegal?

A: The IRS would say the answer depends on the facts and circumstances of the case, since 501(c)(3) organizations cannot support or oppose candidates, but they can rent space, mailings lists or similar items to candidates if they:

1. Charge full market price,
2. Make the same deal available to other candidates, and
3. Report any unrelated business income.

A March 15 aricle on salon.com describes the arrangement between Citizen Works and the Nader campaign. A representative of the Nader campaign said the campaign is subletting for fair market value, and that Citizen Works has other subletters as well. She also said it was approved by the Citizen Works board and the building's landlord.

Will this degree of separation satisfy the IRS? They will need more details to make a determination. The degree of separation required is strict. For example, if any common space or facilities, such as copying machines, are shared, the campaign must pay the full market price. It must be an arms length transcation. Citizen Works cannot subsidize the campaign, indirectly or directly.

In situations like this, where the candidate is a founder and donor to the 501(c)(3) group, the group must be extremely careful to assure the proper legal seperation.

For more information on IRS rules for 501(c)(3)s in an election year see the NPAction section on Candidate Support and Election Year Activities .