TWEETS OF THE WEEK

Nonprofit Tweets of the Week – 5/20/16

Tahoe

I have the great pleasure of being in beautiful Lake Tahoe today speaking at the CEB Renewal Retreat: Reignite Your Passion for Law. Have a listen to the Eagles’ Peaceful Easy Feeling while perusing our curated nonprofit tweets of the week:

  • National Council of Nonprofits: Yes! Your #nonprofit should find out whether the new DOL rules about overtime apply! Where to start: http://buff.ly/1rTX8qT
  • Nonprofit Finance Fund: New Report! Advice to Strengthen #Nonprofit Mergers & Collaborations http://bit.ly/catalystfundreport
  • Nonprofit Quarterly: “What’s at risk if support for nonprofit infrastructure continues to be tepid”? NPQ [Ed. See also The Chronicle of Philanthropy’s take if you’re a subscription holder – CoP.]
  • Guidestar: Investing in Infrastructure: http://npo.gs/1TVJh9y via @CEPData BoardSource: Six Steps to Improve Board Financial Oversight http://hubs.ly/H030Hgr0
  • Foundation Center – SF: Creating Culture: Promising Practices of Successful Movement Networks via Nonprofit Quarterly
  • Guidestar: The end of big #philanthropy? http://npo.gs/1Od1Kgh via @Medium
  • Philanthropy NW: Big Issues, Many Questions explores 5 issues facing foundation leaders and boards. Part 3: http://j.mp/1T8Xrdm via @CEPData @philCEP
  • For Purpose Law: Consent Agenda: A Tool for Better Meetings
  • Harvard Biz Review: Social change happens more quickly when business is behind it | HBR
  • Gene: “New Crowdfunding Rules Let the Small Fry Swim With Sharks” NY Times
EVENTS

Highlights from the Conference on Charitable Giving 2016

Stanford university

Last week, I had the privilege of attending the Conference on Charitable Giving at Stanford University, organized by the Silicon Valley Community Foundation and Stanford University’s Office of Planned Giving. The conference focused on developments and emerging practices in philanthropic advising, with breakout sessions for all levels of practitioners and advisors in the field of charitable giving.

Below are some highlights from the interesting sessions I attended:

Opening Plenary

Martin Hall, Partner at Ropes and Gray, provided an annual update of developments, pending legislation, and cases impacting the sector. Among the many updates, he noted:

  • The PATH Act. Signed into law on December 18, 2015, the PATH Act clarified that contributions (of cash or property) to 501(c)(4), (c)(5), and (c)(6) organizations are not subject to federal gift tax. Additionally, the PATH Act imposed new requirements on 501(c)(4) organizations to clarify their tax-exempt classification (within 60 days of formation or by June 16, 2016 if already a pre-existing self-declared 501(c)(4)). However, despite the impending notice deadline, the IRS has yet to publish a notice form and it is unclear how this new requirement will be enforcement by the IRS.
  • Substantiation Developments. On September 15, 2016, the Department of Treasury and the IRS issued proposed regulations that would have permitted charities to file an additional return with the IRS to substantiate donor contributions of more than $250 in value. The return would have required the nonprofit to collect the donor’s name, social security number, or other taxpayer ID number. After receiving more than 35,000 opposition letters, the proposed regulations were withdrawn in January 2016.

Breakout Session I: What to Know Before Accepting a Seat on a Nonprofit Board

Barbara Anne Murphy, Partner at Farella Braun + Martel, discussed the duties and responsibilities of board membership.

  • When a court considers a claim for a breach of the duty of care, it will generally first look to whether the directors were prepared for the board meetings and whether they were reasonably informed. Barbara stressed the importance of reviewing board materials prior to meetings, attendance (by phone or in person) at those meetings, and taking individual notes to check against the Secretary’s minutes.
  • In addition to reviewing the organization’s articles of incorporation, bylaws, governance policies, Form 990s, recent meeting minutes, and other documents related to the organization’s legal status and structure, the individual should consider whether they, personally, have the time and resources to effectively serve the organization before joining the board. Questions to ask may include: When, where, and how often are board meetings held? How long do they last and what is the typical agenda? Is there a formal orientation or board training for new board members? What is the monthly time commitment? What is the financial commitment, if any? What are the standing committees and what do they do? Will I be expected or able to serve on a committee?

Breakout Session II: Doing Well By Doing Good: Exploring Models of Corporate Philanthropy in Silicon Valley

Gisela Bushey, Director of SanDisk Foundation, Patty Nation, Director of Global Corporate and Community Engagement at Xilinx, and Joe Speicher, Executive Director of Autodesk Foundation, participated in an engaging panel that illustrated various models of corporate giving within their respective organizations. Xilinx, for example, has developed a model called “K to Corporate Public-Private Partnership” that provides funding and services to schools near the company’s headquarters, by building partnerships with local nonprofits to strengthen arts, science, and health education within those schools. One theme among all three panelists was employee-centered philanthropy, where employee volunteerism and charitable work is encouraged and supported by the company through matched donations and/or matched employee volunteer time. Gisela’s closing remarks noted the importance of examining a corporation’s philanthropic efforts—looking at what the corporation does and which causes it supports—to understand the corporation’s core values.

Keynote

Dan Klein, Lecturer of Management at Stanford’s Graduate School of Business, presented a fascinating keynote on how one’s habitual “status” (e.g, whether dominant or deferential) can affect one’s connections and power within professional, or personal, relationships. Through a series of simulations and games, we learned how certain behaviors and mannerisms can increase or decrease our “status” and connection. For example, to maintain high status and high connection within a situation, one might try to maintain eye contact, take up space, breathe fully, keep one’s head still, use smooth movements, and initiate physical and psychological contact.

Breakout Session III: Charity Supervision and Enforcement by the California Attorney General (AG)

Elizabeth Kim, the Supervising Deputy Attorney General, provided a brief overview of the AG’s oversight responsibilities and enforcement programs. Some notable points from her presentation include:

  • The AG’s authority is set in the government code, or the “Uniform Supervision of Trustees for Charitable Purposes Act”, and gives broad authority to allege, and enforce against, violations in the corporations code, the penal code, the tax code, the probate code, and common law, against charitable corporations, unincorporated associations, and charitable trusts, including foreign corporations (corporation formed under the laws of another state) transacting business in California. We have previously discussed this application of laws to foreign corporations on the blog.
  • By June or July of this year, the AG will have e-filing capabilities for registering and reporting of organizations with 25,000 or less in gross annual revenue. The AG’s office hopes to have e-filing for larger organizations by the fall of 2016.
  • Remarking that online solicitation is a hot issue in the AG’s office, Elizabeth pointed to the new AG Guide for Crowdfunding Sites, Charities, and Donors as a helpful resource. She also mentioned that while the AG Guide for Charities is outdated, a new version is being reviewed and revised with the help of local practitioners (including NEO’s Erin Bradrick).

Closing Plenary

William Meehan III, Lecturer of Management at Stanford’s Graduate School of Business, closed out the conference by discussing strategic philanthropy. He summarized the history of U.S. philanthropy in four eras—industrial, independence, information, and now, impact. He noted that impact investing is growing within even investment firms and private banks, and the need for impact evaluation to improve beyond simply looking to Form 990.

ADVOCACY & LOBBYING   IRS & FEDERAL TAX ISSUES

501(c)(3) Electioneering Rules: Candidate Appearances & Debates

International Leaders President Press Conference Flat Vector Illustration

 

While 501(c)(3) organizations are prohibited from intervening in elections, they are permitted to engage in certain nonpartisan election-related activities if they structure such activities appropriately, which we’ll address in this next post in the series.  This includes sponsoring candidate debates and forums and inviting candidates to speak at organizational events.  However, 501(c)(3) organizations must be careful when hosting such events that they do not serve to favor or oppose any particular candidate or political party.

Fortunately, the IRS has provided some guidance in Revenue Ruling 2007-41 regarding how 501(c)(3) organizations may arrange for candidate appearances without jeopardizing their exempt status.  However, keep in mind that whether such events ultimately constitute impermissible campaign intervention will depend on all of the facts and circumstances, including:

  • “Whether the organization provides an equal opportunity to participate to political candidates seeking the same office;”
  • “Whether the organization indicates any support for or opposition to the candidate (including candidate introductions and communications concerning the candidate’s attendance);” and
  • “Whether any political fundraising occurs.”

If a 501(c)(3) organization hosts candidates for a political office at separate events, whether those candidates were given an equal opportunity to participate will depend on the comparative nature of the events.  For example, it would likely constitute impermissible campaign intervention for an organization to invite one candidate for a particular office to speak at its highly-publicized and well-attended annual gala while inviting her opponent to speak at an unpublicized and sparsely attended meeting.  Even if the organization presented each candidate in a neutral way, the disparate nature of the events would likely be viewed as expressing a preference for, and providing a benefit to, a particular candidate.

In Revenue Ruling 2007-41, the IRS also provided guidance on when a 501(c)(3) organization may be able to host a candidate debate or forum for the purpose of educating the public without running afoul of Section 501(c)(3).  The facts and circumstances the IRS has identified as relevant to determining whether a forum or debate involving candidates constitutes political campaign intervention include:

  • “Whether questions for the candidates are prepared and presented by an independent nonpartisan panel,”
  • “Whether the topics discussed by the candidates cover a broad range of issues that the candidates would address if elected to the office sought and are of interest to the public,”
  • “Whether each candidate is given an equal opportunity to present his or her view on each of the issues discussed,”
  • “Whether the candidates are asked to agree or disagree with positions, agendas, platforms or statements of the organization,” and
  • “Whether a moderator comments on the questions or otherwise implies approval or disapproval of the candidates.”

In addition, the organization should be careful to publicize any such event broadly and to avoid intentionally filling the audience with individuals that favor or oppose a particular participating candidate.  It should also select a neutral moderator who is aware of the campaign intervention prohibition and who will be able to treat the candidates fairly.  Finally, the organization should announce a disclaimer at the event that the views shared by the candidates are not those of the host organization and should avoid any post-event publications that contain ratings or evaluations of the candidates’ performances.

For more information, see Alliance for Justice’s advocacy resource, Rules of the Game: A Guide to Election-Related Activities for 501(c)(3) Organizations.

TWEETS OF THE WEEK

Nonprofit Tweets of the Week – 5/13/16

Brazil

This week was marked by Brazil’s suspension of its President and attention to the country’s worst economic crisis in 80 years. Have a listen to Antonio Carlos Jobim’s Brazil while perusing our curated nonprofit tweets of the week:

  • IRS: Many #tax-exempt organizations face a May 16 filing deadline http://go.usa.gov/cueRw … [Ed. Form 990 series calendar year filers.]
  • Venable Nonprofit Law: House and Ways Committee approves measure to block IRS from collecting data on #nonprofit donors via Morning Consult 
  • Nonprofit Quarterly: How will these new laws for #PRIs change the competitive playing field for #philanthropy? NPQ
  • Alex Daniels: They’ve taken the wall down but I haven’t seen the Calvary ride in-@darrenwalker on regs to encourage #impinv #MIE16 [Ed. See also Foundation CEOs Struggle to Boost Mission Investing, Chronicle of Philanthropy.]
  • Bridgespan Group: #BigBetPhilanthropy can measurably change lives. Here’s where it can make a difference: http://bspan.org/1Wbrpym
  • Philantopic: 7 Hopeful Trends in #Philanthropy http://ow.ly/GgOh3006yKo @nonprofitwballs @geofunders
  • Gene: Nonprofits operating in China – ICNL & Pillsbury Law grantmaker treatment unknown
  • Lucy Bernholz: How did #citizensunited change #NPO sector? 60% of politically active social welfare groups founded since 2010 http://darkmoneywatch.org/
  • Fortune: What businesses can learn from nonprofits
  • The White House: “Change is the effort of committed citizens who hitch their wagons to something bigger than themselves, and fight for it every single day.”
CALIFORNIA LAW   CURRENT AFFAIRS & OPINION

California’s Dangerous Nonprofit Warning Label Bill – AB 2855 – Set Aside by Appropriations Committee

Hold

5/12/16 Update: Costly bill that would require charities in California to post a “warning label” on their own websites and fundraising documents set aside to suspense file by Assembly Appropriations Committee

AB 2855 is a dangerous bill that threatens nonprofits raising funds in California and reflects several Assemblymembers’ lack of understanding of the nonprofit sector’s work, influence, and scope, and how nonprofits are regulated. If this bill passes, it will rank among the worst laws in the country in its characterization and treatment of nonprofits. The bill was considered the Appropriations Committee on May 11 and appears to have been set aside to its suspense file.

While the bill is in suspense, it’s not dead. The Appropriations Committee Chair Lorena Gonzalez (D-San Diego) has until May 27 to decide whether to move the bill out of the Appropriations Committee and to the Assembly floor. If you oppose the bill, you should contact her (see contact information below). You can access the May 11, 2016 Bill Analysis for the Appropriations Committee (which includes the comment “unduly onerous”) here.

For more information about the dangers of bills like AB 2855, read our Senior Counsel Erin Bradrick‘s article The Ongoing Overhead Myth and the Dangers of Overly Zealous State Legislators in The Nonprofit Quarterly (4/14/16).

Over 600 nonprofits have actively voiced their opposition to AB 2855, and no organization or entity has supported the bill yet it hasn’t died because of the the author/sponsor of the bill, California Assemblymember Jim Frazier (D –Oakley), and members of the consumer protection-focused Assembly Committee who voted in favor of the bill – Ian Calderon (D–Whittier), Ed Chau (D-Monterey Park), Jim Cooper (D-Elk Grove), Mike Gatto (D-Los Angeles), Matt Dababneh (D-Encino), and Evan Low (D-Silicon Valley) – possibly more as a sign of collegial support and less on its merits and constitutionality.

It’s critically important for many more nonprofits to make their voices heard and to support sector advocates like CalNonprofits. If you haven’t already, please take this opportunity to join the list organizations opposed to the bill:

1. Contact Assemblymember Lorena Gonzalez, who chairs the Assembly Appropriations Committee, and let her know that you oppose this bill and that it will harm nonprofits. It’s easy to call her Capitol office at (916) 319-2080. Or you can email her office at: assemblymember.gonzalez@assembly.ca.gov

 

2. Contact your own Assemblymember with the same message! Check here to find out how to contact your Assemblymember.

Background of the Bill – Mandated Overhead Disclosures

AB 2855 originally was drafted to require charities operating or engaging in charitable solicitations in California to post their administrative overhead expenses or a link to such information on each and every one of their web pages and on the first page of each and every fundraising document.

Requirements of the ‘Warning Label’ Bill

Likely because of Constitutional issues related to compelling such speech, AB 2855 was amended to delete the overhead disclosure requirement and replace it with a requirement for charities to include what CalNonprofits terms a warning label, more specifically:

  1. a required prominent link on charities’ websites to “the Attorney General’s Internet Web site which contains information about consumer rights and protections and charity research resources”; and
  2. the Web site address of such Attorney General’s Internet Web site on all charities’ fundraising documents (including old ones) used to solicit in California.

AB 2855 would require hundreds of thousands of charities operating or engaging in charitable solicitations in California (regardless of what state in which they are based) to put a link to a California Attorney General website with unknown content that would also be freely available to the public without such link. And it would require those charities to put the Attorney General website address on tens of millions of fundraising documents that are distributed within California.

First Amendment Issues

A general principle of the First Amendment requires a court to review any government regulation of the content of a person’s or organization’s speech with strict scrutiny. Generally, this involves asking two questions:

  1. Does the regulation further a compelling governmental interest?
  2. Are the means used narrowly tailored to accomplish that governmental interest?

The government’s interest, according to the Legislative Analysis, is “to give consumers more information about how to research a charity before making a gift ….” The additional substantive information would be required of, and provided by, the Office of the Attorney General. Such information would be accessible to the general public without requiring charities to add any information to their communications. But advocates of the bill appear to be making an argument that giving consumers an easier time to find such information on a government web address is the compelling government interest requiring the consumer protection ‘warning label’ on what would amount to tens of millions of documents.

Requiring hundreds of thousands of charities fundraising in California to include such website addresses and links on all of their websites and fundraising documents will require much work. It’s difficult to see how proponents of the bill will claim that the bill is narrowly tailored particularly in relation to the rather narrow goal of making information on the Attorney General’s website easier for the general public to find. It would be the first law of such nature governing charities in the country and a strong signal of the state government’s distrust of the charitable sector based on a minuscule fraction of charities involved in scandals picked up by the media. It essentially would put charities in the same category as tobacco companies that are required to put a warning label on their products. And it would undermine the incredibly valuable work of the charitable sector, the sector most trusted by the public.

The U.S. Supreme Court dealt with content-based regulation of speech in a charitable solicitation context in Riley v. National Federation of the Blind, 487 U.S. 781 (1988). In Riley, the Court held that the North Carolina Charitable Solicitations Act was unconstitutional content-based regulation of speech. Members of the Assembly Committee should be fully aware of this case and how the Supreme Court protects free speech before voting on compelling the speech of nonprofits in the manner described by AB 2855.

Imagine if all states had the same requirements. Every charity raising funds in all states would have 50 links to include on their website and on all of their national fundraising documents.

Opposition

See CalNonprofits letter to Assemblymember Lorena Gonzalez, Chair, Appropriations Committee:

The impact of AB 2855 – and thus any effort to ensure compliance with its requirements – would be far-reaching. AB 2855 would require every charity to include what feels to nonprofits like a “warning label” on their website in a “prominent” location and also requires nearly every document they produce to direct donors and others to the state’s top law enforcement’s website. Mandating content in the ways proposed by AB 2855 would be expensive and burdensome, and would detrimentally interfere with nonprofits’ ability to communicate with their constituents and the public. AB 2855 arguably compels speech in an unconstitutional manner by dictating specific content to be included on nonprofit websites and documents and seems ripe for challenge on this basis.

See CalNonprofits revised letter to the Honorable Ed Chau, Chair, Assembly Privacy and Consumer Protection Committee:

The AG’s office is already communicating this information to the public – their web site is the first listing in a Google search for “California charities.” Burdening nonprofits in and beyond California with required speech on “any document” which seeks donor support to simply advertise what the public can easily find is unnecessarily punitive without serving any compelling public interest. Imagine all the “documents” that non-profit organizations create to solicit funds to support their mission-based work: signs on coin collection jars, private letters to individual donors, billboards and other large-scale outdoor advertisements, flyers posted in laundromats, neighborhood association newsletters, to name just a few. And AB 2855’s provisions would apply to any charity – regardless of where they are based – that solicits donations from Californians. So, every inbound piece of mail from any charity in the world would have to include this unnecessary disclosure. The additional cost of including this provision on “any document” would be extraordinary.

Also see the Opinion piece by Tim Delaney, chief executive of the National Council of Nonprofits, in The Chronicle of Philanthropy:

The bill, as amended late last week, would force every nonprofit in the country that seeks funds in California to put a link on its home page – plus a disclosure on all other solicitation materials directing potential supporters to  the California Attorney General’s Office.  That office is instructed to provide “information about charities, informational materials containing consumer rights and protections and charity research resources to allow donors to become informed about a charity before making a decision to give.” Such legislative  language puts nonprofits at the mercy of an elected partisan’s changing views on what’s “appropriate” on such things as overhead, compensation, and advocacy – as well as which charitable causes are worthy. It probably will prompt copycat legislation in other states, transforming nonprofit website homepages into huge advertisements for the offices of state charity regulators, rather than the mission of the actual nonprofit.

Burdens and Costs to the State Government

AB 2855 will create substantial burdens for the State’s Office of the Attorney General in developing a website with appropriate information on how to research a charity (a very complex matter approached in myriad ways by grantmakers), developing regulations related to the law (including determining the minimum contacts required to fall within AB 2855 – e.g., a “donate” button on a passive website clicked by 5 California residents?), educating the public about the law and its associated regulations, re-designing registration and registration renewal forms, enforcing the law in audits, defending litigation on the constitutionality of the law (which would be expected in light of the almost universal opposition by the nonprofit sector).

ADVOCACY & LOBBYING   EMPLOYMENT LAW / VOLUNTEERS   IRS & FEDERAL TAX ISSUES

Employee Endorsements & Election Activities

Vote political elections icons. Illustrations for campaign leaflets, web sites and flayers.

 

As we’ve previously written in the first post of this series, 501(c)(3) organizations are prohibited from engaging in or sponsoring activities that intervene in a political campaign for public office.  However, this does not mean that all individuals associated with such organizations, including employees, volunteers, officers, and directors, are similarly prohibited from engaging in electioneering activities.  Individuals do not give up their First Amendment rights simply by associating with a 501(c)(3) organization, and organizations should be careful to avoid placing unnecessary (or impermissible) restrictions on such individuals’ activities.

Rather, a 501(c)(3) organization should adopt carefully-thought-out written policies regarding the use of the organization’s name, its resources, and staff time in connection with individuals’ personal activities.   First and foremost, a 501(c)(3) organization should put into place practices to ensure that none of its assets or facilities are used in connection with an individual’s electioneering activities.  This includes not only the organization’s funds, but also its telephones, computers, email accounts, letterhead, mailing lists, and copy machines, as well as other resources.  The organization should also generally ensure that any compensated staff member does not use time on the job for such activities and should avoid using organizational events or other platforms for announcing individuals’ electioneering activities.

A 501(c)(3) organization may also wish to use disclaimers itself and to encourage associated individuals to do so, as well.  For example, when engaging in permissible nonpartisan election-related activities, the organization should consider including written disclaimers in any materials and oral disclaimers at any event stating that the organization itself cannot and does not endorse or oppose candidates for elective office.  Individuals associated with 501(c)(3) organizations should be requested to include disclaimers making clear that statements they make in their individual capacities in support of or in opposition to candidates for elective office are their own and do not reflect statements made on behalf of the organization.  And if the individual’s affiliation with the organization is included as part of any electioneering statement by that individual, it should be made clear that it is for identification purposes only and is not intended to reflect action on behalf of the organization.

Keep in mind that a 501(c)(3) organization cannot do something indirectly through its employees or volunteers that it could not do directly itself.  It also may not send internal messages or communications to its employees or volunteers, such as alerts as to which candidates are best aligned with the organization’s mission and should therefore be voted for, that it could not send more broadly.

For more information, see Alliance for Justice’s advocacy resource, Rules of the Game: A Guide to Election-Related Activities for 501(c)(3) Organizations.

TWEETS OF THE WEEK

Nonprofit Tweets of the Week – 5/6/16

Medieval knight with sword in armor as style Game of Thrones in Winter Rock Landscapes

I attended the Northern California Planned Giving Council Annual Conference this week, which was also marked by the return of Jon Snow. Have a listen to the GoT cast put lyrics to the show’s theme song while perusing our curated nonprofit tweets of the week:

  • Nonprofit Times: #California #charities pan philanthropic ‘warning label’ – http://ow.ly/4nnCZT
  • CalNonprofits: Latest to join 600+ nps Oppose Letter #AB2855 : @CaliforniaPTA and Coalition CA Welfare Rights. Full list,fact sheet
  • Gene: Issues to Consider When Making and Accepting Gifts of Restricted Stock PGDC
  • Stacy Palmer: Well worth a read: @philCEP piece on @Philanthropy: 5 Issues Foundations Must Confront to Stay
  • Nell Edgington: Day 2 of #2016GEO was about racial equity and philanthropy. @TristaHarris gives you the recap: http://ow.ly/4npwHA
  • Gene: Does the IRS need that information? Schedule B, Form 990 (donor information) Politico
  • National Council of Nonprofits: Lessening the Burdens of Government as a Basis for Tax Exemption under IRC Section 501(c)(3) IRS
  • Sandra Feinsmith: Use Your Form 990 for More than Just Government Compliance ABILA
  • DBR Impact: ICYMI: Revised Model #BenefitCorporation Legislation authored by partner Bill Clark is now available here
  • Nonprofit Quarterly: Four dangerous trends in impact investment: NPQ
TWEETS OF THE WEEK

Nonprofit Tweets of the Week – 4/29/16

Lincoln Memorial

This week, Erin’s been in Washington DC attending Georgetown Law’s Representing and Managing Tax-Exempt Organizations Conference (#NPGTEO16). Have a listen to Grace Potter and the Nocturnals’ Treat Me Right (featuring DC’s Ron Hollaway) while perusing our curated nonprofit tweets of the week:

  • Nonprofit Quarterly: Douglas Rushkoff proposes new business model for companies to be benefit corporations or best of all, #nonprofits. The Sustainability Prerogative: Nonprofits in the Future of our Economy NPQ
  • Nonprofit Law News: Program Related Investments: Final Regulations http://bit.ly/234JJHM | by @seyfarthshawllp
  • La Piana Consulting: New merger series explores key issues, from merger basics to org culture & communications http://ow.ly/10jNXN
  • Haas, Jr. Fund: #Philanthropy can help create a stronger democracy. Six takeaways from California in new #BolderTogether report
  • Jan Masaoka: Interesting! Behind those “dream house” #raffles quotes @CalNonprofits Priceonomics
  • CompassPoint: Unpacking a #nonprofit buzzword: What is a #TheoryOfChange and how can you use it? http://ow.ly/4nd2C2
  • Nonprofit Quarterly: Here are 10 ways Collective Impact gets it wrong: NPQ
  • Charles Keidan: China: The overseas NGO law returns, with a new strategy – Alliance magazine
  • Andy Ho: China Approves Strict Control of Foreign NGOs http://nyti.ms/1qWXw78 via @nytimes
  • Erin Bradrick: IRS Counsel states donor advised funds are high priority and are getting serious reflection right now for further guidance #NPGTEO16
  • Hugh M. Robert: CHARITY Act (S. 2750) unlikely to move fwd due to election year, Senate staffers suggest. #NPGTEO16
ADVOCACY & LOBBYING   EVENTS

Nonprofit Radio: Election Year Advocacy

Headphones silhouette against On-Air sign symbolising a podcast broadcast.

I’ll be on Nonprofit Radio this Friday at 10:30 am PT / 1:30 pm ET discussing What’s Permissible Advocacy with host Tony Martignetti. Catch us live on Talking Alternative or a few days later on iTunes.

How much can your nonprofit participate in the presidential election? Can you educate? Endorse? Lobby? Gene Takagi walks us through what’s allowed; disallowed; and questionable.

Who Should Engage in Advocacy?

All of us who work for nonprofits are advocates of our organizations and the communities they serve. Fundraisers know this. But the role of advocacy needs to be further embedded on all levels of a nonprofit starting with the board. We should also ensure we’re communicating not only with prospective donors but also with the broader public. And we can’t forget about policy makers who create the rules and the playing field we operate in. Let’s remember that all of the most important public policies we hold dear to us – civil rights, women’s rights, disability rights, education, health, religion, environmental protection, animal welfare, etc. – result from strong nonprofit advocacy and not just individual leaders.

Potential Areas of Advocacy

  • Proposed cut in budget or public services to the people you serve
  • Proposed change in a law that will affect your core mission and the people you serve
  • Proposed change in law that will affect your organization’s ability to operate or fundraise

Some Permissible Forms of Advocacy for Public Charities

  • Stating the organization’s position on a public policy issue
  • Educational activities (including educating lawmakers and even candidates if done appropriately in a nonpartisan manner)
  • Lobbying (attempting to influence legislation – bills and laws made by legislative bodies), within certain limits which can be fairly generous, particularly for charities making the 501(h) election
  • Advocating a change in administrative regulations

Some Impermissible Forms of Advocacy for Public Charities

  • Endorsing a candidate for public office (including by providing a link to a candidate’s website)
  • Contributing to a candidate
  • Using organizational resources to support a candidate (including use of organizational emails)
  • Getting a candidate to endorse the organization’s agenda
  • Evaluating or grading the candidates’ positions

Some Tricky Areas to Approach Cautiously

  • Issue advocacy (generally okay) that may appear to be timed with an election
  • Legislative scorecards that may appear to be timed with an election
  • Praising, honoring, criticizing an incumbent who is also a candidate
  • Voter education (debates, forums, guides, candidate questionnaires) implemented in what may appear to be a partisan manner
  • Social media likes, favorites, follows, and third party comments related to candidates

Resources

Everyday Advocacy, National Council of Nonprofits

Policy & Advocacy, Independent Sector

The Do’s and Don’ts of Electoral Advocacy, NAEYC

Electoral Activity, Bolder Advocacy (Alliance for Justice)

 

 

ADVOCACY & LOBBYING   IRS & FEDERAL TAX ISSUES

The Electioneering Prohibition: A Closer Look

A night shot of the eastern facade and dome of the US Capitol in Washington, DC.

With the election year in full swing, many nonprofits have questions regarding the scope of permissible election-related and lobbying or advocacy activities organizations recognized as exempt under Internal Revenue Code Section 501(c)(3) can engage in.  This post will be the first in a series discussing these issues.

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As most 501(c)(3) organizations are well aware, they are prohibited from engaging in any electioneering activities.  This prohibition comes from the language of Section 501(c)(3) itself, which describes an organization exempt under that Section as one that “does not participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of (or in opposition to) any candidate for public office.”  The general idea is that an organization is not operated exclusively for one or more exempt purposes within the meaning of Section 501(c)(3) if it engages in activities intended to impact the outcome of an election.  But what does this language really mean in practice?

In simple terms, a 501(c)(3) organization may not directly or indirectly engage in or sponsor any activity that supports or opposes any candidate for public office.  A “candidate” for purposes of this prohibition includes “an individual who offers himself [or herself], or is proposed by others, as a contestant for an elective public office…”.  The prohibition applies not only to declared candidates, but also to third-party movements and efforts to encourage or discourage someone from running for office.  “Public office” for these purposes refers to any position that is filled by a vote of the people.  This includes elected offices at the local, state, and federal level, as well as party nominations, and is not limited only to partisan positions.  However, it does not extend to appointed public official positions, such as some judges and executive nominees (although note that activities related to such appointments may constitute lobbying if the appointments are subject to legislative confirmation).

The prohibition on election intervention includes publishing or distributing written statements or making oral statements on behalf of or in opposition to a candidate, including on social media.  It also includes using any of the organization’s resources to support or oppose a candidate, such as by making a contribution to a campaign, preparing a research report for the use of only one campaign or certain campaigns, or sharing the organization’s mailing list with a specific campaign for free.  However, it generally also includes less obvious activities, such as coordinating activities with a campaign, distributing campaign materials at an organizational event, or using code words in a communication to refer to a candidate other than by name.

In determining whether a particular action constitutes impermissible electioneering, the IRS will look at the all of the relevant facts and circumstances.  While there is no clearly established test that will be used, the IRS has indicated that the factors it may consider in determining whether a particular communication constitutes prohibited electioneering include:

  • Whether it identifies a candidate for public office or a candidate’s position on an issue that is the subject of the communication
  • Whether it expresses approval or disapproval for a candidate’s position or actions
  • The timing of the message and its proximity to an election
  • Whether it makes reference to an election or voting
  • The targeted audience, including whether it targets voters in an election
  • How the message relates to candidates’ and political parties’ communications, and whether it discusses an issue that has been raised as distinguishing candidates for a given office
  • Whether it is part of an ongoing series of communications by the organization on the same issue that are made independent of the timing of any election
  • Whether the timing of the communication and identification of a candidate are related to a specified event other than an election (such as a scheduled vote on legislation)

If a 501(c)(3) organization engages in any amount of prohibited electioneering, it runs the risk of having its tax-exempt status revoked by the IRS, either permanently or for a specified period during which the activities occurred.  The IRS also has the authority to impose a tax of 10 percent of the expenditure associated with the electioneering activities on the organization and a tax of 2.5 percent on organizational managers who knowingly and willfully approved a prohibited expenditure, up to a total of $5,000.  If the IRS does impose either tax and the expenditure is not corrected within the appropriate period, an additional tax of 100 percent of the prohibited expenditure may be imposed on the organization and an additional tax of 50 percent may be imposed on the individual managers, up to a total of $10,000.

Although 501(c)(3) organizations must be careful to avoid engaging in prohibited campaign intervention, not all election-related activities are completely prohibited for such organizations.  We will discuss certain permitted nonpartisan election-related activities that can be engaged in (if done carefully) without jeopardizing an organization’s exempt-status in additional blog posts in this series.

* Please note that the posts in this series are intended to address some of the federal tax law issues that may apply to organizations recognized as exempt under Internal Revenue Code Section 501(c)(3).  However, they do not address other potentially applicable legal, registration, or reporting requirements, including, but not limited to, state tax law issues, federal election law, or state and local election laws, which are currently beyond the scope of this blog.  Organizations should be aware of all applicable laws, rules, and requirements and ensure appropriate compliance.