Snapshot Summary: Charity Fraud Awareness Week 2024
11.30.2024 | Linda J. Rosenthal, JD
We’re now at the fifth installment of our special series of tiny morsels of advice and information on the main challenge facing 501(c)(3) organizations in election season; namely, avoiding the dreaded “Johnson Amendment.”
In The Johnson Amendment: Bite-Sized Morsels for 2024 (January 24, 2024), and Morsels First and Second, we set the stage. The so-called “politics ban” is real and can have serious consequences if violated. But it’s not a big scary monster that gobbles up anything and everything that can arguably be described as “political” or related to “politics” or to “politicians.”
It’s simply a sentence fragment – added under dubious circumstances in the waning hours of the Senate vote in 1954 to overhaul the federal tax code. To qualify for the charitable tax exemption, an organization may 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.” [bolding added in 1986].
There is wiggle-room galore in those 31 words: These exceptions and exclusions are wide enough to drive a truck through. Most notably: If there’s no “campaign” by a “candidate” for “public office,” there’s no Johnson Amendment problem. The best strategy for the charitable community in the months ahead leading up to November 5, 2024, is to steer way clear of that tiny bullseye of the Johnson Amendment: Head for an escape hatch.
In Morsel Third, we highlighted the best escape hatch of all: “lobbying.” If an organization is “attempting to influence legislation,” it is not participating or intervening in a political campaign. The sentence fragment just before the Johnson Amendment makes clear that an organization will qualify for 501(c)(3) exempt status so long as “… no substantial part of [its] activities … is carrying on propaganda, or otherwise attempting, to influence legislation (except as otherwise provided in subsection (h)….”
“A 501(c)(3) organization may engage in some lobbying, but too much lobbying activity risks loss of tax-exempt status,” according to the IRS at its “Charities and Nonprofits/Lobbying” website page. “Lobbying” is the IRS shorthand for “attempting to influence legislation.”
In Morsel Fourth, we explored more about the items that are viewed as “attempting to influence legislation”; hence, outside the scope of the Johnson Amendment ban. Among them are “activities in support of, or opposition to, ballot referendums, or constitutional amendments.” They are viewed as “lobbying” even though they are “approved or rejected in the context of a ballot-box choice.”
This is a big deal.
Anyone even casually following the news is aware of the growing list of ballot measures in the November election around the nation. Many relate to highly charged social issues. It’s altogether likely that one or more of these initiatives will drive so many voters to the polls that it may tip the scales in candidate races, too.
“Ballot measure advocacy can be an important tool for public charities to help create better laws for the communities they serve. Ballot measures are often used to tackle issues not adequately resolved by current state policy or that elected representatives may be hesitant to sponsor.”
In the last post, we mentioned the “resource-rich website of Bolder Advocacy” which is a program of the Alliance for Justice. Although AFJ is a decidedly progressive nonprofit, the advice and information there applies to organizations and issues across the political spectrum.
Bolder Advocacy has produced an impressive library of advice on ballot-measure advocacy by nonprofits. See Bolder Advocacy’s Ballot Measures Toolkit.
Because this election-year series is for bite-sized morsels of information only, we’re posting just the titles and links to some of AFJ/BA’s key Guides and Fact Sheets in the Ballot Measures Toolkit along with short summaries of the key points of each.
In Seize the Initiative: A Legal Guide on Ballot Measures for Nonprofits and Foundations (April 30, 2020, 39 pp. PDF) AJC/BA provides a comprehensive discussion of this topic including:
Perhaps the most important part of this Guide is “Section V: Ballot Measure Advocacy: A Step-by-Step Discussion of Each Stage of a Ballot Measure Campaign.” At over 20 pages long, beginning on page 17, the authors explain how a nonprofit may participate in the entire ballot-measure process or just at certain points along the way.
“As this critical form of direct democracy grows in popularity, nonprofit organizations need
to be prepared to use the resources available to them to legally and effectively “seize the
initiative.”
– Linda J. Rosenthal, J.D., FPLG Information & Research Director