As quickly as you can obtain 501(c)(3) tax-exempt status for your organization, you can lose it. In addition to failing to comply with annual reporting requirements, there are certain activities that can jeopardize your 501(c)(3) status. Two of the top problematic activities we see 501(c)(3) organizations participate in are “political activity” and “lobbying”.
Let’s talk about political activity. Organizations with 501(c)(3) status are prohibited from participating in any political campaign on behalf of or in opposition to any candidate running for public office. This includes contributions to campaigns and public position statements made on behalf of the organization in favor of or opposition to a candidate for public office. Easy distinctions, right? Not necessarily so. Organizations find themselves in a potential danger zone when they support or oppose certain issues that are at the forefront of someone’s campaign and directly relate to or impact the causes that the organization supports. Notably, while an organization’s leadership is not prohibited from talking about important public policy issues, in order to maintain tax-exempt status, these leaders cannot make partisan statements through official functions or publications of the organization. A large number of organizations with 501(c)(3) status are faced with this issue.
What about lobbying? This is another tricky area. If your organization contacts or urges the general public to contact legislators and/ or their staff to support, oppose or propose legislation or if your organization advocates for or opposes legislation, this is LOBBYING! And while organizations are allowed to engage in SOME lobbying, if the activities are substantial, that tax-exempt status is on the line! There is a certain test to determine if activities are “substantial”.
These are just a few examples of how you can unintentionally lose your tax exempt status while advancing your noteworthy cause. Don’t let it happen to you! Make sure your activities fully comply with the requirements for 501(c)(3) organizations. Contact us TODAY!
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