IRS Probe Finds Tax Exempt Organisations Engaging In Political Activity

by Leroy Baker, Tax-News.com, New York

01 March 2006

Internal Revenue Service officials have released a report on the agency’s examination of political activity by tax-exempt organizations during the 2004 election campaign following an increase in complaints about political activities during the 2004 election cycle.

The report concluded that of 82 examinations of tax exempt organizations completed to date, nearly three-quarters engaged in some level of prohibited political activity, including churches.

Most of these examinations concerned one-time, isolated occurrences of prohibited campaign activity, which the IRS addressed through written advisories to the organizations. In three cases – involving tax-exempt organizations that were not churches – the prohibited activity was egregious enough to warrant the IRS proposing the revocation of the organizations’ tax-exempt status.

"The law does not allow charities to participate in political campaigns," commented IRS Commissioner Mark W. Everson.

"While the vast majority of charities, including churches, did not engage in politicking, our examinations substantiated a disturbing amount of political intervention in the 2004 electoral cycle. As the 2006 electoral season approaches, we are going to provide more and better guidance and move quickly to address prohibited activities," he added.

The IRS found nine cases where charities, including churches, distributed printed materials endorsing a particular political candidate, and in a further 12 cases, religious leaders were found to have used their church to encourage followers to vote for particular candidate.

In other cases charities, again including churches, were found to be endorsing candidates on their websites (15 alleged; 7 determined), placing signs on their property to show support for a candidate (12 alleged; 9 determined), giving improper preferential treatment to certain candidates by permitting them to speak at functions (11 alleged; 9 determined), and making cash contributions to a candidate’s political campaign (7 alleged; 5 determined).

The report covered the 2004 election cycle, beginning on July 30, 2004 and running through Nov. 30, 2004. The 110 tax-exempt organizations contacted by the IRS covered the full spectrum of political viewpoints.

As part of the report, the IRS unveiled new procedures for the 2006 election season, which provide additional guidance to charities regarding political activities.

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