RSM Resources

June 2007

Healthcare is a key national issue and candidates for political office are going to request to use your hospital as a staging platform for their objectives. Are you ready to respond? Your board of directors and management team need to be keenly aware of the IRS' current focus on political campaign activities.

In 2006, the IRS received 237 referrals alleging prohibited political campaign intervention by section 501(c)(3) exempt organizations. Organizations exempt from U.S. income tax under section 501(c)(3) are not allowed to participate in, or intervene in, any political campaign on behalf of (or in opposition to) any

candidate for public office. Engaging in such activity may result in loss of an organization's tax exempt status and/or the imposition of an excise tax on the organization and on the management of the organization, including its board members, trustees and officers of the organization.

IRS Report on Political Activity by Exempt Organizations
The IRS recently released its report on its examination of political activity by exempt organizations during the 2004 election year. Read the report by clicking here. Of the 82 examinations closed to date, nearly three-quarters of the organizations engaged in some level of prohibited political activity. The IRS is proposing revoking the exempt status of three of the organizations and assessing an excise tax on another.

IRS Releases Guidance on What Constitutes Political Activity
The IRS has provided additional guidance on what constitutes participating in and intervening in political campaigns. Read the report by clicking here. This revenue ruling examines 21 factual situations covering various types of activities including:

• Voter Education, Voter Registration and Get Out the Vote Drives;
• Individual Activity by Organization Leaders;
• Candidate Appearances;
• Candidate Appearances Where Speaking or Participating as a Non-Candidate;
• Issue Advocacy vs. Political Campaign Intervention;
• Business Activity (e.g., selling or renting mailing lists, leasing of office space, or acceptance of political advertising); and
  
• Web Sites and Links.

Steps to Take to Protect Your Organization, Board Members, and Management Team

1. Develop policies and procedures for addressing political activities including, but not limited to: visits by candidates; use of facilities and mailing lists by candidates, political contributions, fundraising and advertising; and activities of organization leaders.

2. Educate your board members and trustees, officers and other employees on what constitutes prohibited political activity.

3. Make available your policies and procedures on your website.

Your RSM McGladrey tax adviser is ready to protect your organization's tax-exempt status, and help you understand the complex IRS guidelines on political campaign activities.

Author: John Romano is a managing director and leads RSM McGladrey's tax-exempt practice. He focuses on providing services to tax-exempt organizations, including health care systems, colleges and universities, scientific research organizations, and many other types of tax-exempt organizations, including private foundations. If you have questions regarding this article, you can reach him by phone at 563.888.4155 or email at john.romano@rsmi.com