Washington (April 29, 2004) -- Charities must be careful that their efforts to educate voters comply with the Internal Revenue Code requirements concerning political campaign activities, or they risk losing their tax-exempt status, a presidential election-year advisory warned.

The IRS issued a reminder this week that organizations described in Section 501(c)(3) of the code that are exempt from federal income tax -- such as charities, educational institutions and religious organizations, including churches -- are barred from participating or intervening in any political campaign on behalf of, or in opposition to, any candidate for public office.

These groups can't endorse candidates, make donations to their campaigns, engage in fund raising, distribute statements, or be involved in any activities that may be beneficial or detrimental to any candidate. Even activities that encourage people to vote for or against a particular candidate on the basis of nonpartisan criteria violate the political campaign prohibition, the IRS said.

Groups that engage in such activities risk losing their tax-exempt status and could be subject to an excise tax on the amount of money spent on the prohibited activity, the IRS said. In addition, contributions to organizations that lose their Section 501(c)(3) status because of political activities aren't deductible by the donors for federal income tax purposes.

As an example, the IRS said organizations may sponsor debates or forums to educate voters, but if the debate or forum shows a preference for or against a certain candidate, it becomes a prohibited activity.

-- WebCPA staff

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