“Tell your state rep to vote for State Bill X, to protect __________!” May a Section 501(c)(3) nonprofit legally spend its money (and use volunteers) to urge enactment or defeat of pending or proposed legislation? Yes, but only through “insubstantial” lobbying, and subject to related legal constraints. For public charities, lobbying communications lie between fully permissible educational issue advocacy and prohibited political campaign activity.
President Trump recently told faith leaders that he would “totally destroy” the Johnson Amendment, referring to then-Representative Lyndon Johnson’s sponsored legislation banning churches’ and other Section 501(c)(3) organizations’ political campaign speech. As W & O attorney Ryan Oberly recently observed in Modern Healthcare’s article, the prohibition is controversial and difficult to enforce, given both the free speech and religious liberty constitutional interests at stake and the IRS’s questionable capability to enforce the law fairly. Many religious organizations have openly flaunted the ban by endorsing or speaking against candidates, leaving others to wonder whether they should follow the letter of the law despite its dubious constitutional legitimacy.
Branching Out: Of Group Tax Exemptions and Other Section 501(c)(3) Organizational Structures for Related Organizations
Many nonprofit leaders start additional organizations for visionary or other reasons, such as to pursue a new tax-exempt mission, to develop regional chapters or groups, to appeal to a broader donor base, or to better address risk management issues. Various organizational constellations may result, such as group tax exemption, integrated auxiliaries of a religious parent organization, or other related organizations that function within a range of accountability and responsiveness. Each option carries certain tax and governance implications, as follows