November 25, 2004 | Read Time: 1 minute
The IRS has ruled that a charity broke the law when it administered a payroll-deduction plan that allowed its employees to contribute voluntarily to a political-action committee.
Under federal law, charities must not participate in a political campaign in behalf of, or in opposition to, a candidate for public office. As is its policy, the revenue service did not identify the charity involved in the ruling.
The IRS said the charity, the parent organization of groups that provide health care, told employees in meetings, a newsletter, and a video featuring the charity’s president that they could contribute to the political-action committee, which endorses and supports candidates of all political parties that are backed by the hospital industry. The committee was formed under Section 527 of the federal tax code.
“While there is no evidence [the charity] has endorsed or rated candidates for public office, Section 501(c)(3) organizations may not do indirectly what they cannot do directly,” the IRS said. “Therefore, they may not provide or solicit financial or other forms of support to political organizations, or establish political action committees.”
The IRS said that, by implicitly endorsing the political-action committee and soliciting financial support for it, the charity indirectly intervened in political campaigns.
The tax agency noted that a charity’s officials can be involved in a campaign if they do not “utilize the organization’s financial resources, facilities, or personnel,” and make clear that their actions are those of the individuals and not of the organization.
However, the IRS said that the video of the charity’s president was “essentially an endorsement” of the political committee by the charity through its official (Technical Advice Memorandum 200446033).
