January 8, 2004 | Read Time: 1 minute
The IRS has released guidelines for charities and other tax-exempt groups that explain when such organizations must pay taxes on advertisements about political and social issues.
The guidance, known in tax parlance as a revenue ruling, uses six examples to explain when such spending is taxable. Revenue rulings from the IRS are designed to help the public by stating the government’s official position on aspects of tax law. According to the ruling, in general, the activities by groups classified under Section 527 of the Internal Revenue Code are taxable when they support or oppose candidates for political office. Advertising in support of an issue, such as greater federal spending for the poor, is not subject to taxes.
Charities, which are organized under Section 501(c)(3) of the revenue code, are barred from supporting or opposing any candidates for political office. Some groups, however, have affiliated lobbying groups, established under Section 501(c)(4), that may engage in politicking.
In one example, the IRS cites a Section 501(c)(4) organization that buys an ad in a state’s newspapers advocating improved health care. Because the ad identifies a specific state senator by name shortly before an election, and because it does not identify any specific, timely need for the ad, such as a piece of pending legislation, the ad is taxable, the IRS says.
Revenue Ruling 2004-6 is available online at http://www.irs.gov/pub/irs-drop/rr-04-6.pdf. It will be published in a forthcoming issue of the Internal Revenue Bulletin.
