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September 12, 2012

Church May Have Violated IRC By Endorsing Romney For President

St. Raphael Catholic Church of El Paso Texas appears to have violated the IRC by endorsing Mitt Romney in its bulletin.  “I am asking all of you to go to the polls and be united in replacing our present president with a president that will respect the Catholic Church in this country,” the entry in the church’s August 5 bulletin says. “Please pass this on to all of your Catholic friends.”

501(c)(3) organizations are strictly prohibited for engaging in political activity under several provisions of the IRC.  The rules that apply with respect to lobbying activities are set forth in § 501(h) of the Code as well as § 1.501(c)(3) of the Treasury Regulations.  Failure to follow these proscriptions could result in loss of tax-exempt status for the institution, as well as the imposition of excise taxes on both the organization and the “management” of the organization under IRC § 4955.

Compare the strict prohibition on 501(c)(3) with the general allowance of 501(c)(4) ”social welfare organizations” to engage in political activity.  According to Treasury Regulation 1-501(c)(4)-1, a social welfare organization is one that is operated “exclusively” for the promotion of social welfare and is “primarily” engaged in promoting the common good and general welfare of the people of a community for the purpose of bringing about civic betterment and social improvements.  Despite the statement by the regulations that “the promotion of social welfare does not include direct or indirect participation or intervention in political campaigns on behalf of or in opposition to any candidate for public office,” social organizations are generally allowed to advocate a particular stance on a political issue as long as they can show that it is not their primary focus to participate directly or indirectly in political campaigns on behalf of or in opposition to any candidate for public office.

While there is some evidence that the IRS is beginning to reconsider the treatment of 501(c)(4)s now that they are being increasingly used for political activity following the Citizens United decision, they currently remain able to engage in political activity.  However, the ban on such activity by 501(c)(3) organizations is much more stringent.  Understanding that one of their members had crossed the line, the Catholic Diocese of El Paso, which oversees St. Raphael, acknowledged in an email that the entry in the bulletin was inappropriate.  “Churches and other nonprofits are strictly prohibited from engaging in political campaigning/endorsement of a particular candidate,” said Deacon Carlos Rubio, vice chancellor of the diocese. “The Diocese of El Paso is aware of this requirement from the IRS and mindful that it does not violate such norms.”

Loss of tax-exempt status can be devastating to a charitable entity and violations of the IRC can also lead to harsh punishments for those in management.  If you operate a tax-exempt entity, it is good idea to consult with a qualified tax attorney who can help you to know and understand the actions which put you and your charity at risk.