Wednesday, May 5, 2010

Pro Charter Tax Exempt Orgs Enter Political Fray - and Violate the Law

A compilation of postings from NYCEdNews Listserve for any legal eagles out there:

Received a beautiful colored flyer supporting NY State Senator Craig Johnson on Education paid for by Education Reform Now.

Nowhere is the word "Charter School" mentioned or the market forces that are supporting them. It would appear that these market forces are funding free promotions for their elected supporters. Yet when they solicit contributions to the organization, they claim they are tax-deductible. Is that legal, anyone?

This is not the first time this sort of thing has happened; remember Juan Gonzalez’s discovery that Al Sharpton’s political organization was provided funds by Harold Levy’s hedge fund, after first passing it through a 501C3?

According to Education reform Now’s 2008 Form 990 (“tax” return for non-profits) (p. 3), they’re a 501(c)3 and do not engage in “direct or indirect political campaign activities on behalf of or in opposition to candidates for public office.” ( Their website does say contributions are tax-deductible.

The IRS code prohibits 501(c)3 organizations from engaging in most forms of political activity (see below from IRS website).

You’ll need to collect the campaign flyers and file a complaint with the IRS. I believe any citizen has standing to file a complaint but I would imagine Sen. Johnson’s opponents would have more resources and motivation.,,id=163395,00.html

The Restriction of Political Campaign Intervention by Section 501(c)(3) Tax-Exempt Organizations

Under the Internal Revenue Code, all section 501(c)(3) organizations are absolutely prohibited from directly or indirectly participating in, or intervening in, any political campaign on behalf of (or in opposition to) any candidate for elective public office. Contributions to political campaign funds or public statements of position (verbal or written) made on behalf of the organization in favor of or in opposition to any candidate for public office clearly violate the prohibition against political campaign activity. Violating this prohibition may result in denial or revocation of tax-exempt status and the imposition of certain excise taxes.

Certain activities or expenditures may not be prohibited depending on the facts and circumstances. For example, certain voter education activities (including presenting public forums and publishing voter education guides) conducted in a non-partisan manner do not constitute prohibited political campaign activity. In addition, other activities intended to encourage people to participate in the electoral process, such as voter registration and get-out-the-vote drives, would not be prohibited political campaign activity if conducted in a non-partisan manner.

On the other hand, voter education or registration activities with evidence of bias that (a) would favor one candidate over another; (b) oppose a candidate in some manner; or (c) have the effect of favoring a candidate or group of candidates, will constitute prohibited participation or intervention.

The Internal Revenue Service provides resources to exempt organizations and the public to help them understand the prohibition. As part of its examination program, the IRS also monitors whether organizations are complying with the prohibition.

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