As the 2022 midterm elections approach, many nonprofits are wondering how much they can spend on political advertising without jeopardizing their nonprofit status.
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The simple answer is that nonprofits can spend an unlimited amount on political advertising, as long as the ads don’t explicitly tell people to vote for or against a candidate. Also, 501(c)(3) nonprofits can spend “insubstantial” amounts on lobbying – more on that later.
But, as with anything related to elections and campaign finance, the reality is a bit more complicated. Here’s what you need to know about spending money on political ads as a nonprofit.
Beware, getting this wrong could risk the organization’s 501(c)(3) IRS classification.
What counts as political advertising?
The Federal Election Commission (FEC) defines political advertising as any communication that clearly identifies a candidate for federal office and urges voters to vote for or against that candidate. This could be a television ad, a mailer, or even a Facebook post.
Generally speaking, if your ad mentions a candidate by name and urges people to vote (or not vote) for that person, it’s considered political advertising. There are some exceptions to this rule, but we’ll get to those later.
Now that we know what counts as political advertising, let’s talk about how much money nonprofits can spend on it. The short answer is that nonprofits can spend an unlimited amount on political ads, as long as the ads don’t explicitly tell people to vote for or against a candidate. These ads would focus more on get out the vote messaging/activities in non-partisan ways.
What if My Ad Doesn’t Explicitly Tell People Who to Vote For or Against?
Even if your ad doesn’t explicitly tell people who to vote for or against, it could still be considered electioneering if the message of your ad is clear enough. This is because the FEC has a rule that prohibits ads from mentioning a candidate within 30 days of a primary election or 60 days of a general election if those ads can reasonably be interpreted as an endorsement or opposition to that candidate.
In short, beware mentioning candidates by name in messaging unless these rules are clearly understood. More exciting information about this FEC rule: Advertising and disclaimers.
What is the difference between lobbying and political advertising?
Lobbying and political activities have two seperate sets of rules under the IRS (Political and Lobbying Activities | Internal Revenue Service). Lobbying is trying to influence specific legislation through direct contact with legislators or their staff. Political activity is trying to influence the outcome of an election, usually through campaign contributions, voter education, or get-out-the-vote drives.
They key term to understand for 501(c)(3) nonprofit organizations is the term “insubstantial”, because the IRS code states that all activities/cost must not be a “substantial” amount of the organizations work.
Sound hazy? You’re not alone. Here is the Substantial Part Test from the IRS website:
“The IRS considers a variety of factors, including the time devoted (by both compensated and volunteer workers) and the expenditures devoted by the organization to the activity, when determining whether the lobbying activity is substantial.” – Measuring Lobbying: Substantial Part Test | Internal Revenue Service.
This is why experts from The Council of Nonprofits recommends organizations planning these lobbying activities elect for the 501(h) election. Here is an awesome explanation of this process: Taking the 501(h) election | National Council of Nonprofits.
What does the IRS say about political ads?
Here is a summary of what the IRS says about political advertising: The Restriction of Political Campaign Intervention by Section 501(c)(3) Tax-Exempt Organizations | Internal Revenue Service
Not Allowed
- 501(c)(3) organizations are absolutely prohibited from participating in any political campaign on behalf of, or in opposition to, any candidate for elective public office.
- Violating this prohibition may result in denial or revocation of tax-exempt status and the imposition of certain excise taxes.
Allowed
- Voter education activities conducted in a non-partisan manner do not constitute prohibited political campaign activity.
- Voter registration and get-out-the-vote drives conducted in a non-partisan manner would not be prohibited political campaign activity.
- Voter education guides conducted in a non-partisan manner are allowed.
What Are the Requirements for Political Ad Buys?
Hypothetically, if the organization was planning on running ads supporting or opposing candidates, there are two main things you need to know about ad buys:
- You must disclose your ad buys to the FEC.
- You must make sure that your ad buys comply with certain rules set by the FEC.
Let’s start with disclosure. Under campaign finance law, any person or entity that makes an independent expenditure (IE) must disclose that IE to the FEC within 24 hours. An IE is defined as any expenditure that is made independently of a candidate or political party and that is not coordinated with a candidate or political party. In other words, if you’re running ads supporting or opposing a candidate, your ad buy must be disclosed to the FEC.
The disclosure requirements for IEs can be found in section 304 of the Federal Election Campaign Act (FECA). The required information includes the name and address of the person making the IE, the amount and date of the expenditure, and a description of the communication that was purchased. This information must be filed with the FEC within 24 hours of making the expenditure.
In addition to disclosure, IEs also have to comply with certain rules set by the FEC. These rules are designed to ensure that IEs are not made in coordination with candidates or political parties and that they are not used to funnel money illegally into campaigns. Some of these rules include:
- IEs cannot be made in coordination with candidates or their campaigns.
- IEs cannot be made using substantially similar language as a candidate’s campaign materials.
- IEs cannot use funds from a candidate’s campaign committee or political party committee.
- IEs cannot be made using corporate funds or funds from unions or trade associations .
There are other rules as well, but these are some of the most important ones to keep in mind. If you’re planning on running ads supporting or opposing candidates, you need to make sure that your ad buys comply with all of the rules set by the FEC.
Expert Sources
For more reading on this super complex topic, here are some suggested threads to explore:
- The Restriction of Political Campaign Intervention by Section 501(c)(3) Tax-Exempt Organizations | Internal Revenue Service
- IRS Compliance Guide for 501(c)(3) Public Charities – IRS
- Advertising and disclaimers – FEC
- Taking the 501(h) election | National Council of Nonprofits
- Can Nonprofits Be Involved In Political Campaign Activity?
Bonus Resource
For organizations interested in creating a quick lobbying campaign on Twitter, Politweets.org (by Whole Whale) is a free way to create a tool on your site that lets users send your message directly to representatives.
Example of the widget: