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Can a charity participate in a referendum on gentrification?

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Can a charity participate in a referendum on gentrification?

A local 501(c)(3) has recently placed an advisory referendum on local ballots opposing "gentrification" or the displacement of the poor by the rich in the neighborhood. The 501(c)(3) has enlisted the aide of a local university to help with the referendum. As the university’s website describes it "Each student becomes an expert on one block, providing a description and analysis of the ongoing development trends there. Student data is then collated and compiled into a master database from which [the organization] produces reports and maps to help their campaign." In addition, the 501(c)(3) has published and distributed a photo with the name of the local politician that it opposes in this matter, emphatically stating their opposition to his continued occupation of his seat on the city council. Does the university or the 501(c)(3) cross the line on proscribed not-for-profit behavior? How does the IRS distinguish between a contest between candidates and a public policy referendum?

You raise good questions. Participating in a referendum is deemed direct lobbying by the IRS, although if this question is advisory only and does not enact a specific law, it may not be deemed lobbying at all. Lobbying is permitted so long as it is not a substantial part of an charity’s activities. (See Ready Reference Page: “Lobbying Rules Create Opportunity for Charities.”) Student participation in the referendum will not jeopardize the tax-exempt status of the university and, depending on the size of the activity, may not jeopardize the charity even if it is lobbying.
If the activity crosses the line to oppose a candidate for office, the charity can have a real problem. (See Ready Reference Page: “IRS Guidance Has Not Changed on Electioneering.”) The IRS has previously ruled that universities are not involved in electioneering merely because they allow or encourage students to participate in election campaigns as part of an academic experience so long as the university does not take an official position in its own name. It sounds unlikely that the political ad will be attributed to the university.
Sunday, September 28, 2008

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