Under IRS regulation 501(c)(3) nonprofits, such as PTA, are governed by specific rules that carry severe penalties if violated. The basic IRS rule is that any political intervention is prohibited under the Internal Revenue Code (IRC). According to section 501(c)(3), nonprofits get and keep their tax exemption only if they do "not participate in, or intervene in [including the publishing or distributing of statements], any political campaign on behalf of [or in opposition to] any candidate for public office." If a charitable organization engages in a political campaign activity, it becomes classified as an action organization and may be disqualified for tax-exempt status.

Nonprofits may not intervene in partisan political campaigns. The IRS and other federal agencies take this very seriously. Violation of it can lead to retroactive revocation of the organization’s 501(c)(3) status (temporarily or permanently), with the organization becoming liable for any resultant taxes. Additional penalties include a 10 percent tax on any political expenditures and a 2.5 percent tax levied against the managers who approved such expenditures. It isn’t always easy to conform a PTA’s conduct to federal tax laws while exercising First Amendment rights. For PTAs, though, federal tax laws concerning political activities should take precedence.

Following are some activities permitted and some prohibited by 501 (c)(3) nonprofits. Even the permitted activities should be undertaken only with extreme caution. The IRS takes this very seriously and says it has "zero tolerance" for political activity on the part of section 501 (c)(3) organizations.

PTAs concerned about specific issues are allowed to use an election to get increased exposure for their issues. They also are allowed to work to get their positions on issues included in political party platforms. While nonprofits are free to publicize their issues, they are not allowed to directly solicit candidates to support such issues.

Although the IRS says it allows 501(c)(3) organizations to deal with moral, social, or economic issues during election years, nonprofits are not allowed to engage in political intervention by using "code words" (e.g. conservative, liberal, anti-gun) in communications that are timed to help or hurt the election chances of any candidate.

1. Must be designed solely to educate the public about the importance of voting
2. Must not show any bias for or against any candidate or party

PTA can encourage people to participate by mentioning key issues in the election as long as its presentation of the issues does not take advantage of any differences between the candidates’ positions on the issues. PTA must present enough relevant facts to permit the public to form its own opinion or conclusion concerning the candidates.

1. Give candidates a questionnaire that solicits brief statements about each candidate’s position on a wide range of issues
2. Select the issues solely on the basis of their importance and interest to the electorate as a whole
3. Publish all responses in a voters’ guide generally made available to the public
4. Have the content and structure of both the questionnaire and voters’ guide show no bias or preference regarding any candidate’s views

Doing any of the following can place a PTA at risk:

1. Not printing candidates’ answers completely
2. Paraphrasing candidates’ answers
3. Getting the candidates’ views from anywhere other than the questionnaire
4. Summarizing the candidates’ positions on issues

PTAs may financially contribute to an issue campaign or ballot measure or, if PTAs take the lead on this activity, they may accept contributions from outside organizations. In either case, such funds may not be used solely for lobbying purposes. Money must be used to promote a variety of activities. In addition to lobbying, funds should be used for educating the public on the issue and organizing members.

PTAs that engage in issue campaigns or ballot related activities must keep appropriate financial records and comply with state and local reporting requirements. State law should be consulted before any of these activities are pursued.

School System Budgets.  In the state of Connecticut, PTAs can speak out and endorse (or oppose) initiatives such as a school system budget.  The exception to this is if the school budget goes to referendum. State Election law limits the time period during which you may endorse (or oppose) a school system budget that is part of a referendum question. Please contact our office directly for further details.

Myths & Urban Legends About Nonprofits

It is worth noting that some common assumptions about nonprofits are actually more like urban legends. Like the legendary alligators in New York sewers, these stories have been passed along through so many people they've gained a measure of credibility just by their longevity.

"Nonprofits can't make a profit."
The IRS guidelines clearly state that any profits can't be simply distributed to board members (as corporate profits are to shareholders), but they don't say that nonprofits can't have profits. In fact, surpluses ("profits") are needed
by nonprofits to even out their cash flows, to provide reserves for emergencies, and to allow them to pay for equipment, research, staff development, building renovations, and other necessary investments.

"Nonprofits can't charge for their services."
In fact, many nonprofits exist solely or mostly on fees charged, such as nonprofit preschools that charge tuition, or community choirs that sell tickets to their concerts.

"Nonprofits are poorly managed compared to businesses."
It depends which business! Compared to Enron, Montgomery Ward, Webvan? In fact, nonprofits often achieve growth rates well above for-profit companies of comparable size, and do so while undercapitalized, highly regulated, and still with the highest of ethical standards.

"Nonprofits can't lobby."
Nonprofits cannot engage in any electoral activity-they can't support or oppose candidates. However, they can support or oppose ballot measures (such as for public school bonds or against new immigration laws). In addition, nonprofits can encourage legislators to support or oppose various pieces of legislation-as long as such lobbying activities are an "insubstantial" part of their activities. (More good info at www.independentsector.org/clpi/index.html, Charity Lobbying in the Public Interest.)

"A nonprofit budget has to be balanced."
In fact, in some years a nonprofit will want to budget for surpluses, such as to create a cash reserve, or to save up for new equipment. In other years the same nonprofit might budget a deficit, for example, to do one-time programs with windfall money, or to invest in a new fundraising director, or a publicity strategy. Over time, the financial goal of a for-profit is to maximize profits; the
financial goal of a nonprofit is to sustain sufficient working capital for program continuance and strategic choices.

"Nonprofits aren't important economically."
Surprisingly, nonprofits generate 6% of the US GDP (gross domestic product), and employ 1 in every 14 American workers. Nonprofits mobilize the efforts of an army: 83.9 million adults volunteer 15.5 BILLION hours each year for the community and public benefit. This is equivalent of 7.7 million full time staff. In comparison to this 7.7 million staff, the total active military personnel in all services (Army, Navy, Marines, Air Force) is 1.4 million!

Myths & Urban Legends - Courtesy: BOARD CAFE
The Newsletter Exclusively for Members of Nonprofit Boards of Directors (http://www.boardcafe.org)

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