Executive Order on Electioneering by Nonprofits

A recent Executive Order (EO) purports to ease the political speech restrictions on religious organizations, but what does it really do? 

Section 2 of the EO, captioned “Respecting Religious and Political Speech,” announces the general rule: 

All executive departments and agencies shall, to the greatest extent practicable and to the extent permitted by law, respect and protect the freedom of persons and organizations to engage in religious and political speech. (emphasis added)

The EO then delves into specifics:

In particular, the Secretary of the Treasury shall ensure, to the extent permitted by law, that the Department of the Treasury does not take any adverse action against any individual, house of worship, or other religious organization on the basis that such individual or organization speaks or has spoken about moral or political issues from a religious perspective, where speech of similar character has, consistent with law, not ordinarily been treated as participation or intervention in a political campaign on behalf of (or in opposition to) a candidate for public office by the Department of the Treasury. (emphasis added)

For purposes of the EO, the term “adverse action” means:

  • the imposition of any tax or tax penalty;
  • the delay or denial of tax-exempt status;
  • the disallowance of tax deductions for contributions made to entities exempted from taxation under section 501(c)(3) of title 26, United States Code; or
  • any other action that makes unavailable or denies any tax deduction, exemption, credit, or benefit.

The phrase “to the extent permitted by law” signals that the EO is not (nor could it be) a departure from existing law. The relevant law is a federal statute: Section 501(c)(3) of the Internal Revenue Code (IRC). That section exempts certain entities from federal income tax. They are:

(3) Corporations, and any community chest, fund, or foundation, organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes, or to foster national or international amateur sports competition (but only if no part of its activities involve the provision of athletic facilities or equipment), or for the prevention of cruelty to children or animals, no part of the net earnings of which inures to the benefit of any private shareholder or individual, no substantial part of the activities of which is carrying on propaganda, or otherwise attempting, to influence legislation (except as otherwise provided in subsection (h)), and which does 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. (emphasis added)

The bold portion is the electioneering prohibition. It essentially prevents 501(c)(3) organizations from campaigning for or against political candidates. Contrary to common belief, it does not disallow all political activity by 501(c)(3) organizations (but note the lobbying proviso). Moreover, it does not apply to all candidates; it only applies to elected officials. Electioneering relative to candidates for non-elected (i.e., appointed) positions is not covered.

Organizations that violate the electioneering prohibition are vulnerable to being denied tax-exempt status or losing 501(c)(3) status that the IRS had previously granted. However, the electioneering prohibition is rarely invoked against organizations that already have 501(c)(3) status. The extent to which the rule has been used to delay or deny tax-exempt status for new organizations is not clear. 

 IRC § 501(c)(3) prohibits participation or intervention in any political campaign on behalf of (or in opposition to) any candidate for public office. Section 2 of the EO refers to the same activities, but simply directs the Treasury Department (i.e., the IRS) not to take adverse action against organizations engaging in speech that does not constitute “participation or intervention in a political campaign on behalf of (or in opposition to) a candidate for public office.” In other words, the EO simply directs the IRS not to punish speech that is already not punishable under existing law. As such, the EO represents more of a policy change than a legal change, and religious organizations would be wise not to alter their political behavior in reliance upon it.

Source: Presidential Executive Order Promoting Free Speech and Religious Liberty, May 4, 2017 (pdf)

Posted by Joel D. Roettger, JD, LLM, EPLS

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