Not Even a Peep? The Regulation of Political Campaign Activity By Charities Through Federal Tax Law

Abstract

Under current law, charitable organizations qualify for exemption from federal income taxation only if they do not participate to any degree in political campaigns on behalf of (or in opposition to) candidates for public office. The Internal Revenue Service has begun to examine the political activities of charitable and religious organizations (including churches) with heightened scrutiny. This Article first surveys the statutory, administrative and case law governing the political campaign activities of charities. Next, this Article identifies and critically analyzes the major rationales for prohibiting tax-exempt charitable entities from participating in electoral politics. These rationales are evaluated, for the first time in the academic literature, through the perspective of a recently advanced theory of the taxation of charitable entities and their donors. After concluding that none of the rationales necessarily justify the absolute prohibition of participation in political campaigns by charities, this Article explains why some charities should be permitted to participate in political campaign activity without adverse tax consequences. Finally, this article proposes several statutory modifications that both relax the current ban on engaging in electoral politics and guard against the private exploitation of charities through political activity.

Keywords: Tax-exempt organizations, charitable organizations, political campaign, church, section 501(c)(3), political activity, political expenditures