In late December the IRS released an announcement reminding tax exempt organizations that they must comply with both campaign finance and tax rules during an election year. The guidance, in Revenue Ruling 2004-6, focuses on those nonprofits permitted to take sides in an election and lists the facts and circumstances the IRS believes distinguish genuine issue advocacy from partisan electioneering. Six specific examples are provided. The IRS asks for comments and suggestions on questions for future guidance in this area. Charities, which are prohibited from taking sides in elections under Section 501(c)(3) of the tax code, are not discussed in the ruling. The announcement applies to social welfare groups (501(c)(4)), unions and trade associations that are permitted to “engage in only limited political campaign activity” that relates to their overall advocacy work. These groups need to distinguish between their genuine issue advocacy and communications meant to influence the outcome of elections. These specified groups must pay tax on expenses used to influence the outcome of an election that is not paid for out of a separate segregated fund (SSF). In the ruling, guidance is given to define electioneering communications as those that are: á made during a time that coincides with an election á identify a candidate á target voters in a particular election á identify a candidate’s position on an issue á distinguish the candidate’s position from others (in the communication or in the overall campaign) á not part of an ongoing series of substantially similar advocacy on the same issue. The guidance given also identifies communications that are genuine issue advocacy as ones that: á identify specific legislation or a specific event outside the control of the organization á are timed to coincide with the specific event á identify the candidate solely as a government official in a position to act on the policy or specific event á mention the candidate solely as the a key sponsor of legislation. The six examples in the ruling show how these factors apply in specific situations. They also illustrate application of tax rules to all electioneering, whether at the national, state or local level. (Federal campaign finance laws only apply to federal elections.) The text of Rev. Rule 2004-6 is on the IRS website. CAUTION: Reading the ruling may be confusing. It refers to partisan electioneering as an “exempt function under Section 527(e)(2)”, which governs political action committees. Their exempt purpose is to influence elections. Comments on situations or factors that need further guidance should be sent to the IRS c/o Judy Kindell, T:EO:RA:G, 1111 Constitution Ave. NW, Washington, DC 20224.