Since the 2004 election the Internal Revenue Service (IRS) has stepped up its enforcement of the ban on partisan electoral activity by charities and religious organizations. The result has been controversial audits, questions about the standards used to decide when to investigate and the procedures used and new guidance from the IRS. This article provides summaries and links to more infomration. Background: Update: Aug. 31, 2006: IRS Drops Case Against NAACP. See our press statement Charities, educational institutions and religious organizations, including churches, are among tax-exempt organizations described in section 501(c)(3) of the Internal Revenue Code. They are prohibited from participating or intervening in any political campaign on behalf of, or in opposition to, any candidate for public office. These organizations cannot endorse any candidates, make donations to their campaigns, engage in fund raising, distribute statements, or become involved in any other activities that, directly or indirectly, may be beneficial or detrimental to any particular candidate. Even activities that encourage people to vote for or against a particular candidate on the basis of nonpartisan criteria violate the political campaign prohibition of section 501(c)(3). In 2004, the IRS created new procedures to review and fast-track enforcement action on allegations of improper political activities by 501(c)(3)s. This program was called the Political Intervention Program (PIP). On Feb. 24, 2006 the IRS released its much-anticipated assessment of its program created in 2004 to enforce the ban on partisan election activity by charities and religious organizations. The report found that nearly 75 percent of organizations investigated had violated the ban. At the same time, the agency released guidance that includes detailed examples based on the types of situations that led to investigations in 2004. While continuing to expand its educational efforts, the IRS also announced it will step up enforcement for the 2006 election cycle, releasing new procedures for expedited handling of referrals alleging violations, in an effort to end any ongoing violations. The same day the IRS released Fact Sheet 2006-17, which summarizes the IRS interpretation of the ban on intervention in elections in a variety of fact situations, covering voter mobilization and education, individual activity by leaders, candidate appearances, issue advocacy vs. political campaign intervention, voter guides, websites, business activity, and multiple or combined activities. Current Status: On June 8, 2007 the IRS released a report on the initial results of its 2006 program. The same day it also released Revenue Ruling 2007-41, which provides guidance in the form of 21 examples and explanations nonprofits can rely on in planning permissible get out the vote, voter education and mobilization activity. It is a helpful step toward providing clearer definitions of allowable and unallowable activities, but does not establish any safe harbors or bright line rules. For more information, see our Summary and Analysis of Revenue Ruling 2007-41. The results of the 2006 enforcement program to date show a continued low level of violations. While only 40 of the 100 cases selected for examination have been closed, the report provides a useful picture of the PACI program, as well as updated information on the IRS' 2004 enforcement cases. The 2006 report also details a new program that matches state campaign finance reports to the IRS database of 501(c)(3) organizations. See our Initial Findings on 2006 IRS Political Activities Enforcement Efforts Released and IRS Reports on 2006 Political Activities Enforcement Program, Releases Guidance. Issues: Although the Treasury Inspector General for Tax Administration (TIGTA)has published a report on the IRS' process for reviewing referrals alleging political campaign intervention by charities, it did not address a number of issues charities are concerned about. The report did not address whether the IRS has the authority to "fast track" these cases absent a flagrant violation of the prohibition. Additionally, the IRS currently lacks a clear set of rules defining prohibited intervention in elections, instead considering each case individually on facts and circumstances. The 2004 audits have demonstrated that the IRS seems to be blurring the lines between partisan interference and legitimate issue advocacy. The IRS should make is clear that a charity's right to criticize elected officials is not suspended because an election is taking place. Examples: IRS investigations, audits, and resolutions are secret — by law, the IRS cannot publicly comment on specific cases. Therefore, we have little details about the current examinations resulting from PIP. The organizations under investigation, however, may and do sometimes publicly disclose their audits. Following are examples of investigations as shared by the organizations.

• Friendship Missionary Baptist Church: In Feb. 2005, the IRS notified Friendship Missionary they were under investigation for engaging in political activity. The investigation stemmed from an Oct. 2004 appearance at a service by Democratic presidential candidate Sen. John Kerry. In late Dec. 2005 the IRS told Guy Lewis, the attorney for Friendship Missionary Baptist Church, that the case would be closed and resolved favorably for the church. Before the investigation, the church had reduced its formal policy regarding candidate appearances to writing, which helped convince the IRS that there was no attempt to favor one candidate over another, and therefore, no political intervention.
• NAACP: In Oct. 2004, the NAACP's received notice that an IRS audit was underway. According to the IRS, the NAACP’s tax exempt status is being challenged because NAACP Chairman of the Board Julian Bond allegedly made politically partisan remarks while speaking at the NAACP National Convention last July. The NAACP has rejected the IRS’s premise that Bond’s speech constituted prohibited campaign intervention.
• All Saints Episcopal Church: In Nov. 2004, the IRS initiated an audit into an anti-war sermon delivered during a church sermon two days before the 2004 general election. The IRS characterized the sermon as "a searing indictment of the Bush administration's policies in Iraq". The IRS offered to not pursue the case further if All Saints would admit wrongdoing and agree not to hold similar sermons in the future. All Saints rejected the offer.
• Falwell Ministries: Two complaints led to IRS investigations into allegations that the Rev. Jerry Falwell's nonprofit had violated the prohibition by publishing an endorsement of President George W. Bush in his July 2004 newsletter, the Falwell Confidential. It appears it the complaint was dismissed on the grounds of that the communication was paid for out of their 501(c)(4) nonprofit fund. Another complaint was lodged against Falwell for a speech he gave at the Southwestern Baptist Theological Seminary in which he endorsed Bush in Aug. 2004. In dismissing the complaint, the IRS seems to have given latitude for speakers at organizational events in which they are expressing personal opinions.