association of corporate counsel (acc) - it’s campaign season: … · 2019-03-21 · 202.719.7558...

It’sCampaignSeason:WhatCanNon-ProfitsDo?

Theseslidesareaccompaniedbyanoralpresentationandshouldnotberelieduponaslegaladvice.Copyright©2018WileyReinLLP

PresentedBy:CalebP.Burns

ThomasW.AntonucciRyanP.Meyers

July17,2018

Speakers

ThomasW.AntonucciPartner

WileyReinLLP202.719.7558

tantonucci@wileyrein.com

RyanP.MeyersDeputyGeneralCounsel

U.S.ChamberofCommerce202.463.5816

rmeyers@uschamber.com

CalebP.BurnsPartner

WileyReinLLP202.719.7451

cburns@wileyrein.com

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Topics§  Federalcampaignfinancelawapplicabletoallincorporatednon-profitorganizations.

§  Taxlawsthatapplydependingonwhethertheorganizationistax-exemptpursuantto:•  I.R.C.501(c)(3)or•  I.R.C.501(c)(4)/(6).

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FederalCampaignFinanceLaw§  Federalcampaignfinancelawplacesrestrictionsonallincorporatedorganizations.•  Theseincludefor-profitandnon-profitcorporations,and•  Incorporatedtax-exemptorganizationslike501(c)(3)charities,501(c)(4)socialwelfareorganizations,and501(c)(6)tradeassociations.

§  Notethatthisportionofthepresentationaddressesthecampaignfinancelawrestrictionsatthefederallevel.Stateandlocalcampaignfinancelawsmustbeconsultedwhenparticipatinginstateandlocalelections.

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FederalCampaignFinanceLaw:Prohibition§  Asageneralmatter,federalcampaignfinancelawprohibitstheuseofcorporateresourcesinconnectionwithfederalelections.

§  Inparticular,acorporationmaynotcontributeitsfundsdirectlyto:•  Politicalcandidates•  PoliticalpartiesregisteredwiththeFederalElectionCommission(“FEC”)

–  TheRNC,DNC,NRSC,DSCC,NRCC,andDCCC,and–  Thefederalaccountofanystateorlocalparty.

•  OtherpoliticalcommitteesregisteredwiththeFEC–  LeadershipPACsmaintainedbyMembersofCongress,and–  Othernon-connectedPACs(e.g.,ActBlue,Emily’sList,BIPAC).

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FederalCampaignFinanceLaw:Prohibition§  Acorporationalsomaynotuseitsresourcestofacilitatecontributionstotheforegoingentities.Thisincludes:•  Facilitiesandresourcesforfundraisingevents(e.g.,roomsandadministrativestaff);

•  Communications(e.g.,newsletters,intranetpostings,emails);and•  Resourcestomakecontributions(e.g.,stamps,envelopes,stafftocollectandsend“bundled”contributions).

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FederalCampaignFinanceLaw:Exceptions§  Variousexceptionshavebeencreatedbystatute,regulation,andcaselaw.•  OperateaPAC.•  Makecampaignorfundraisingcommunicationstothe“restrictedclass.”•  Hostcampaignorfundraisingeventsforthe“restrictedclass.”•  Makeindependentcampaignorfundraisingcommunicationstothepublic(CitizensUnitedv.FEC).

•  Useofcorporateresourcesforotherlimitedpurposes.

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OperateaPAC

§  APACisabankaccountintowhichacorporationsolicitscontributionsofupto$5,000fromcertaineligiblepersonsandmakescontributions–subjecttolimits–tofederalcandidates,parties,andcommittees.

§  Corporateresourcesmaybeusedtoestablish,fundraisefor,andadministeraPAC.

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CampaignandFundraisingCommunicationstothe“Restricted

Class”§  The“restrictedclass”includescertainhigh-levelemployeesof

theorganizationaswellasqualifyingmembers.§  Acorporationmayuseitsresourcestocommunicatecampaign

support–includingfundraisingsupport–toits“restrictedclass.”§  Maynot:

•  Republishcampaignmaterials(e.g.,campaignliterature,contributionsolicitations,orcontributionreplycards).

•  Facilitatecontributionsbyincludingenvelopesorstampsorpermitothercorporateresourcestobeusedtomakecontributions.

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CampaignandFundraisingEventsforthe“RestrictedClass”

§  Mayusecorporatefundsandresourcestohostaneventforacandidatetowhichonlythe“restrictedclass”isinvited.

§  Corporationmayexpresscampaignandfundraisingsupportforthecandidateandneednotprovideanequalopportunityforthecandidate’sopponent.

§  Maynot:•  Republishcampaignmaterials(e.g.,campaignliterature,contribution

solicitations,orcontributionreplycards).•  Facilitatecontributionsbyincludingenvelopesorstampsorpermitother

corporateresourcestobeusedtomakecontributions.

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CampaignandFundraisingCommunicationstothePublic

§  OnJanuary21,2010,theSupremeCourtinCitizensUnitedv.FECstruckdownthefederalstatutoryprohibitiononcorporate-fundedpoliticalspeechthatpubliclyadvocatestheelectionordefeatofafederalcandidate.

§  Thesearecalled“independentexpenditures.”•  Maynotbecoordinatedwithpoliticalcandidatesandparties;•  MustbereportedtotheFEC;and•  Includecertaindisclaimerinformation.

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CampaignandFundraisingCommunicationstothePublic

§  CitizensUnitedv.FECalsostruckdownthefederalstatutoryprohibitiononcorporate-funded“electioneeringcommunications”whichareTVorradioadsthatmerelyrefertoacandidatewithin30daysofaprimaryor60daysofageneralelectionandaretargetedtotherelevantelectorate.

§  Like“independentexpenditures,”“electioneeringcommunications”•  Maynotbecoordinatedwithpoliticalcandidatesandparties;•  MustbereportedtotheFEC;and•  Includecertaindisclaimerinformation.

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Useofcorporateresourcesforotherlimitedpurposes

§  Anyotheruseofcorporateresourcesforpoliticalactivities(e.g.,facilities,catering,transportation,employeetime)mustbepaidfor,ofteninadvanceby:•  Thecampaign,or•  ByanindividualorPACandtreatedasanin-kindcontribution(subjecttotheappropriatecontributionlimits)tothecampaign.

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Useofcorporateresourcesforotherlimitedpurposes

§  Exceptionsinclude:•  Food,travel,andlodgingexpensesofemployeestoattendaneventforwhichthePAChasmadeacontribution.

•  Employeetimethatdoesnotexceed1hourperweekor4hourspermonthtoconduct“volunteer”politicalactivitiesthatdonotincreaseoverheadexpenses.

•  Meetingroomsthatareavailabletonon-politicalclubs,civicorcommunityorganizationsandmadeavailabletoanypoliticalorganizationonthesameterms.

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TaxRulesfor501(c)Organizations§  CommonTypesofTax-ExemptOrganizations

•  501(c)(3):CharitableOrganizations–  Organizedandoperatedforreligious,charitable,scientific,oreducational

purposes§  Twotypesof(c)(3)’s:PubliclyCharities,andPrivateFoundations

•  501(c)(4):SocialWelfareOrganizations–  Operatedprimarilyforthepromotionofsocialwelfare(i.e.societyasa

whole)•  501(c)(6):BusinessLeagues/TradeAssociations–  Operatedprimarilytopromotethecommonbusinessinterestsofits

members

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501(c)Organizations(cont’d)§  Ingeneral,therulesonlobbyingandpoliticalactivitiesarethesamefor501(c)(4)and501(c)(6)orgs,buttheyaredifferentfromtherulesfor501(c)(3)organizations.

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501(c)(3)Organizations–PoliticalActivities§  PoliticalActivities

•  Maynot“participateorintervene,directlyorindirectly,inanypoliticalcampaignonbehalfoforinoppositiontoanycandidateforpublicoffice.”–  Maynotendorseorcontributetocandidates–  Prohibitionisabsolute

§  Violations:ExciseTaxesandRevocation

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501(c)(3)Organizations–PoliticalActivities(cont’d)§  PermissibleActivities

–  VoterEducationandVoterRegistration/GOTVefforts–  Mustbeconductedinanonpartisanmanner,withoutshowingabiasorpreferencefororagainstanycandidateorpoliticalparty

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501(c)(3)Organizations–PoliticalActivities(cont’d)§  VoterEducation

•  VoterGuides:Format,Content,Distributionmustbenonpartisan–  IncumbentVotingRecords:

§  Timing:ElectionSeason/LegislativeSession§  RegularActivity:comparevotingrecordtoorganization’spositiononissues§  Shouldnotreferencecandidates,orendorseorrejectanincumbent

–  CandidateQuestionnaires:§  Shouldcoverawidevarietyofissues§  Shouldincludeallcandidates§  Shouldincluderesponseswithouteditorialcomment(nograding)Note:SimilarAnalysisforCandidateForums

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501(c)(3)Organizations–PoliticalActivities(cont’d)§  VoterRegistration/Get-out-the-vote

•  Nonpartisan•  Shouldidentifyallcandidatesornocandidates•  Communicationshouldbelimitedto–  Encouragingorassistingwithregistrationandvoting–  Providinghoursandplacesforregistrationandvoting

•  Shoulduseneutralandnonpartisancriteriaforselectingareasandgroupstotarget.–  Forexample,cantargetareas/groupsthattypicallyareunderrepresented,

butshouldnottargetareas/groupsbasedonhistoricalvoting

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501(c)(3)Organizations–LobbyingActivities§  LobbyingActivities

•  501(c)(3)PublicCharitiesmayengageinalimitedamountoflobbyingactivities–  501(c)(3)PrivateFoundationsmaynotlobby

•  Twotests:–  SubstantialPart:Subjectivefactsandcircumstancestest.IRSwill

considerexpenditures,volunteertime,andotherfactors.–  501(h)Election:A501(c)(3)publiccharitycanmakea“501(h)Election”–

anobjectivetest,basedsolelyontheamountofmoneyspentonlobbyingactivities.

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501(c)Organizations–LobbyingActivities(cont’d)§  501(h)Election:Expenditures

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ExemptPurposeExpenditures(EPE) PermissibleTotal(Direct+Grassroots)LobbyingExpenditures

PermissibleGrassrootsLobbyingExpenditures

Upto$500,000 20%ofEPE(upto$100K) 5%ofEPE(Upto$25K)

$500,000-$1,000,000 $100K+15%ofEPEover$500K $25K+3.75%ofEPEover$500K

$1,000,000–$1,500,000 $175K+10%ofEPEover$1M $43,750+2.5%ofEPEover$1M

$1,500,000-$17,000,000 $225K+5%ofEPEover$1.5M $56,250+1.25%ofEPEover$1.5M

Over$17,000,000 $1,000,000 $250,000

501(c)(4)and501(c)(6)Organizations§  LobbyingActivities

•  Lobbyingcanbetheorganization’sprimaryactivity,provideditisrelatedtoexemptpurpose.

§  PoliticalCampaignActivities•  Anorganizationcanengageinpoliticalactivity,provideditisnottheprimarypurpose.

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501(c)(4)and(c)(6)Organizations(cont’d)§  PoliticalActivities

•  60/40Rule:Nomorethan40%ofexpensescanbespentonpoliticalcampaignpurposes.–  NotaSafeHarbor,but…–  IRSLetter5228:IRShasissuedletterstocertain501(c)(4)applicants

grantingexpeditedapprovaloftax-exemptioniftheorgcertifiesthatlessthan40%ofexpenses(andtime)willbeforpoliticalcampaignactivities.

•  501(c)(4)and501(c)(6)organizationsmaynotgivedirectlytocandidatesorcoordinateexpenditureswithcandidates.

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501(c)(4)and(c)(6)Organizations(cont’d)

§ Donations–Deductibility•  IRC162:OrdinaryandNecessaryBusinessExpense–  501(c)(4):Usuallyno–  501(c)(6):Usuallyyes

§  Inallcases,non-deductibletotheextentusedforlobbyingorpoliticalactivities.

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501(c)(4)and(c)(6)Organizations(cont’d)§  Donations–Notices

•  NoticestoAllDonors–  501c4and501c6organizationsmustnotifyalldonorsthatcontributionsarenot

deductibleascharitablecontributions.§  “Contributionsto[NameofOrganization]arenottaxdeductibleascharitablecontributions.”

•  NoticestoMembers:–  Organizationswithmembersmustnotifymembersthatdues(andothersimilar

payments)arenotdeductibletotheextentusedforlobbying/politicalactivities.–  Noticemustincludeareasonableestimateoftheamountallocatedtolobbying/

politicalactivities.§  “Weestimatethatthenon-deductibleportionofyourduesis__%”

–  Organizationsthatdonotprovidethenoticewillbesubjecttoproxytaxonlobbyingandpoliticalexpenses.

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Affiliation§  AffiliatedPoliticalOrganization

•  A501(c)orgmaywanttoaffiliatewithotherorganizations,includingwithapoliticalorganization(527/PAC)

•  527s/PACscanengageentirelyinpoliticalcampaignactivities

•  527s/PACsaresubjecttodisclosure/reportingrequirements•  501(c)(3)organizationsmaynotestablishaPACdirectly

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Affiliation§  CommonAffiliatedStructures

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501(c)(3)

501(c)(4)/(6)

527/PAC

501(c)(4)/(6)

501(c)(3) 527/PAC

Affiliation §  Importantforaffiliatedorganizationstooperateasseparateentities–books,records,bankaccounts•  Canhaveoverlappingdirectors

§  Theorganizationsmayshareresources(e.g.,facilities,employees,etc.),butmustallocateexpenses•  SharingAgreementbetweentheorganizations•  Reasonableandconsistentallocationmethod–e.g.,timesheetsforemployees

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PracticalApplication §  SenatorSmithrequestsacampaigncontribution.

•  Campaignfinancelaw:–  Cannotusecorporatefunds,butcanusePACfunds.–  Personalcontributionspermissibleassumingnouseofcorporate

resources.

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PracticalApplication §  SenatorSmithrequestsacampaigncontribution.

•  Taxlaw:–  A501(c)(3)entitymaynotcontributetoacandidate.–  Ifthecandidateisnon-federalandtheapplicablejurisdiction

permittedcorporatecontributions,thena501(c)(4)/(6)couldcontribute,butthecontributionwouldbepoliticalcampaignactivityandcounttowardsits40%limit.

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PracticalApplication §  Youwanttoholdacampaign/fundraisingeventforSenatorSmith.•  Campaignfinancelaw:–  Iftheaudienceislimitedtothe“restrictedclass,”thencorporate

fundsandresourcescanbeusedtoplanandadministertheevent.–  Iftheaudienceisbroader,thenthecampaignmustpayfortheuseof

corporateresources(oranindividualorPACcanpayandtreatthepaymentasanin-kindcontribution).

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PracticalApplication §  Youwanttoholdacampaign/fundraisingeventforSenatorSmith.•  Taxlaw:–  A501(c)(3)maynothostthistypeofevent.–  A501(c)(4)/(6)couldhostthistypeofevent;itwouldbepolitical

campaignactivityandcounttowardsits40%limit.–  Seepreviousdiscussionregardingnon-partisan“all-candidate”events

thatcouldqualifyasnon-political.

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PracticalApplication §  YouwanttocommunicatecampaignsupportforSenatorSmith.•  Campaignfinancelaw:–  Iftheaudienceislimitedtothe“restrictedclass,”thencorporate

fundsandresourcescanbeusedtomakethecommunication.–  Iftheaudienceisbroader,thenthecommunicationmustbemade

independentlyofthecampaignandsubjecttoreportingattheFEC.

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PracticalApplication §  YouwanttocommunicatecampaignsupportforSenatorSmith.•  Taxlaw:–  A501(c)(3)maynotcommunicatecampaignsupportforacandidate.–  A501(c)(4)/(6)cancommunicatecampaignsupportforacandidate;it

wouldbepoliticalcampaignactivityandcounttowardsits40%limit.

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PracticalApplication §  YouwanttocommunicatepolicysupportforSenatorSmith.•  Campaignfinancelaw:–  IfpubliclydistributedbyTVorradiotoconstituentswithin30daysof

aprimaryor60daysofageneralelection,thenitwillbeconsideredan“electioneeringcommunication”andmustbeconductedindependentlyofthecampaignandsubjecttoreportingattheFEC.

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PracticalApplication §  YouwanttocommunicatepolicysupportforSenatorSmith.

•  Taxlaw:–  A501(c)(3)maycommunicatesupportforSenatorSmithwithrespecttopolicyor

legislation;howeversuchcommunicationmaybeconsidered“lobbying”(mustbeinsubstantial;butsee501(h)election).

–  A501(c)(4)/(6)organizationmaycommunicatepolicyorlegislativesupportforacandidatewithoutlimitation.

–  BUT…ifthecommunicationisan“electioneeringcommunication”(referringtoacandidate30/60daysbeforeanelection)itlikelywillbeconsideredapoliticalcommunication–i.e.,prohibitedfora501(c)(3),andwillcountagainstthe40%politicalbucketfor501(c)(4)/(6),particularlyifthecommunicationisisolated/targetedandnotpartofanongoingcampaign.

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PracticalApplication §  Youwanttodisseminateavoterguidebrochurethatexplainsthecandidates’positionsonissues.•  Campaignfinancelaw:–  Ifthevoterguidedoesnotexpresslyadvocateanycandidates’

electionordefeatandisnotcoordinatedwithacandidate,thennotrestrictedbycampaignfinancelaw.

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PracticalApplication §  Youwanttodisseminateavoterguidebrochurethatexplainsthecandidates’positionsonissues.•  Taxlaw:

–  Anonpartisanguideofincumbentvotingrecordsthatdoesnotexpresssupportoroppositionforacandidatemaybenon-political,particularlyifitispartofanorganization’sregular,ongoingactivities.

–  Anonpartisanquestionnaireofcandidatespositionsonissuesthatincludesallcandidates,onawidevarietyofissues,withouteditorialbiasmaybenon-political.

–  Ifdeemednon-political,all501(c)organizationsmaydisseminate.Ifdeemedpolitical,501(c)(3)orgsmaynotdistribute;501(c)(4)/(6)orgsmaydistributebutitwillcountagainstthe40%politicallimit.

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PracticalApplication §  Youwanttoencouragepeopletovoteorregistertovote.•  Campaignfinancelaw:–  Ifthecommunicationsdonotexpresslyadvocateanycandidates’

electionordefeatandarenotcoordinatedwithacandidate,thennotrestrictedbycampaignfinancelaw.

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PracticalApplication §  Youwanttoencouragepeopletovoteorregistertovote.

•  Taxlaw:–  Ifnonpartisan,referstonocandidatesorallcandidates,andtheselection

criteriaisneutral(i.e.,nottargetedbasedonhistoricalvotingrecord),thenGOTV/voterregistrationactivitymaybenon-political.

–  Ifdeemednon-political,all501(c)organizationsmayengageinthisactivity.Ifdeemedpolitical,501(c)(3)orgsmaynotdistribute;501(c)(4)/(6)orgsmaydistributebutitwillcountagainstthe40%politicallimit.

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Questions

ThomasW.AntonucciPartner

WileyReinLLP202.719.7558

tantonucci@wileyrein.com

RyanP.MeyersDeputyGeneralCounsel

U.S.ChamberofCommerce202.463.5816

rmeyers@uschamber.com

CalebP.BurnsPartner

WileyReinLLP202.719.7451

cburns@wileyrein.com

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