Q&A #9: 501(c)(3) Nonprofits and Political Campaigns: What You CAN and CANNOT Do

[@FoundationGroup]

GOT A QUESTION?! Let us know in the comments. Your question could be answered in the next installment of Q&A with Greg.

[@618druidindigo]

How much of the board can be a working board that also works as staff? In a public 501c3

[@FoundationGroup]

Ideally, less than 50%. If it's more than that, you end up with a situation where it is tempting for everyone to vote themselves overly-generous salaries, because who is going to stop it if most of the board is paid staff? From an IRS perspective, it's not that it WILL happen...it's simply that it can.

[@TonyLaycockJr]

I have a question, I will be working with your organization later on to start a non-profit organization dedicated to serving Tennessee regarding Animals and Cruelty, etc. But my question is this, How can the organization influence policy regarding animal laws in our state?

[@FoundationGroup]

Hi, Tony...thanks for reaching out. We look forward to working with you soon! What you're asking is, "How do we lobby?" If you start a 501(c)(3) animal welfare charity, you are allowed to spend a minimal amount of money and time attempting to influence legislation, either by direct (talking with lawmakers) or indirect (building public support) lobbying. Keep in mind, though, the limits are roughly 10% or so of all resources aimed at this type of activity. Once you get started with us, your Exemption Specialist will work with you to help you understand how lobbying works in a public charity.

[@kathleendobbins9577]

Our 501(c)3 has a clubhouse. We use it for our meetings and events. When we are not using it we rent it out and use that money to pay our mortgage. Can we rent our clubhouse to a political candidate (we would not promote the event, just allow it? And if so, can we offer a discounted rate or is there a reason they must pay the going rate? Thank you.

[@FoundationGroup]

As long as you're not endorsing the candidate, you should be able to rent to their event. What you choose to charge them doesn't really concern any regulatory matter. The bigger concern is your rental activity in general. Revenue generated by a nonprofit that isn't directly tied to the purpose of the organization, assuming it's ongoing revenue, can be considered Unrelated Business Income (or UBI). While not illegal, it's taxable and requires tracking on a separate set of books. Rental income is often an exception to this rule, but not short term rentals like what you're doing. I would be concerned that your rental activity is a taxable revenue stream, and if you're not reporting it properly, you could have a big issue to deal with.