TaxNewsFlash-Exempt Organizations

July 31, 2008
No. 2008-68

PRINTABLE VERSION

IRS Directive Instructs Examining Agents on Internet Political Activity by Section 501(c)(3) Organizations

IRS Director of Exempt Organizations (EO) Examinations Marsha A. Ramirez in a recent memorandum to IRS EO revenue agents provides guidance relating to the examination of cases involving allegations of political activity on the Internet as part of the IRS Political Activity Compliance Initiative (PACI). See IRS document SE:T:EO:E 06-2008 (July 28, 2008).

The memorandum states that many cases involving potential political campaign intervention in the form of communications posted on Web sites operated by section 501(c)(3) organizations include links to the Web sites of other organizations. The analysis of these cases requires a determination of whether material on the linked Web site is attributable to the section 501(c)(3) organization. The memorandum states experience suggests that electronic proximity—including the number of "clicks" that separate the objectionable material from the section 501(c)(3) organization's Web site—is a significant consideration.

The memorandum analyzes cases involving links between unrelated organizations and those involving links between related organizations:

In situations involving a link between a section 501(c)(3) organization's Web site and the site of an unrelated organization (whether or not exempt), the memorandum instructs EO agents to pursue the case if the facts and circumstances indicate that the section 501(c)(3) organization is promoting, encouraging, recommending or otherwise urging viewers to use the link to get information about specific candidates and their positions on specific issues. Analysis of the context around the link is a key factor. When the facts and circumstances suggest that a section 501(c)(3) organization is using a link between Web sites to indirectly communicate a message that could well be a violation of the law were it done directly, agents are instructed to pursue the case.

When the link is to the website of a related organization, the memorandum instructs EO agents to consider the implications of Taxation with Representation of Washington v. Regan, 461 U.S. 540 (1983) particularly Justice Blackmun's concurring opinion which emphasized the formal corporate separation between a section 501(c)(3) organization and a related section 501(c)(4) organization. Because this added consideration can complicate the analysis in this area, the memorandum instructs agents not to pursue cases involving a link between the Web site of a section 501(c)(3) organization and the home page of a Web site operated by a related section 501(c)(4) organization.

Agents are also instructed to analyze whether a section 501(c)(3) organization has intervened in a political campaign when it: (1) takes a position on an issue; and (2) provides information about candidate positions on the same issue, even when the two elements are in separate parts of the organization's own Web site, or when one element is on the Web site and the other is not. Factors to be considered in analyzing the connection between the elements include, but are not limited to, timing, proximity and references between the elements.

An electronic version of the memorandum is available on the IRS Web site: http://www.irs.gov/pub/irs-tege/internetfielddirective072808.pdf

For more information, contact Rick Speizman, National Partner-In-Charge, KPMG’s Exempt Organizations Tax Practice (ExoTax), at (202) 533-3084 or rspeizma@kpmg.com

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