Jim Frazier  /  Jim Frazier
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updated 7/25/2008 6:22:29 AM ET 2008-07-25T10:22:29

Nonprofits could be one of the "sleeping giants" of this fall’s presidential election, having as much to do with turning red states blue — or vice versa — as will Iraq, Barack or soaring gas prices.

No way, you say? Nonprofits can’t get involved in politics, right?

Truth is, there’s a fine line between what they can and cannot do legally when it comes to politics. That line distinguishes issues advocacy from partisan electioneering, but this election season, it’s a line that’s getting blurred quite a bit as more groups turn to the Internet to raise money and awareness for their favorite causes and candidates.

To be sure, federal law bars tax-exempt organizations from donating money to a politician’s campaign or endorsing a candidate, either verbally or in writing. But it’s OK to put on such events as a voter registration drive or voter forums — or a get-out-the-vote push, as long as all are nonpartisan. Clearly, some issues and causes are aligned more with one party than another — Al Gore and global warming, or George Bush and troop support in Iraq, for starters

So how far can a nonprofit go when advocating an issue — without actually endorsing a particular candidate and thereby jeopardizing its tax-exempt status? The short answer: Further than ever before, thanks to the Internet.

Consider a little history. Until recently, the aim of digital get-out-the-vote drives was to get younger voters of either party out to the polls. In the 2004 election, for example, Rock the Vote signed up 1.4 million new voters. Similarly, this month, the nonprofit Hip-Hop Summit Action Network — a coalition of American hip-hop artists — partnered with Time Warner and CPX Interactive, an online ad network, to launch their Vote For It 08 campaign, a multimedia effort aimed at signing up first-time voters through a celebrity PSA campaign and a national bus tour that kicks off next month and runs through October.

With the need to woo more young, social-networking converts to their causes, issues-advocacy nonprofits — 501(c)(4)s — have been flocking to the Internet in droves, from the left-leaning MoveOn.org Civic Action to the right-leaning Christian Coalition.

Shaping public policy debates
Don’t underestimate the online power of nonprofits in public policy debates. MoveOn.org was formed to use the Internet to fight the impeachment of President Clinton in 1998 and wound up generating enough support to help convince the U.S. Senate to acquit Clinton of the charges — even after the U.S. House of Representatives had voted for impeachment. Since then, conservatives have used the Net — in sites like Focus on the Family and Citizens Flag Alliance — to push for legislation banning gay marriage, as well as to force a vote on whether to make flag-burning illegal. Liberals, in turn, also have successfully used sites like MoveOn.org to exert political pressure. One example? Their 2005 campaign to discredit U.S. Supreme Court nominee Harriet Miers and get her to withdraw her name from consideration.

To be sure, 501(c)(4) nonprofits tend to be a little more outspoken than other types of charities. That’s because they are permitted by law to lobby and advocate — but only if their advocacy doesn’t comprise the bulk of what they do. And like 501(c)(3) nonprofits, the “c4s” are also barred from directly or indirectly participating in political campaigns that favor one candidate over another — a line that becomes further blurred as more outspoken (and wealthy) players become more involved. Case in point: In early 2007, billionaire Sheldon Adelson created Freedom Watch, a 501 (c) (4) that last summer spent $15 million on an ad campaign to support the troop surge in Iraq. More recent ad campaigns have accused Democrats of inaction regarding the war in Iraq and soaring gas prices — this as their Web site stresses its nonpartisanship.

And that’s not all. This past May, The Washington Post reported that two key McCain supporters — Joseph I. Lieberman, I-Conn., and Lindsey Graham, R-S.C., removed themselves as board advisers for the nonprofit Vets for Freedom — a self-described nonpartisan organization — after the group ran ads attacking Barack Obama on his failure to visit American troops in Iraq.

Even 501(c)(3)s are considering their potential for political advocacy. “Nonprofits are trusted community partners who can bring a nonpartisan message about voting to a receptive audience,” says Maureen Ramirez Cisneros, coordinator of the Minnesota Participation Project at the Minnesota Council of Nonprofits. To help Minnesota nonprofits walk the line — and skirt the ban on political activity — this group created the Minnesota Participation Project, a Web site to help the state’s nonprofits define and conduct permissible, nonpartisan voter recruitment efforts. Since then, they also have formed the National Nonprofit Voter Engagement Network, to expand that effort to other states.

Group helps nonprofits register voters
The group is helping nonprofits to register voters and has voter education and get-out-the-vote toolboxes on its Web site. It also is encouraging nonprofits to create listservs and other digital ways to mobilize voters sympathetic to their causes.

In addition, there is a growing trend by some nonprofits to split themselves into various subgroups, just to be able to have more of an influence over policy debates. MoveOn.org, for example, is actually two different entities. MoveOn.org Civic Action is a 501(c)(4) organization that uses the Internet to connect millions of like-minded Americans to coordinate issues campaigns, whether to back measures to repeal the estate tax or to get U.S. troops out of Iraq. Its other arm, MoveOn.org Political Action, is a registered PAC under Section 527 of the IRS Code, and last year its members contributed $9 million to candidates and campaigns around the country.

But woe to those nonprofits that go too far. Indeed, the difference between issue advocacy and political intervention can get pretty murky sometimes — and there’s a need for clarity that has become especially urgent in this era of instant communication.

Just ask the NAACP. After the contentious 2004 elections, the IRS threatened to revoke the NAACP’s tax-exempt status because its chairman, Julian Bond, had trashed the administration policies of President George W. Bush in a speech. The issue was whether Bond’s statements — about race, the economy, and Iraq — meant the 501(c)(3) had crossed the line for a nonprofit.

In the same way, last September, the pastor of the All Saints Episcopal Church in Pasadena, Calif., in a Sunday sermon, criticized the Bush Administration on its policies to eradicate poverty, improve race relations and bring about both war and peace. And while the IRS concluded that the NAACP did not intervene in the 2004 elections, it said that All Saints did. Eventually, both cases were closed after the Department of Justice declined to back the IRS in court. But the IRS actions sent a stringent — albeit mixed -- message to the nonprofit community. “In view of the broad, subjective definition of political speech, the chilling effect on groups such as the NAACP and All Saints Church is real,” says Marcus Owens, an attorney with Caplin and Drysdale in Washington, D.C., which represented the NAACP in 2004.

Owens, also a former director of the IRS’s charity division, says the NAACP believes “that it cannot undertake its core mission without being able to talk about government policy.” In spite of that, the NAACP has been especially careful in this presidential election not to endorse Obama, despite the fact that a majority of its members support him.

IRS cites 75 charities
The IRS also cited 75 charities, including churches, for engaging in prohibited political activities during the 2004 presidential election, such as handing out leaflets encouraging members to vote for a particular candidate, endorsing candidates from the pulpit or endorsing or opposing candidates on their Web sites or through links to other Web sites. Churches were an instrumental force in galvanizing voters on such issues as abortion and gay marriage. But three charities, which the IRS did not name publicly, engaged in such “egregious” levels of prohibited political activities that their tax-exempt status was revoked.

While the Internal Revenue Code is clear in general categories of what political activity is allowed for nonprofits, many nonprofit advocates feel the IRS needs to offer more detailed guidelines — especially some that would take into account the Internet and nonprofits’ online advocacy and fundraising activities. “I think that the ambiguity of not knowing where that line is, until the IRS comes knocking at your door, heightens the chilling effect for nonprofits,” says Owens, who spent 25 years with the IRS.

Late last year, in anticipation of the 2008 presidential election, the IRS released a plan that calls for more thorough and aggressive enforcement of campaign intervention. But Owens says the rules remain ill-defined. It’s still not clear, he says, when a nonprofit could be accused of political intervention.

Nonprofits, he says, have no choice but to self-censor. Says Owens: “The First Amendment implications are tremendous and I feel the IRS would do best in erring on the side of permitting speech in gray zone as they’ve done in the past.”

Is more clarity forthcoming? Maybe so. But don’t hold your breath. It will depend on which side does better in November. Policy, like history, tends to be written by the winners. Stay tuned.

Elizabeth Wasserman is a Washington, D.C., writer whose work has appeared in a variety of publications, including Inc . magazine and Congressional Quarterly . Additional reporting by Contribute reporter Cristina Maldonado.

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