Did Nonprofit Ad Violate Tax Law?

December 14, 2010; Source: Boston Globe | In the last few days of the hotly contested race for governor of Massachusetts, a well known nonprofit ran ads that the Boston Globe is now suggesting violates the IRS guidelines on partisan political activity. The group, the Alliance to Protect Nantucket Sound, ran a series of ads that criticized the incumbent and eventual winner, Deval Patrick, for supporting the Cape Wind Energy proposal while pointing out that the other candidates did not.

The ad that ran on radio started, “Tired of paying high electric bills? If Governor Patrick has his way, 172 communities across Massachusetts will soon be paying even more.” It then sent listeners to the Alliance website where comparisons were  made between Patrick and the republican contender, Charles D. Baker. The organization paid $32,000 for the ad.

While the group says that it was merely informing the public, Laura J. Kenney, the New England executive director of nonprofit tax services for the accounting firm Grant Thornton, said her general advice to 501(c)(3) clients is to avoid any issue advocacy that appears to favor or oppose a political candidate, “even if they do not make a specific endorsement.’’ The IRS guidelines state, “even if a statement does not expressly tell an audience to vote for or against a specific candidate, an organization delivering the statement is at risk of violating the political campaign intervention prohibition if there is any message favoring or opposing a candidate.’’

If the IRS investigates and finds against the Alliance it could simply be charged an excise tax, but it could also lose its tax status altogether.

Meanwhile, Common Cause of Massachusetts has asked the Massachusetts Office of Campaign and Political Finance to investigate the fact that the Alliance did not report its spending, as required by a new law that took effect in January.

The Alliance has been fighting the wind energy project for years with lots of high profile supporters and big donations backing the organization—after all, that area is home (at least in the summer) to many well heeled and connected people. Still, earlier this year reports suggested that the organization has been facing seriously waning revenues. This will be an interesting story to watch for any groups engaged in advocacy where they refer to political candidates.—Ruth McCambridge