• Frank Monti

    The prohibition against campaign activities for organizations which receive tax-deductible contributions is simple to understand – and we really do not want to change it.
    First, one has to clarify in their mind that there are two types of tax-exempt organizations. Some are exempt from paying income taxes because they are not involved in a business. Rather, they are a group of like-minded individuals who get together for some purpose. The private golf club is a great example. Here two or three hundred people come together, purchase acres of land, build a golf course and all pay to support the endeavor. If they should happen to collect more from the members during a year than they actually spend on the care and maintenance of the course and club, should they have to pay income tax on that excess revenue (called a “profit” in a business enterprise)? Of course not – no more than you should have to be tax because you returned from vacation with money in your pocket because you spent less than anticipated.
    The other type of tax-exempt entity is the public charity that is exempt from income taxes because we citizens want these organizations in our community and have devised tax-exempt status to encourage their creation. The other inducement that we have provided to these entities is that we give the people who provide them with financial support a deduction which reduces their own individual income tax.
    The people in the country club who enjoy tax-exempt status are free to become involved in a political campaign. They can take some of their pooled money and put up signs all over their property in favor or against one candidate or another. It is no different than you and your neighbor chipping in to put a political sign in the space between your two driveways. Note, however, that you and your neighbor (as well as you and your 300 golfing friends) are using “after-tax dollars” for these expenditures. You are using the money you have left from your earnings after paying income taxes.
    When you make a charitable contribution to a tax-exempt charity, however, you are using “pre-tax dollars” because you are able to take a deduction from your otherwise taxable income for the amount of the contribution.
    If your income taxes (federal and state) take about 25% of your income, then your “after-tax dollars” are really only 75 cents of each of your dollars of earnings. In other words, it takes $10,000 of salary to pay $7,500 of country club dues. But it only takes $7,500 of salary to contribute $7,500 to your tax-exempt charity. Big Difference!
    We like to speak about level playing fields in this country. But it would not be a level playing field if the local church could solicit “pre-tax dollars” to fund a campaign for or against a political candidate while the non-charities had to solicit “after-tax dollars” to counter that campaign. In the current system, all dollars going into political campaigns are the same value – “after-tax dollars”. We should not mess with this.

  • Leaders and members of 501(c)(3) organizations are free now to speak their minds on issues without endangering their tax-exempt status. What they can’t do is exist primarily to propagandize or influence legislation. And of course, they can’t get involved as a group in electoral politics. So, this really isn’t a free-speech issue as much as a campaign finance/political influence issue. The “religious freedom” argument is a straw man and misleading because the free exercise of religion has not been abridged.