A nonprofit, 501c3 organization can do a lot of good for a lot of people. They are incredible ways to give back to your community or those that are less fortunate. A 501c3 also comes with a lot of benefits when it comes to tax exemptions. However, like all things, even 501c3 have limitations on what all they can do. In fact, breaking the rules that govern 501c3 organizations can even have your status revoked.
While it’s important to know what you can do with any type of 501c3 organization, it’s also very important to know what you can’t do as well to remain in compliance. This is why Nonprofit Elite of Keller, Texas provides more than just applying for your 501c3 status. We also specialize in consulting and compliance for your organization so you never have to worry about making a mistake that could jeopardize your organization.
501c3 Nonprofits Can’t Support Political Campaigns
Many nonprofit organizations are started with the root of a certain ideology that can often be very political. A great example would be nonprofits that educate people about pet ownership and try to stop animal abuse and neglect. A 501c3 nonprofit organization is not allowed to endorse, whether written, spoken, or with financial support, any political candidate. So if a political candidate that was pro-animal rights could not receive any support from a nonprofit organization.
On the other hand, a 501c3 organization cannot oppose political candidates. When it comes to political candidates and campaigns, a nonprofit organization must remain neutral and cannot contribute.
Can 501c3 Nonprofits Participate In Lobbying?
As mentioned earlier, many nonprofits will advocate for certain policies and ideologies. The Humane Society of the United States, for example, is very well known for advocating and lobbying for legislation that protects animals and punishes those who abuse animals. Lobbying, though, can be a tricky position for a nonprofit.
The IRS has set out some rather strict rules and regulations when it comes to nonprofits and lobbying. While a 501c3 nonprofit cannot support or oppose a political candidate, nonprofit organizations can participate in some lobbying. Doing this effectively and also legally to maintain your 501c3 status can be like trying to navigate a minefield, and doing so poorly could put your organization in jeopardy.
A nonprofit organization can only use a portion of their budget for lobbying. So, let’s go back to the Humane Society of the United States. The organization can allocate a portion of their budget to lobby for members of Congress to vote on a bill or law that would increase protections for animals against abusers. In theory, as long as the process is done within the IRS guidelines, this is perfectly fine. If the Humane Society allocated a majority of their entire budget towards lobbying, however, this is going to put them in jeopardy. It’s important to remember that the vast majority of a nonprofit’s budget must go towards what the primary purpose of the organization is.
Private Benefits And/Or Inurements
There are many people who think that they can start a nonprofit and financially benefit from it, or even “get rich”. The hard facts about this is that it’s just not true. Are there some nonprofits where the board of directors do receive a lot of money? Yes. But they do so in a way that is legal as far as IRS rules and regulations.
A 501c3 nonprofit is expected to direct its activities towards the original purpose of its existence. So if we go back to the Humane Society, they are expected to direct their activities to preventing and ending animal abuse. When it comes to private interests, a nonprofit should never carry out any activities that are in the private interest of a stakeholder or member. All activities done by a nonprofit should be for the organization’s intended purpose.
While a nonprofit is an organization that, well, doesn’t make a profit, there are many within the organization who do get paid. They are still “working” and many make a particular job within a nonprofit their career, so many do deserve to get compensated for that. However, the IRS prohibits any insider to receive payment that is considered unreasonable compensation. This starts to get into what are call inurements. The basic principle of an inurement is that a nonprofit’s earnings should not be in the benefit of a private stakeholder or insider that also allows the opportunity to influence the nonprofit.
Nonprofit Consulting And Compliance in Keller, Texas
Maintaining compliance and your organization’s 501c3 status is important. After all, following the strict rules and regulations of the IRS will determine whether your organization will be able to continue to operate. Additionally, it’s just as important to know what you can’t do as it is important to know what you can do as a 501c3 nonprofit.
Nonprofit Elite has helped numerous organizations obtain their 501c3 tax exemption status with a 100% success rate with the IRS. We have provided professional assistance in maintaining this status with annual filing and consulting. If you want your nonprofit organization to be able to operate at maximum efficiency, contact Nonprofit Elite today.
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