Top Five Errors that can Cost a Non Profit Their Legal Status
This is a writing sample from Scripted writer Josh Wallman
Top Five Errors That Often Cost Non-Profit CEOs Their Tax-Exempt Status As the CEO of Drummond Law, a prominent, tax-exempt law firm in the city, you need to know what political activities your firm can engage in as a 501©3 non-profit, and what activities it must avoid to maintain its status as a legal non-profit under IRS rules. They are as follows: ** **1. Drummond Law Hosts a Campaign Event IRS rules allow tax-exempt organizations (non-profits) to host candidate speeches as long as the candidate does not promote their political campaign at the event. So it is legal for Drummond Law to invite a political candidate to its offices to host a fundraiser. In that fundraiser, that candidate may speak on behalf of all the causes Drummond Law represents without an issue. However, if officers of Drummond Law allow the candidate to transition to their candidacy for office, those officers risk the non-profit status of Drummond Law according to [IRS rules*](https://www.irs.gov/charities-non-profits/charitable-organizations/the-restriction-of-political-campaign-intervention-by-section-501c3-tax-exempt-organizations) *. In addition, it would be wise for Drummond Law to invite all candidates for that same office to speak about their support for Drummond Law causes to avoid any suggestion of partiality toward one candidate or the other. 2. Drummond Law Funds Contributed to a Single Candidate Any official non-profit funds contributed to a candidate's campaign, whether directly or indirectly, would be an automatic violation of ** IRS rules ** and may cause Drummond Law to lose its non-profit status. This violation would include in-kind "gifts" such as ** _ **pro bono _ ** work a Drummond Law attorney performed for the candidate as a thank you for the fundraising speech. However, this would not apply to any single member of Drummond Law who chooses to donate to the candidate. As they would be acting as individuals, and not as officers of the firm, they would be allowed to donate the legal limit for individuals. ** 3. A Drummond Law Officer Lobbying for a Political Candidate Any officer of the law firm found lobbying for a political candidate at any time would be a violation of ** IRS rules ** and likely jeopardize its legal status. An example of this would be an officer of the firm dressed in professional attire suggesting a particular candidate to a client because that candidate favors a position the law firm favors could be considered lobbying and risk that legal status. ** *That same officer attending a public hearing on an issue favored by the law firm and promoting one candidate over another would be considered lobbying and risk that legal status. That said, that same officer * advocating ** for a cause supported by the law firm would be fine. 4. Any Drummond Law Activity That Suggests Favors for One Candidate over Another If Drummond Law favored one political position over another, it could not show that openly. Any action that even suggested that favoring could cost Drummond Law its tax exemption. An example would be the ** purchase ** of a favored position in a public location to be used by its favored candidate. It also could not dissuade the public from approaching the position used by the opposing candidate. An example would be purchasing an overhead covering for its favored position or purchasing all available overhead coverings so the opposing candidate could not find one. Both would be considered violations of its legal status as a non-profit. ** **5. Drummond Law Cannot Provide Pro Bono or Reduced Fee Services to supporters of its Favored Candidate *If Drummond Law were to offer free or reduced-fee services to a prominent supporter of that candidate, that would be lobbying and risk the legal status of the firm. *
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