IRS Issues Guidance on Hospitals and Political Activity

July 13, 2011

Recently, the IRS released a Private Letter Ruling on hospitals and political activity.  Although it seems almost nonsensical to link a 501(c)(3) with political activity, the Private Letter Ruling advises that a hospital’s indirect initiation of a PAC would not jeopardize the hospital’s tax-exempt status. The Private Letter Ruling was based on the facts presented to the IRS and does not give hospitals and/or other 501(c)(3) organizations permission to engage in political activity and/or to directly establish a PAC.  Rather, as is common practice in the not-for-profit world (and as previously discuss here), the IRS Ruling advises that an exempt hospital may establish a 501(c)(4) social welfare organization, which may in turn establish a PAC.  The IRS Ruling also gives the PAC the ability to use a payroll deduction system for collecting contributions from hospital employees. Perhaps what is most significant about the IRS Ruling is that hospitals may now look to form 501(c)(4) organizations to carry out their social welfare and lobbying agendas rather than relying upon the hospital itself to carry out that message.

Tag: Federal