Despite a strict prohibition against electioneering, nearly 90 nonprofit churches, hospitals and schools in Illinois collectively donated more than $80,000 to local campaign groups over the past decade with little or no consequences, a Better Government Association analysis found.
While nonprofits such as trade associations and unions are allowed to engage in some campaigning, the Internal Revenue Service has a blanket prohibition on direct political activity by so-called 501(c)(3) nonprofit groups to ensure they focus on benefitting the public and fulfilling their educational, charitable or spiritual mission. For doing that, the government grants them valuable income, property and sales tax exemptions, and their donors’ contributions can be tax-deductible.
“I’m frankly surprised there are so many instances because the law is so well known . . . (c)(3)s can’t get involved in politics,” said Paul Ryan, deputy executive director of Campaign Legal Center. Ryan said the complaints his campaign finance reform organization typically hears of are “a closer call” – such as preaching politics from the pulpit. “It’s not such a blatant violation such as a church contributing to a candidate for office.”
It’s not against the rules for politicians to accept such donations. Charitable nonprofits, however, face losing their tax-exempt status if they’re found to have engaged in prohibited political activity, though the BGA’s findings suggest the IRS rarely enforces the restriction.
The IRS’ nonprofit regulation division, the nation’s top watchdog of charitable groups, has seen funding and staffing erode over the years. The agency has been more focused on developing clearer regulations for 501(c)(4) groups, which are allowed to engage in some political activity and carry ideological leanings, and have rapidly become major players in elections around the country.
“The (c)(3)s by statute are prohibited from engaging in political activities. We’ve been, most of the time I’ve been there, worrying about the (c)(4)s,” said IRS Commissioner John Koskinen, appointed by President Barack Obama in 2013 to run the agency.
The BGA’s analysis of Illinois State Board of Elections data from 2006 through 2015 and interviews with dozens of contributors and recipients show:
- Illinois campaign committees that support or oppose candidates received contributions from 89 nonprofits in the past 10 years, including almost $36,000 from 24 hospitals, more than $26,000 from 44 churches and roughly $21,000 from 21 schools. The true number of donations could be higher, as dozens of nonprofits and political funds couldn’t be reached to confirm elections board records.
- Chicago’s Mercy Hospital and Medical Center donated $6,200, mainly to committees supporting Ald. Ed Burke (14th). Montini Catholic High School in Lombard donated $3,510 to the political fund for Dan Cronin, now DuPage County Board chairman. Haven of Rest Missionary Baptist Church on the South Side made eight donations totaling $2,900 to ward committees.
- Campaign funds supporting Burke and two nursing home trade associations, Health Care Council of Illinois and Illinois Council on Long Term Care, were among the biggest recipients. Burke’s committees received $5,500 while the nursing home committees got about $6,860, including $3,200 last year.
- In addition to straight contributions, nonprofits bought tickets to events such as banquets and golf outings benefitting politicians’ committees. A half-dozen nonprofits reported the contributions paid for ads in booklets produced by politicians and their committees and several others said the money went to pay for booths at an event held by a political committee.
- More than a dozen political committees and politicians – including Burke, Cook County Board President Toni Preckwinkle, state Sen. James Clayborne (D-Belleville) and Ald. Matt O’Shea (19th) – have returned or will return a combined $19,000 in campaign funds after questions from the BGA. Some officials said they didn’t want to put nonprofits in a precarious spot.
Carol Schneider, president of Mercy, said her hospital’s contributions mostly went to ads in booklets created by the political committees. “We regret this mistake . . . Mercy has launched a thorough investigation and is implementing corrective measures to prevent this from happening again.”
Burke couldn’t be reached, though Schneider said he’s refunding Mercy’s donations.
A spokeswoman for the nursing home trade groups said they inherited a membership dues structure from a predecessor organization that automatically sent a percentage of dues to the groups’ political arms and since the groups primarily represent for-profit nursing homes, they didn’t know about the problem.
Many nonprofit leaders said they were unaware their participation in politicians’ events or ad books constituted political intervention.
James Segredo, president of Montini, said he “didn’t know we were screwing up” when the school spent money to attend and buy ads for Cronin’s Corned Beef & Cabbage fundraising dinners. “We were just trying to thank” him for his support for parochial schools, Segredo said, adding that Cronin’s staff informed him a few years ago that donations weren’t allowed, at which point the school stopped. Cronin said he’s returning the money and meant to do so in 2013: “We want to make sure we do everything by the book.”
Similarly, Arlisha Kennedy, a Haven of Rest trustee, said the church’s contributions, which mainly went to the 8th Ward Regular Democratic Organization, paid for tickets to dinners, breakfasts or banquets and the church would have made employees pay their own way had they known it would be a problem. The church gave $1,110 to the organization since Ald. Michelle Harris took over as committeeman. Harris said the political committee doesn’t just support candidates, but also funds activities such as a summer youth program and a back-to-school parade that “positively impact thousands of young people every year.”
Greg Colvin, a nonprofit tax attorney in San Francisco, said, “Sometimes [nonprofits] walk into these transactions with political committees not realizing they’re crossing the line. It may seem like part of their ordinary community relations.”
But when a charity buys booths, event tickets or ads from a political campaign committee, “it is a signal of support . . . an implied endorsement,” said Marc Owens, a former Exempt Organizations division director at the IRS. “So the IRS would consider that an act of campaign interaction.”
One of the churches that donated campaign money.
Aside from stripping away tax-exempt status, the IRS can also require a nonprofit wrongly engaging in political activities to recoup the money, pay a 10 percent excise tax on the contribution and have managers of the group who knew they were political expenditures pay a 2.5 percent tax on the contribution.
The IRS is typically cautious about looking into nonprofit political activity and has been more so since criticism of its handling of Tea Party nonprofit applications, according to nonprofit tax lawyers. The agency ended its Political Activities Compliance Initiative despite substantiating alleged political activity during the 2004, 2006 and 2008 elections for more than half of the 250 501(c)(3) groups it investigated, according to IRS documents.
The IRS wouldn’t say how many, if any, nonprofits in Illinois saw their tax-exempt status yanked because of improper political behavior in recent years. But the BGA’s analysis found the IRS was not terribly aggressive in going after Illinois nonprofits, with only three reporting that they heard from the agency about political donations.
A 2005 BGA report found 220 Illinois tax-exempt groups gave $186,475 over five years. There are more than 47,000 501(c)(3)s in the state.