Communication
Frequently Asked Questions about Communication
A donor should not attach the written acknowledgement from the recipient organization to the donor's individual income tax return. Instead the donor must keep the written acknowledgement to substantiate the contribution.
Yes. The Iowa Principles and Practices for Charitable Nonprofit Excellence states in Part XI that "Nonprofit organizations should individually and collectively communicate their views to government about matters which affect the delivery of their services." That being said, it is important for nonprofits to be aware of the tax code's restrictions on both lobbying and political campaign activity.
The following are tools that your organization can use to teach others about your organization:
1. Your website. This should include your organization's message, ways to contact you, current events or news involving your organization, and ways to become involved and receive more information;
2. Press releases. Press releases announce events or other newsworthy items about your organization to members of the media.
3. Brochures. Brochures should explain what your organization offers, its mission, and contact information.
4. Newsletters. These can be annual, monthly or bimonthly news and should include stories and articles about what is happening in your organization.
5. Annual reports. The annual report summarizes your organization's activities for the last year and should give a detailed report about your organization's financial status.
Tax exemption under IRS code §501(c)(3) has two primary benefits: 1) the donor making a donation to the nonprofit gets a tax deduction, and 2) there is no income tax on related earned income. This is true for purposes of federal income tax and Iowa income tax. Other benefits include the ability to issue tax-exempt bonds for capital projects, qualification for tax-exempt retirement plans (403(b)), and special postal rates.
If a nonprofit engages in political campaign activity, the IRS may revoke the organization’s tax-exempt status or compel the organization to pay fines. Both the organization itself and the individuals responsible for the illegal political activity may be fined. Despite the severe consequences for a nonprofit if it engages in political activity, the Internal Revenue Code does not define the phrase in great detail. IRC 501(c)(3) provides that political activity is “participat[ing] in, or interven[ing] in (including the publishing or distributing of statements) any political campaign on behalf of (or in opposition to) any candidate for public office.” However, “political expenditures” are defined further in the Internal Revenue Code. In essence, a nonprofit may express a point of view about an issue, but may not support or oppose a specific candidate.
If an organization has not elected to lobby under 501(h) and have its lobbying limits measured by the “expenditure test,” its lobbying limits will be measured by the “substantial part of activities test.” If it is determined that an organization has engaged in lobbying beyond an insubstantial amount, that organization will generally lose its federal tax-exempt status. However, if an organization has elected to qualify under 501(h), its lobbying limits will be measured by the “expenditure test.” If an organization exceeds the limits established under this test, it must pay an excise tax based on the amount exceeding the limit. Therefore, under the “expenditure test,” exceeding the lobbying limit results in the organization having to pay a monetary fine, not in the complete loss of the organization’s tax-exempt status. However, a nonprofit can lose its tax-exempt status under the “expenditure test” if it exceeds the lobbying limit for four consecutive years.