More Than 350 Charities Examined by IRS for Partisan Activity During 2006 Election

More than 350 charities either donated money to political candidates or have been investigated by the Internal Revenue Service for engaging in possible illegal political activities during the 2006 election cycle.

Many of the IRS's investigations against the suspected organizations remain open, but an interim report released today by the agency offers an early glimpse into how it is attempting to crack down on electioneering by nonprofit groups in the wake of controversy surrounding such activities during the 2004 campaign.

Federal law prohibits religious congregations and charities from participating in partisan political campaigns in support of, or in opposition to, candidates for public office.

The law became a point of controversy during the 2004 election, when the IRS was flooded with public complaints about groups that were getting involved in political campaigns. In 2004, the agency processed 166 referrals and launched 110 investigations. It also set up an audit process aimed at stopping the activities.

Ultimately, about three-quarters of the organizations reviewed by the IRS were found guilty of violating the law and five organizations were stripped of their tax-exempt status because of electioneering activities.

But the audits drew criticism from some organizations and members of Congress, who questioned whether they were being used to stifle disagreement with President Bush, who was running for reelection in 2004.

A Treasury Department review found no evidence of political bias and the IRS continued the audit program for the 2006 election cycle.

Endorsements from the Pulpit

Today's report suggests the furor over the 2004 election has done little to cut down on illegal activities by charities.

The IRS received 237 public complaints alleging illegal campaign activities by nonprofits during the 2006 election cycle. Those complaints prompted 100 formal investigations. In addition, the agency also reviewed public campaign-finance reports for state and federal candidates and uncovered 269 organizations that made direct contributions to candidates totaling nearly $345,000. Of that total, more than $121,000 has been returned to the organizations in the form of refunds from candidates.

The 2006 audit remains a work in progess. To date, the IRS has issued written warnings to 26 organizations that it found to have violated the law and dismissed cases against 14 charities. Sixty groups are still under investigation.

Among the most common violations:

• In 16 cases, organizations were accused of allowing candidates to speak at official functions.

• Fifteen groups have been accused of posting signs on their property endorsing a candidate.

• Fourteen organizations are alleged to have distributed printed documents supporting candidates.

• In 13 cases, church officials have been accused of making statements during routine religious services endorsing candidates.

Copies of the report are available at the IRS Web site. Go to: http://www.irs.gov/pub/irs-tege/2006paci_report_5-30-07.pdf.

The IRS has also issued new guidelines on political activities for charities. Go to: http://www.irs.gov/pub/irs-drop/rr-07-41.pdf.