Influencing the appointment of the governor to fill a vacant Senate or seat – tax

United States:

Influencing the appointment of the governor to fill a vacant Senate or a seat in the House

May 28, 2021

Adler & Colvin

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Vice President-elect Kamala Harris is mid-term as California’s representative in the United States Senate. As a result of her election as Vice President, her Senate seat will become vacant until January 20, 2021, and it will be left to California Governor Gavin Newsom to appoint the person to serve for the remainder of her term (or until the next general) in election California). Similar problems could arise in other states as President-elect Biden begins building his cabinet and staff, possibly by reaching out to the current senators and representatives and creating vacancies in those seats.

Charities may have views on how these vacancies should be filled and if they do so carefully, they can share those views without breaking federal tax law.

Charities can engage in a significant but limited amount of legislative lobbying and are absolutely prohibited from participating, directly or indirectly, in or participating in any campaign (for or against) a candidate for public office. The question for a charity is whether there is any of these restrictions on disclosing their views on a potential candidate for a vacant Senate seat.

As noted earlier, a Senate vote to confirm a candidate for the judiciary or executive branch of a president is “specific legislation” within the meaning of federal tax rules that regulate charity lobbying. As a result, communications from a charity that support or disapprove of confirmation may be lobbyed for tax purposes, either as direct lobbying (e.g. communicating directly with senators) or lobbying at the grassroots level (e.g. communicating with the public, including a “call to action” to contact their senators).

Since the appointment of a governor to fill a vacant Senate seat generally does not require endorsement by a legislature, no legislative action is required. As a result, communications with Governor Newsom or the public about the appointment of Harris’ Senate seat will not constitute lobbying for tax purposes. (However, government lobbying disclosure rules may still apply and should be considered by the charity as well.)

Because Harris’ vacant seat is filled by appointment rather than election, influencing the governor’s appointment should not constitute a prohibited intervention in a candidate campaign under Section 501 (c) (3). (Judge appointments are a little different from senator appointments in that federal judges are typically not elected, while senators are. In theory, the IRS could clearly distinguish between the two types of appointments, but has not so far done so. )

There is one more tax issue to consider that the IRS has not provided final guidance on. Pursuant to Section 527 (f) of the Internal Revenue Code, a tax is levied on certain political expenses of a 501 (c) organization (including, but not limited to, charities) up to the amount of that organization’s investment income in the same tax year. (If the organization has no investment income, it has no tax liability under Section 527 (f).) In contrast to the prohibition under Section 501 (c) (3), however, Section 527 (f) includes not only elections, but also non-election-related activities, including attempting to influence the “selection, appointment, … or appointment” of any person to public office.

More than thirty years ago, the IRS was considering whether a section 501 (c) (3) organization attempting to influence the Senate’s confirmation of a federal candidate should be taxable under section 527, but ultimately failed to make a final decision on the issue . As a result, practitioners generally believe that if the IRS decided to impose Section 527 (f) taxes on charitable attempts to influence judicial appointments, it would not do so until after that position was publicly announced and only in relation to those made thereafter Activities would do this announcement. The same may apply to Senate appointments, although the IRS has not specifically said so.

Charities can influence the appointment of a governor to fill a vacant seat in the US Senate or House of Representatives. Because of the complexity and uncertainty associated with the rules in place, a charity that elects to do this work should seek legal advice first on how to safely proceed.

Originally published November 11, 2020

The content of this article is intended to provide general guidance on the subject. A professional should be obtained about your particular circumstances.