BGA: Despite law, nonprofits contributed to politicians
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By Julie Patel
Though federal law bars them from doing so, nearly 90 not-for-profit churches, hospitals and schools in Illinois have contributed a total of more than $84,000 to campaigns and other political funds over the past decade, an analysis of campaign records shows.
While nonprofits such as trade associations and unions are allowed to engage in some campaigning, the Internal Revenue Service code prohibits direct political activity by charitable organizations known as 501(c)(3) groups.
That designation — referring to the section of the IRS code that covers them — grants tax-exempt status to organizations operated, for instance, for religious, charitable or educational purposes. Because of those public missions, the government grants them exemptions from income, property and sales taxes, and their donors’ contributions can be tax-deductible.
“I’m frankly surprised there are so many instances because the law is so well known,” says Paul Ryan, deputy executive director of the Campaign Legal Center.
Ryan says his group, which pushes for campaign finance reform, typically hears complaints about not-for-profits mixing politics with their causes that 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,” he says.
Politicians aren’t barred from accepting contributions from charitable organizations. But the nonprofits risk losing their tax-exempt status if they’re found to have engaged in banned political activity.
The IRS’ nonprofit regulation division — its watchdog over charitable groups — has seen its funding and staffing erode over the years, though. The head of the agency says it’s been focused more on developing clearer regulations for so-called 501(c)(4) civic groups, which, unlike the 501(c)(3) organizations, are allowed to engage in some political activities and have rapidly become major players nationwide in elections.
“The (c)(3)s, by statute, are prohibited from engaging in political activities,” says IRS Commissioner John Koskinen, appointed by President Barack Obama in 2013 to run the agency. “We’ve been — most of the time I’ve been there — worrying about the (c)(4)s.”
Based on Illinois State Board of Elections data from 2006 through 2015 and interviews with dozens of contributors and recipients:
• Illinois campaign committees supporting or opposing candidates got contributions in the past decade from 89 nonprofits — including a total of nearly $36,000 from 24 hospitals, more than $26,000 from 44 churches and roughly $21,000 from 21 schools.
• Chicago’s Mercy Hospital and Medical Center gave $6,200, mainly to committees supporting Ald. Edward Burke (14th). Montini Catholic High School in Lombard gave $3,510 to the political fund for Dan Cronin, who’s now the DuPage County Board chairman. Haven of Rest Missionary Baptist Church on the South Side made eight contributions totaling $2,900 to ward committees.
• Campaign funds supporting Burke and two nursing home trade associations — the Health Care Council of Illinois and Illinois Council on Long Term Care — were among the biggest recipients of not-for-profits’ political contributions. Burke’s committees received $5,500. The nursing home committees got about $6,860.
• In addition to contributions, nonprofits also bought tickets to events such as banquets and golf outings that benefit politicians’ campaign funds. A half dozen nonprofits reported contributions for ads in booklets produced by politicians and their committees. Others said the money went to pay for booths at an event held by a political committee.
• More than a dozen politicians and political committees — including Burke, Cook County Board President Toni Preckwinkle, state Sen. James Clayborne, D-Belleville, and Ald. Matt O’Shea (19th) — have returned or plan to return a combined $19,000 in campaign funds after being asked about taking money from the not-for-profit groups. Some officials say they didn’t want to put nonprofits in a difficult spot.
Carol Schneider, Mercy Hospital’s chief executive officer, says the hospital’s contributions mostly went to ads in booklets created by the political committees.
“We regret this mistake,” Schneider says. “Mercy has launched a thorough investigation and is implementing corrective measures to prevent this from happening again.”
Burke couldn’t be reached, but Schneider says the alderman is refunding Mercy’s contributions.
A spokeswoman for the nursing home trade groups says they inherited a dues structure from a predecessor organization that automatically sent a percentage of dues to the groups’ political arms. She says that because the groups primarily represent for-profit nursing homes, they didn’t realize there was a problem.
Many nonprofit leaders say they were unaware their participation in politicians’ events or ad books constituted political intervention.
James Segredo, president of Montini, says he “didn’t know we were screwing up” when the school spent money to attend and buy ads for Cronin’s Corned Beef & Cabbage fund-raising dinners.
“We were just trying to thank” him for his support for parochial schools, Segredo says.
He says Cronin’s staff informed him a few years ago that political contributions weren’t allowed, and the school stopped.
Cronin says he’s returning the money and that he meant to do so in 2013: “We want to make sure we do everything by the book.”
Arlisha Kennedy, a Haven of Rest trustee, says the church’s contributions, mostly to the 8th Ward Regular Democratic Organization, paid for tickets to dinners, breakfasts or banquets and that the church would have made employees pay their own way if aware those were banned political contributions.
The church gave $1,110 to the organization since Ald. Michelle Harris took over as committeeman in 2010. Harris says the ward organization, in addition to supporting political candidates, also funds activities such as a summer youth program and a back-to-school parade that “positively impact thousands of young people every year.”
There are more than 47,000 501(c)(3) organizations in Illinois.
When a charity buys booths, event tickets or ads from a campaign committee, “It is a signal of support . . . an implied endorsement,” says Marc Owens, a former exempt-organizations division director for the IRS. “So the IRS would consider that an act of campaign interaction.”
Aside from stripping away tax-exempt status, the IRS can require a nonprofit engaging in political activities to recover the money, pay a 10 percent tax on the contribution and have managers of the group who knew about political expenditures pay a 2.5 percent tax on the money as well.
The IRS typically is cautious about looking into nonprofits’ political activity and has been even 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 allegations of 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 whether any nonprofits in Illinois have had their tax-exempt status pulled in recent years because of political activities.
Julie Patel is an investigator for the Better Government Association.
These were the largest nonprofit contributions to Illinois political funds, based on Illinois State Board of Elections records, reported from 2006 through 2015.
Nonprofit Contribution total
Mercy Hospital & Medical Center $6,200
Adventist Hinsdale Hospital $5,000
Montini Catholic High School $3,510
University of Chicago $3,500
Guerin College Preparatory High School $3,140
Haven of Rest Missionary Baptist Church $2,900
Loretto Hospital $2,700
Little Company of Mary Hospital $2,550