Tax-Exempt Hospitals Must Tread Lightly on Political Ground

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By Matthew Loughran

Sept. 14 — Nonprofit hospitals could risk losing their tax-exempt status if they take part in partisan political activity.

However with such weighty reimbursement concerns as the Affordable Care Act's continued fate and the implementation of new Medicare payment regulations at issue in the coming elections, hospitals looking to influence health-care policy still have avenues to push their agendas without running afoul of the tax code.

Two attorneys who advise nonprofit organizations on tax and government relations issues facing exempt organizations talked to Bloomberg BNA about the pitfalls and opportunities nonprofit hospitals face when attempting to engage with the political world.

“Nonprofit hospitals that engage in charity work are exempt under Section 501(c)(3) of the tax code, which is one of the most favored exemptions because donors to the organization deduct the amount of their donations from their own taxable income,” said Eric K. Gorovitz, a principal at Adler & Colvin in San Francisco who counsels tax-exempt organizations with an emphasis on political advocacy and nonprofit corporate governance.

Do's and Don'ts of Political Action for Nonprofit Hospitals

“But that benefit comes with some real constraints,” he added, pointing to provisions in the law that prohibit 501(c)(3) organizations from dedicating a substantial part of their activities to lobbying and from any direct intervention in elections for public office.

Avoiding Political Intervention

That latter restriction against offering political support for a particular candidate, or electioneering, poses the most danger for hospitals that wish to advance certain policy positions, according to Gorovitz.

“There is no de minimis rule with regard to partisan political activity. The IRS has the authority to respond to even a single violation by a hospital, even if it is a tiny part of the organization's activities, by revoking the hospital’s exemption” he said.

Gorovitz added that a hospital's status as the primary health-care delivery system in the community won't necessarily insulate it from penalties for noncompliance. “Hospitals are not too big to fail, and they shouldn't see themselves that way,” he said.

However, Gorovitz said, a hospital can engage in election-related activities as long as the organization isn't seen as supporting one candidate or the other. “The hospital can engage in non-partisan voter education, such as by hosting a candidate forum where all viable candidates are invited to speak on health-care related issues” he said.

Just as the hospital itself can't be seen to support one candidate over another, hospital executives run the risk of breaching the restriction on the hospital's behalf.

Gregory Y. Harris, a partner at Lewis Roca Rotheberger Christie, LLP in Phoenix, who advises health-care clients on government relations, warned that leaders of tax-exempt health-care organizations have to be very clear that their views are their own and can’t be attributed to their employers.

“At the top of the organization, the CEO level, it is hard to separate the person from the institution,” he said. “But for employees lower down on the chain, nonprofits may want to put rules in place to avoid using company resources and to make it clear that any political statements aren't attributed to the company unless the organization has made that decision,” he added.

Additionally, according to Harris, health-care executives have to consider the effect their views have on the organizations’ relationships within the community. “You’ve got to have a plan if you are going to speak on behalf of the organization because, particularly given how passionate people are about issues in the health-care space, comments that alienate community groups or institutions may have an impact on the organization’s standing in the community as a whole,” he said.

Hospital executives, however, still can be politically active as long as it's clear they're acting as private citizens, Gorovitz said. “Individuals who work for charities don't surrender their First Amendment rights, they can always make political statements in their personal capacities,” he said.

Gorovitz added that hospital executives can be identified in reference to their employers on candidate literature, as long as it is done for identification purposes-only and not in a way that indicates endorsement by the hospital.

“Ambiguity is always a risk,” he said. “So a hospital has to be unambiguous in that it is not providing an endorsement of one candidate over panother,” he added.

Social Media Advocacy

Social media platforms provide a very unsettled arena for political activity by nonprofit hospitals. According to Gorovitz, the IRS hasn't provided much in the way of guidance for dealing with personal social media applications, such as Twitter or Facebook, for hospital executives.

“We have to extrapolate from the guidance that we do have, and there are not a lot of good answers, but there is a lot of political advocacy that goes on with Twitter and trending hashtags such that hospitals do have to be careful,” he said.

As an example Gorovitz said that a hospital website that contains a live feed of the executive's personal Twitter account could be seen as advocating for a particular candidate if that executive is careless in his postings.

“You have to be careful, there is the possibility that some hashtags and trending topics could jump over the line and the ambiguity is again a risk,” he said.

Advocating for Policy Changes

Lobbying for health-care policy changes is one way that nonprofit hospitals can get involved in the political sphere with minimal risk.

“Under the law, 501(c)(3) organizations can lobby, quite a bit,” Gorovitz said. The IRS has provided tools for hospitals to determine how much of their annual budgets they can spend on lobbying activities, he added.

Harris said that nonprofit health-care entities that want to engage in the political process should do so thoughtfully and only after surveying the existing landscape of political actors.

“They should never jump into a new environment without first figuring out the lay of the land,” he said. “There may be other groups involved that have the same objective,” he added.

“By jumping in without figuring what others are doing, you may be undercutting efforts that are already underway to accomplish the public policy goal that you favor,” Harris said.

Harris emphasized collaboration among nonprofits when petitioning government agencies and legislatures for policy change. “Nothing happens in the political realm just because someone wakes up one day with an idea,” he said. “You have to have a discussion with your cohorts and peers, companies that are in the same space and working toward the same goals, about whether pursuing a public policy is a good idea and why,” he said.

Harris added that simply petitioning government authorities for desired public policy changes frequently isn't sufficient to accomplish those goals. “You always have to think about implementation, about what is the next step,” he said. “Once you have the desired provision on the books, you have to make sure that you have gone to talk to the regulatory agency that will be in charge of implementing the change and be sure that they are ready to carry it through.”

To contact the reporter on this story: Matthew Loughran in Washington at

To contact the editor responsible for this story: Peyton M. Sturges at

For More Information

The IRS guide to exemption requirements for 501(c)(3) organizations is at

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