Not-for-profit hospitals and their executives could pay a steep price for intervening in political campaigns -- their 501(c)(3) status and an excise tax, too. In a new technical advice memorandum, the Internal Revenue Service said a payroll deduction program allowing an unnamed system's managerial employees to deduct contributions to a state hospital association's political action committee "constitutes participation or intervention in a political campaign prohibited by section 501(c)(3)." The IRS said excise taxes should be imposed on such contributions. Technical advice memorandums give insight into IRS thinking but may not be cited as a precedent.
According to the IRS, the system's president, also chairman of the state hospital association, publicly urged employees to participate in the PAC and the system used video presentations to spread the word. "Hospitals and other tax-exempt organizations must remain vigilant not to allow any cross-pollination between the tax-exempt organization and organizations with PACs," said Thomas Hyatt, a healthcare tax attorney in the Washington office of Ober Kaler. "The message is you can't do indirectly what you you're not allowed to do directly." -- by Mark Taylor