This report discusses the permissible "political activities" in which organizations, associations, or businesses may engage if such entities receive federal funds through a grant or a federal contract. When discussing "political" activities by private grantees or contract recipients, this report includes lobbying or advocating for legislative programs or changes; campaigning for, endorsing, making campaign related expenditures, or contributing to political candidates or parties; and voter registration or get-out-the-vote campaigns.
Generally, organizations or entities which receive federal funds by way of grants, contracts, or cooperative agreements do not lose their rights as organizations to use their own, private, nonfederal resources for "political" activities because of or as a consequence of receiving such federal funds. However, such organizations are uniformly prohibited from using the federal grant or contract money for such political purposes, unless expressly authorized to do so by law. These recipient organizations must thus use private or other non-federal money, receipts, contributions, or dues for their political activities, and may not charge off to or be reimbursed from federal contracts or grants for the costs of such activities.
Certain entities, because of the nature of the organization or its tax status, may have particular limitations or restrictions on political or advocacy activities which would apply, in most instances, regardless of the entities' status as a federal grantee or contractor. Thus, charitable 501(c)(3) organizations (entities exempt under 26 U.S.C. § 501(c)(3), which are entitled to receive tax deductible contributions) are limited in the amount of lobbying in which the organization may engage, and are prohibited from participating or intervening in any political campaigns. Corporations and labor unions are expressly prohibited from making contributions to candidates, parties, or committees in federal elections (2 U.S.C. § 441(b)), and federal government contractors are prohibited from making political contributions in such elections (2 U.S.C. § 441(c)), although corporations, unions, and federal contractors are all allowed to establish and finance separate segregated funds which may act as political action committees (PACs) to gather voluntary contributions and make political campaign expenditures and contributions.
Non-profit social action organizations may lose their tax-exempt status under Section 501(c)(4) of the Internal Revenue Code (26 U.S.C. § 501(c)(4)) for engaging in certain lobbying activities, even with their own funds, if they receive federal grants; but these organizations may establish affiliated social action groups (other 501(c)(4)s) through which the organizations and their members may exercise First Amendment rights of advocacy and speech using non-federal resources. Additionally, under certain federal programs, other specific restrictions or limitations may apply to federal funds and activities within the scope of that particular program.
Legislative attempts to flatly require private organizations or entities to forgo or abdicate their First Amendment rights of speech, expression, or advocacy with their own, private resources as a condition to be eligible to receive federal grants or contracts would encounter significant First Amendment obstacles under the "unconstitutional conditions" cases, as well under any analysis of permissible limitations on so-called "government speech." The recent Supreme Court decision in Citizens United v. Federal Election Commission has reaffirmed the right under the First Amendment of private entities, including corporate entities, to engage in independent political speech by way of making independent political "expenditures."
Date of Report: February 12, 2010
Number of Pages: 36
Order Number: RL34725
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Friday, March 5, 2010