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 This Week in the iNews:

▲ IRS Continues Information Campaign

▲ TECH TIP WEEKLY: How Spammers Get Your E-mail Address - Part Two

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▲ IRS Continues Information Campaign

The IRS continues to use education rather than the hard hand of enforcement, to win compliance by tax-exempt entities with certain controversial political activity restrictions. The IRS has clarified some issues these organizations often face, both in connection with specific political activities and more general lobbying efforts.

Range of Permitted Political Activity

The degree of political activity allowed to a tax-exempt organization depends upon the Code Section under which it enjoys its exemption.

--Code Sec. 527 political organizations are organized and operated for the purpose of accepting contributions or making expenditures to influence the selection, nomination, election, or appointment of any individual to a public office.

--Code Sec. 501(c)(4), 501(c)(5) and 501(c)(6) organizations may engage in limited amounts of the type of advocacy allowed for Code Sec. 527 organizations, as long as the activity is less than the primary activity which furthers their exempt purposes.

--Code Sec. 501(c)(3) organizations, in contrast, are absolutely prohibited from any type of political campaign activity.

Unlike Code Sec. 501(c)(3) organizations, however, Code Sec. 527 political organizations may not receive tax-deductible charitable contributions, receive contributions or fees deductible as business expenses, or exempt their investment income from federal income tax.

Information to Political Candidates

A Code Sec. 501(c)(3) organization with exceptional knowledge within a certain area risks its tax-exempt status by offering that information to a political candidate.  However, if a charity regularly supplies the public with this type of information, and a candidate requests and receives this information as would any other member of the public, the organization's tax-status should not be affected.  Candidates may attend organization events that are open to the public without jeopardizing the tax status of the organization.

However, the situation becomes more complicated in instances where the tax-exempt organization itself has decided to take the initiative and send information out to a political candidate. The IRS requires self-initiated communications from Code Sec. 501(c)(3) organizations to political candidates to meet certain factors to preserve the organization's tax-exempt status such as providing equal opportunities to participate and indicating no support or opposition to any candidates.

Permissible 501(c)(3) Lobbying Efforts

While Code Sec. 501(c)(3) organizations are absolutely prohibited from political campaign activity, they are allowed to lobby for legislation without losing their tax-exempt status. This activity, however, must not be a "substantial activity" of the organization, as determined under either a facts and circumstances test or the so-called "expenditure test."

The expenditure test only examines money spent for lobbying and sets out specific dollar amounts that are permissible, starting at 20 percent of exempt purpose expenditures.  While the permissible amount increases as a tax-exempt organization's acceptable expenditures increase, there is, however, a ceiling.  An organization that elects to use the expenditure test cannot spend more than $1 million on lobbying, regardless of how large the organization is.  Additionally, tax-exempts must make an election with the IRS to use the expenditure test in determining whether its lobbying activities are a prohibited substantial activity.

Absent an election, an organization is subject to the facts and circumstances test regarding whether its lobbying activity is a substantial activity and, therefore, revokes its tax-exempt status. Under this test, the IRS looks at all of the organization's lobbying activities, including money spent and the amount of any volunteer hours on behalf of the organization, and compares those activities to the organization's activities as a whole.

There is no bright-line rule regarding the specific percentage of lobbying activities allowed. However, one court cases indicate that lobbying activities amounting to less than 5 percent of a tax-exempts overall activities were not substantial.  Another case found that lobbying activity constituting 16-20 percent of a tax-exempts overall activities was considered substantial and, therefore, warranted a revocation of its exempt status.

▲ TECH TIP WEEKLY: How Spammers Get Your E-mail Address - Part Two

Spammers use a variety of methods to get e-mail addresses.  Some methods take advantage of the e-mail addresses readily available on the Internet, whereas others use different levels of cunning and deceit, from harvesting to outright stealing.

 

Part Two – Harvesting from the Internet

 Spammers utilize a technique called harvesting to acquire e-mail addresses.  While harvesting requires a lot of bandwidth, it is ingeniously simple: Simply download the right pages from select web sites and extract the e-mail addresses that are there for the picking.  Some of the tools and sources employed in harvesting e-mail addresses from the web include the following:

• Web spiders – these are not unlike the spiders and web crawlers used by Yahoo, Google, and others that scan the internet’s web sites in order to keep web searches fresh.  Except that e-mail address harvesting spiders are up to no good; they get domain names often times by just guessing!
• Groups, blogs and discussion boards – Yahoo and Google have their groups and mailing lists many of which make up their members’ e-mail addresses.  There are thousands, millions of blogs and discussion boards out there that contain easily acquired e-mail addresses.
• Unsubscribe links – many spam messages include an opt-out or unsubscribe link so that the recipient can request not to receive more spam.  However, often the real purpose of the unsubscribe links is to confirm a valid, active e-mail address.
• Malware – spammers us Trojan horses, viruses, and worms to extract e-mail addresses from individual users’ computers. If mass-mailing worms can extract the contents of a user’s e-mail address book for the purpose of propagating spam, then it’s going to be easy to perform the same extraction and simply send the list back to the hacker’s computer.  This would probably be easier in fact, because this activity is far less likely to be detected than a mass-mailing worm.