1. Civil Disobedience and Tax-Exempt Status
The IRS has long held that organizations engaged in illegal activity or activity contrary to public policy are not eligible for federal tax exemption under Section 501(c)(3). In Rev. Rul. 75-384, the IRS denied exemption to a nonprofit that encouraged civil disobedience, including urging participants to break the law during anti-war demonstrations. The ruling emphasized that even nonviolent, well-intentioned law-breaking disqualifies an organization from charitable status if it is planned, encouraged, or ratified.
2. Risk of Liability for Staff or Volunteer Conduct
Even if an organization does not formally endorse protest activities, it could still face civil or even criminal liability under doctrines like respondeat superior, which holds employers liable for the acts of their employees within the scope of their duties.
Courts have found that an organization may be liable for civil disobedience committed by staff if:
– It occurred during working hours or using organizational resources
– It was implicitly or explicitly condoned
– It was within the employee’s general scope of duties
3. Civil Disobedience at Sponsored Events
Sponsorship of an event that includes protest activity can increase a nonprofit’s risk. Courts focus not on the term ‘sponsor’ but on how much control or supervision the organization exercised. For example, if the nonprofit organized the logistics, coordinated speakers, or provided significant funding, it may be considered responsible for what occurs even if it did not anticipate unlawful activity.
4. Indemnifying Staff for Arrest-Related Legal Costs
Some organizations may want to support staff or volunteers who are arrested during protest activity. While well-intentioned, reimbursing legal defense costs for civil disobedience can increase legal and tax risk. Most nonprofit indemnification statutes prohibit reimbursement where the individual knew their conduct was unlawful. Reimbursing such expenses can also be viewed by the IRS as condoning illegal activity, jeopardizing the organization’s exempt status.
5. Policy Recommendations for Risk Mitigation
To balance support for social change with legal compliance, organizations should adopt clear internal policies. These may include:
– Express prohibition on participating in illegal conduct or civil disobedience while representing the organization
– Staff training on permitted forms of advocacy, protected First Amendment activity, and when legal lines may be crossed
– Pre-screening event partnerships to avoid affiliation with activities that could reasonably foresee illegal action
– Refusal to indemnify unlawful protest conduct
6. Lawful Alternatives to Civil Disobedience
Organizations committed to systemic change still have many options under federal tax law:
– Educating the public through reports, teach-ins, and town halls
– Organizing lawful demonstrations with required permits
– Lobbying within permitted limits
– Supporting litigation or test cases
– Funding media campaigns or community organizing
These strategies can be powerful and legal ways to advance change without crossing IRS lines.
Final Word
While civil disobedience plays a crucial role in American history, tax-exempt organizations must tread carefully. The IRS and courts distinguish sharply between lawful protest and illegal conduct, even if peaceful or principled. By adopting clear internal policies, maintaining a focus on legal methods of advocacy, and avoiding direct or indirect support for illegal activity, nonprofits can continue to be a force for justice without endangering their mission or tax status.
Ellis Carter is a nonprofit lawyer with Caritas Law Group, P.C. licensed to practice in Washington and Arizona. Ellis advises nonprofit and socially responsible businesses on federal tax and fundraising regulations nationwide. Ellis also advises donors concerning major gifts. To schedule a consultation with Ellis, call 602-456-0071 or email us through our contact form.