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How much lobbying can a 501(c)(3) do? What is the 501(h) election?
In general, nonprofit organizations described under Section 501(c)(3) of the tax code may engage in lobbying and other advocacy activities within certain limits. Specifically, the code provides that “no substantial part” of the activities of such organizations can involve “carrying on propaganda, or otherwise attempting, to influence legislation.” Outlined below are key lobbying rules that apply to public charities and private foundations.
Lobbying Rules for Public Charities
Public charities may engage in a limited amount of legislative lobbying, direct and/or grassroots, under either the vaguely defined “no substantial part of its activities” test or, except for churches, by electing to operate such activities under the Section 501(h) of the tax code.
The IRS measures compliance with the “no substantial part” test on the basis of “all the pertinent facts and circumstances of each case,” determined under a variety of factors such as the time devoted (by both paid and volunteer workers) and the expenditures devoted to the activity by the organization. Courts have interpreted this test in a variety of ways, from a 5% safe harbor (1955) to a ruling that percentages test are inappropriate (1972).
Under 501(h) expenditure test public charities may spend:
- on Direct Lobbying:
20% of the first $500,000 of its exempt purpose expenditures;
15% of the next $500,000, and so on, up to one million dollars a year.
- on Grassroots Lobbying:
5% of the first $500,000 of its exempt purpose expenditures;
3.75% of the next $500,000, and so on, up to $250,000 a year.
Direct lobbying is defined as an attempt to influence legislation by stating a position on specific legislation to legislators or other government employees who participate in the formulation of legislation, or urging your members to do so.
Grassroots lobbying is defined as an attempt to influence legislation by stating a position on specific legislation to the general public and asking the general public to contact legislators or other government employees who participate in the formulation of legislation.
The term "lobbying" does not include the following activities:
- providing technical assistance or advice to legislative body or committee in response to a written request;
- making available nonpartisan analysis, study or research;
- providing examinations and discussions of broad, social, economic and similar problems;
- communicating with a legislative body regarding matters which might affect the existence of the organization, its powers and duties, its tax-exempt status, or the deduction of contributions to the organization (the "self-defense" exception); and,
- updating the members of your own organization on the status of legislation, without a call to action.
Lobbying Rules for Foundations
In general, foundations may not express views on specific legislation in communications with legislators, or with the general public if the communication includes a “call to action.” However, private foundations (as well as public charities) may:
- provide technical assistance or advice to legislative body or committee in response to a written request;
- make available nonpartisan analysis, study or research; and,
- under the so-called “self-defense” exception, communicate with a legislative body regarding matters which might affect the existence of the foundation, its powers and duties, its tax-exempt status, or the deduction of contributions to the foundation.
Restrictions on Grants
In general, private foundations may not earmark a grant to a nonprofit for lobbying.
However, lobbying is permitted under foundation grants in two circumstances:
1) Under general support grants, nonprofits may pay for lobbying expenses; and,
2) Under grants for specific projects with a lobbying component, nonprofits may pay for lobbying expenses under the project but not with the foundation’s grant funds.
Last Updated: April 4, 2008 |
