Lobbying and the Law for Nonprofits under section 501(c)(3)

Lobbying can be an effective means through which a nonprofit can achieve its mission

• Lobbying is a form of advocacy that focuses on changing laws that affect individuals’ lives and issues communities care about.
• Lobbying is an appropriate way to educate and even influence government and has resulted in many important policies from clean air, civil rights, labor laws, foster care and recognition for arts and culture.

Is lobbying legal?
YES! Lobbying by charitable nonprofits – tax-exempt under section 501(c)(3) of the Internal Revenue Code – is absolutely legal.

What do I need to know to follow the IRS rules for lobbying by 501(c)(3) s?
Organizations have a choice between two sets of rules to follow. They can choose either the Substantial Part Test or the Expenditure Test, also known as the 501(h) election.

The Choice: Substantial Part vs. Expenditure Test

Will IRS “red flag” a 501(c)(3) for an audit if it elects 501 (h) Expenditure Test?
Absolutely not and the IRS has gone on record to that effect. The IRS recommends non-profits elect to go with the Expenditure Test.

How much can my organization spend on lobbying under the Expenditure Test?
A generous amount:
20% of the first $500,000 of annual expenditures
15% of the next $500,000;
And so on up to $1 million a year

What about grassroots lobbying expenditures?
Charitable nonprofits may spend ¼ of the total amount of their lobbying budget on grassroots lobbying.

Sample budget:
ABC charity has annual expenditures of $250,000.
20% of $250,000= $50,000 = Direct lobbying limit
25% of $50,000 = $12,500 = Grassroots lobbying limit
Nonprofits can spend a significant amount on lobbying under the Expenditure Test.

How do I keep track of lobbying expenses for reporting purposes?
It is important to track employee time, supplies, postage, travel, and any other related expense by date and activity.
see sample Lobbying Activity Reporting Form (PDF)

May nonprofits use federal funds to lobby?
No. Except in certain situations, federal grants cannot be used to lobby on legislative matters at the federal or state levels.
Federal contract funds cannot be used to lobby at the federal, state or local levels.
Federal funds also cannot be used for electioneering purposes.

May nonprofits use private foundation funds to lobby?
Yes. Nonprofits may use “non-earmarked” or general-purpose funds to lobby.
However, private foundations cannot earmark grant funds for lobbying.
Community foundations can earmark grants for lobbying (they are exempt under 501(c)(3) and not private foundations).

What is direct lobbying?
Direct lobbying is when an organization attempts to influence specific legislation by stating its position or urges a legislator to support, oppose or otherwise take action on a bill or proposed legislation.

Direct lobbying examples:

• A state association of human service organizations takes a position to support legislation to increase the state’s budget for human service programs. Staff of the association then meet with members of the legislature and encourage them to support the pending legislation.

• A local housing organization takes a position against proposed legislation that would change the eligibility of families for affordable apartments. The organization sends a letter to each of its bona fide members who are residents, asking that they contact their City

Council member and provides them contact information and some sample text to include in their letter.

Examples of things considered to be not lobbying:

• Contact with Executive Branch employees in support of, or opposition to, proposed regulations.

• Communications to organization members on legislation – even if the organization takes a position on the legislation – so long as it doesn’t directly encourage members or others to lobby.

• Responding to written requests from a legislative body for technical advice on pending legislation, even if the organization takes a position on the legislation. For example, a nonprofit could be asked to provide testimony at a hearing. However, this cannot be a request from an individual legislator.

• Discussion of broad social, economic and similar policy issues whose resolution would require legislation so long as the discussion does not address the merits of specific legislation. This holds true even if specific legislation on the matter is pending.

• Making available the results of nonpartisan analysis, study or research on a legislative issue, even if the organization takes a position on the merits of the legislation. Provided the information is made generally available; the information contains the facts needed to enable the readers to form an independent opinion; and the material does not include a direct call on the audience to contact legislators.

Self-defense lobbying
Lobbying matters affecting a nonprofit’s own status is considered to be not lobbying

Self defense lobbying examples:

• Opposing proposals to curtail lobbying
• Lobbying in support of a change in the law to discontinue itemizing charitable tax deductions

Not self-defense lobbying (and therefore lobbying):

• Lobbying for programs in the nonprofit’s field (e.g. a children’s nonprofit lobbying for increased school appropriations)

What is grassroots lobbying?
When an organization urges the public to take action on specific legislation
Key elements of grassroots lobbying are:

• Refer to specific legislation
• Reflect a point of view on its merits
• Encourage the general public to contact legislators, and
• Supply the public with legislative contact information

Basic components of a grassroots lobbying and advocacy plan

Letter-writing campaign or call to action
Arts organizations can make a big difference by encouraging their supporters to write or contact decision makers. The costs associated with creating and disseminating information encouraging your supporters to write to decision makers does count against the lobbying budget of your organization.
see sample Call to Action

Example: In one mid-sized city, arts supporters’ hand delivered en masse and in wheel barrels, nearly 15,000 letters in support of the arts to a U.S. Senator’s district office. The media had been alerted to the event in advance and the arts community received notable coverage. The Senator held a key leadership position, but had not declared his position on the arts yet. Since that constituent-driven event, the Senator has been steadfast in his support of the arts.

Put together a local or regional advocacy day
Gather arts advocates together under the banner of raising awareness for all arts activity through this event. You might consider using Arts Advocacy Day or another celebration as a rallying point for the local advocates. In one city, the arts groups worked in cooperation with the local public radio station and organized a full day of coverage and celebration on the arts and culture. Following the station’s regular live formatting they profiled regional and local artists and projects that had received public funding. Throughout the day, the arts advocates encouraged their listeners to call their elected officials to encourage support of arts activity.

Make regular telephone calls to your decision maker’s offices.
Put yourself in the position of being a resource or expert for the decision makers and their staff members.

Put together candidate forums in the months leading up to elections.
Invite all candidates to a forum so that arts constituents can discuss issues and ask questions. Consider developing a survey that can be sent prior to the forum so that candidates that cannot attend will be represented.

Write op-eds and letters to the editor in local, regional, and national publications.
In some cities, representatives from arts organizations write regular columns about the arts in the local newspapers. Letters are usually in response to a local issue of importance or a recent article or editorial.

Invite decision makers and their staff to performances or to visit school programs or other activities with either a large audience or a good photo opportunity.
If possible, find an arts supporter who knows the decision maker to call and follow-up the invitation with an offer to bring them to the event and share the experience. If they come to your event, be sure to acknowledge their presence and/or get the photos taken.

Actively recruit key political contributors who are also arts and cultural supporters. Research who contributes funds to the campaigns of local, county, state, and national elected officials. The contributors are recruited as board members, committee chairs, or advisors for advocacy efforts. To find a list of political contributors, do research at these websites: www.followthemoney.org and www.opensecrets.org

Invite decision makers to write a column in your newsletter or to be interviewed.
This opportunity offers some exposure through your publication for the decision maker and builds a stronger advocate at the same time.

Participate in meetings, hearings and activities hosted by decision makers.
Attend meetings throughout the year and allow decision makers to register your presence. In some communities, arts representatives have been asked to wear T-shirts or buttons to identify themselves during these gatherings and have created quite a sensation.

Adapted from materials by
Charity Lobbying in the Public Interest
Americans for the Arts Monograph Volume 1 Number 2
National Assembly of State Arts Agencies Advocacy Toolkit