Last reviewed/updated 07/16/2013
Given the many crucial issues facing non-profit organizations and the people they serve, it is more important than ever that charities become involved in the public policy debate. Yet too many people mistakenly assume that it is illegal for non-profits to lobby. To the contrary, federal laws actually exist to encourage charities to lobby within certain specified limits. Knowing what constitutes lobbying under the law, and what the limits are, is the key to being able to lobby legally and safely. This article represents a vastly simplified summary of some of the laws and regulations governing charitable lobbying. The complete laws are much more complex, so consult your attorney or accountant for professional advice. For more detailed information, you can also call the Center for Non-Profit Corporations at (732)227-0800.
How much Lobbying is Too Much?
Federal law clearly states that a 501(c)(3) publicly supported charity may devote no more than an "insubstantial" portion of its activities to lobbying. There are two ways in which this can be measured. One is a subjective "substantiality test" based on the facts and circumstances of each case. Because this test can be applied rather arbitrarily, it is often advisable for a charity to file a short form with the IRS in order to be governed by the "expenditure test," which is based solely on the amount of money spent for lobbying. The expenditure test lays out specific limits on how much money a charity can spend for lobbying, based on the charity's own "exempt purpose" expenditures:
|Total Annual Exempt Purpose Expenditures||
Percent that May beSpent on Lobbying
|$500,000 or less||20%|
|$500,000-$1 million||$100,000 + 15% of budget over $500,000|
|$1 million-$1.5 million||$175,000 + 10% of budget over $1 million|
|$1.5 million and over||$224,000 + 5% of budget over $1.5 million|
Note: Total lobbying expenditures may not exceed $1 million. "Grassroots lobbying" expenditures may comprise no more than 25% of an organization's total allowable lobbying ceiling.
What is Lobbying?
Generally speaking, the IRS defines lobbying as the attempt to influence the passage, defeat, introduction or amendment of legislation, including bills introduced by a federal, state or local legislative body, bond issues, referenda, constitutional amendments, and Senate confirmation votes on Executive branch nominees. For charities that elect to be governed by the expenditure test, IRS regulations define two types of lobbying communications:
Direct lobbying -- In general, any attempt to influence any legislation through communication with a legislator, an employee of a legislative body or other government official, which:
(1) refers to specific legislation; and
(2) reflects a view on such legislation.
Grassroots lobbying -- any attempt to influence any legislation through an attempt to affect the opinions of the general public or any segment thereof. A grassroots lobbying communication is one which:
(1) refers to specific legislation;
(2) reflects a view on that legislation; and
(3) encourages the recipient to take action with respect to the legislation, either by
(a) directly urging the recipient to contact legislators or other government officials in order to influence legislation;
(b) including the address, phone number or similar information about a legislator or government official;
(c) providing a petition, postcard or other prepared message to send to a legislator or government official in order to influence legislation; or
(d) identifying one or more legislators who will vote on the legislation as opposing the organization's view; being undecided; being the recipient's representative in the legislature; or being a member of the legislative committee that will consider the legislation. Encouraging the recipient to take action does not include naming the main sponsor(s) for the purposes of identifying the legislation.
The IRS does allow for certain exceptions to the definitions of lobbying, such as nonpartisan analysis or research, or "self-defense lobbying." In addition, the regulations allow a charity to count certain communications as direct lobbying if they encourage the charity's members to take action.
Any activity that does not meet these criteria is regarded as advocacy, which charities may conduct without limit. The IRS does not view attempts to influence administrative rules, regulations or other executive branch actions as lobbying. Be advised, however, that if your organization engages in these activities, whether at the federal or state level, it may be subject to other federal and/or state registration and reporting requirements (see below).
Some Examples of Advocacy and Lobbying (IRS Definitions)
It’s easy for an organization that is trying to comply with the law to become confused about whether its activities are direct lobbying, grassroots lobbying or advocacy. The IRS has provided some examples of each in order to provide additional clarity with respect to its lobbying regulations of public charities. The following examples are abbreviated versions of those issued by the IRS.
Charities are expressly prohibited from intervening in a political campaign of any candidate for public office, and from engaging in partisan activity of any kind. In addition, charities may not use government funds, such as government grants or contracts, to lobby, including the use of federal funds to lobby for federal grants or contracts.
Registration and Reporting Requirements
In addition to the IRS limitations on lobbying activities, charities are also governed by state and federal lobby disclosure laws which require certain organizations and individuals to register and file periodic reports on their lobbying activities. If your organization pays anyone -- be it a staff member, outside lobbying firm or a volunteer who is reimbursed for expenses -- to influence legislation or administrative rules, you should explore the extent to which these laws apply to you.
A Word about Private Foundations and Lobbying
Under federal law and regulations, with narrowly drawn exceptions, private foundations are prohibited from lobbying and can incur severe tax penalties and possible loss of tax-exempt status for doing so. However, foundations can communicate with government officials in ways that do not constitute lobbying. IRS lobbying regulations also allow private foundations, without penalty, to make general support grants to publicly supported charities that do some lobbying, provided the grant is not earmarked for lobbying purposes. A private foundation may also make special purpose grants for projects that involve lobbying as long as the grant is not earmarked for lobbying purposes, and the grant does not exceed the nonlobbying amount of the project budget. IRS regulations also provide protection for foundations that make grants in accordance with IRS guidelines to charities that later lose their tax exemption because of excess lobbying.