This information taken from coloradononprofits.org non-profit advocacy toolkit

Can Charities Lobby?

Yes they can - and they should!

Contrary to popular opinion nonprofits are legally entitled to lobby and advocate for the causes and constituents they represent. The confusion often results because charitable nonprofits (designated as 501(c)(3) organizations) are prohibited from participating in partisan politics – working for a political party or candidate. But it is imperative that nonprofits get involved in the political process as it affects government funding for their programs and policies that impact their ability to carry out their charitable missions.

What Exactly is “Lobbying”

Lobbying is defined by federal tax law as any attempt to influence specific legislation. Lobbying can be done by (1) contacting or urging the public to contact policy makers for the purpose of proposing, supporting, or opposing legislation or (2) by advocating the adoption or rejection of legislation. Regulations divide lobbying into two types, direct and grassroots. Specific rules apply to each type.

Policy Makers refers to anyone who has direct influence over the outcome of a piece of legislation and could include:

• Legislators
• Legislative aides
• Governor
• Lt. Governor
• President
• Others

In the case of a ballot initiative or referendum, voters are considered policy makers, because they decide the outcome of legislation.

Direct lobbying is any attempt to influence legislation through communication with any member or employee of a legislative body, or with any other government official who may participate in the formulation of legislation. There is a three part “test” to determine if a specific activity constitutes direct lobbying:

1. The principal purpose is to influence legislation,
2. There is reference to a specific piece of legislation (even if the legislation is not currently under consideration), and
3. A point of view is expressed.

Asking members of your organization to contact legislators is considered direct lobbying since they are part of the organization and presumably working on its behalf.

Grassroots lobbying is any attempt to influence legislation by affecting the opinion of the general public. In this case the organization encourages the public to lobby. The organization refers to a specific piece of legislation and provides information to the public on how to contact decision makers. Under certain circumstances mass media ads are an example of grassroots lobbying.

What is not Lobbying?

If your organization makes the 501(h) election, you should be aware that many activities do not count as lobbying, including:

1. Distributing materials to members of your organization that discuss legislation but do not urge action by the members.
2. Making available the results of analysis or research on a legislative issue, as long as the facts are presented fully and fairly.
3. Responding to written requests from a legislative body (not an individual legislator).
4. “Self-defense” lobbying on matters that affect the organization's existence, powers and duties, tax-exempt status, or deductibility of contributions.
5. Discussing broad social issues, without mentioning specific legislation.

What are the Financial Limits?

The general rule governing all nonprofits under section 501(c)(3) of the IRS code is that “no substantial part” of their activities may be directed toward influencing legislation. The substantiality rule may be interpreted quite widely and be dependent on the nonprofit’s prominence, perceived impact on public opinion and use of unpaid volunteer labor. An organization with a committed cadre of volunteers that successfully lobbies to pass or defeat a bill may be considered to have substantially influenced legislation, even though it did not spend any money.

In 1976, sections 501(h) and 4911 were added to the Internal Revenue Code to set clear definitions of financial limits and acceptable activities and allow public charities to “elect” to be governed by these regulations instead of the broad “substantiality” rule. (Do note that those organizations supported in large part by government grants are subject to different rules discussed later.) The IRS released the final regulations in August 1990. Nonprofits electing to come under sections 501(h) and 4911 may spend the following percentages of their “exempt purposes expenditures”* on lobbying activities:

*For most organizations, exempt purposes expenditures are the budget. Exempt purpose expenditures do not include tax on unrelated business, expenses associated with unrelated business, capital expenses for new buildings or permanent improvements, expenses for a separate fund raising unit, or the services of a fund raising consultant.

Note that the above amounts are for “direct lobbying.” No more than 25 percent of the permitted amounts may be spent on “grassroots” lobbying. In addition, there is no limit on the amount of lobbying that may be conducted by volunteers who are not reimbursed.

Unless your organization is involved in a substantial amount of lobbying, you are unlikely to even come close to the financial limits. The 501(h) election actually allows for much simpler record keeping - organizations which lobby under that “insubstantial part test” are required to provide the IRS with a detailed narrative description of their activities.

Even if you do exceed the limits, you are subject to a tax penalty but do not immediately lose your exemption. The excise tax is one quarter of the amount of the excess lobbying expenditures. The IRS uses a four-year averaging period, and only if you exceed the limits by more than 50 percent over the entire period are you in danger of losing your exemption. It is also important to remember that lobbying expenses are counted on a rolling average over four years.

Nonprofit activities during an election

There are rules governing what charitable nonprofit organizations can and cannot do leading up to and during an election. The most important thing to remember is that a 501(c)(3) nonprofit must remain nonpartisan at all times. An organization may support or challenge a piece of legislation or an issue, but may not support or criticize an elected official or candidate for office. If a particular issue is a hot partisan item and each candidate has a clear and opposing view on the issue, nonprofits should exercise caution in how outspoken they are about that issue so that they do not appear to be supporting one candidate.

*While nonprofit organizations cannot participate in or contribute to a candidate’s campaign, volunteers, staff or board members of an organization may do so provided that they are acting as individual citizens, not on behalf of the organization.