I walked past the event calendar in my gym recently and was momentarily surprised to find that there are actually classes that teach spinning.
Who knew? I did regain focus when I saw all those bicycle riders going nowhere. Often during any election season, and perhaps particularly this one, my thoughts turn to a different form of spinning.
Perhaps the prevalence of spin being applied to significant issues is a reminder to us all of the need to be involved in the public discourse on issues of importance to us. It can be critical for nonprofits to express their positions on issues that may have an effect on the nonprofit sector and on their individual missions.
The good news is that 501(c)(3) nonprofits are permitted to engage in a limited amount of lobbying and in educational efforts on public policy matters.
This post will describe what types of activities are regarded as lobbying by the IRS and, hopefully, serve as a catalyst for nonprofits to look carefully at their activities and seek advice, as necessary, to keep any lobbying activities within permissible limits.
An organization can’t qualify for 501(c)(3) status if a substantial part of its activities is attempting to influence legislation, or lobbying.
There are two tests for lobbying. The substantial part test focuses on lobbying activities while a test under Internal Revenue Code §501(h) focuses on expenditures for lobbying activities. Nonprofits must make an election to have their activities measured by the 501(h) expenditure test.
Activities Test
Under the activities test, a nonprofit’s activities (by employees or volunteers) to contact, or urge the public to contact, members of a legislative body to propose, support, or oppose legislation will be regarded as lobbying activities.
Examples include:
- Sending letters to government officials or legislators;
- Meeting with or calling government officials or legislators;
- Sending or distributing letters or publications to members or the general public;
- Using direct mail, advertisements, or press releases; and
- Holding rallies and demonstrations.
There is no objective definition of what is a “substantial part” of a nonprofit’s activities, which can make it difficult for a nonprofit to implement lobbying activities with a high comfort level that it is in compliance with the test.
Expenditure Test
Under the 501(h) expenditure test, lobbying expenditures comprise expenditures for direct lobbying and grassroots lobbying activities and include overhead and administrative expense allocable to those activities. The test establishes the permissible amount of a nonprofit’s lobbying expenditures based upon percentages of its total expenditures for exempt purposes.
Lobbying expenditures are expenditures made for the purpose of attempting to influence legislation through:
- Communication with a member or employee of a legislative or similar body or with a government official or employee or with the general public in a referendum initiative or similar procedure (direct lobbying), and
- Communications that attempt to affect the opinions of the general public or a part of the general public (grassroots lobbying).
Direct communication with a legislator or government official is treated as lobbying if the communication refers to specific legislation and reflects a view on such legislation.
A communication to the general public or a part of the general public will be considered lobbying if it refers to specific legislation, reflects a view on such legislation, and encourages the recipient to take action about the specific legislation.
Some examples of encouraging action in a communication are:
- Urging the recipient to contact legislators;
- Providing contact information for a legislator;
- Providing a petition, postcard, or other means to communicate with a legislator; and
- Identifying one or more legislators who may have an impact on the passage of the legislation.
Under either test, some exceptions for communications that might appear to be lobbying include:
- Engaging in nonpartisan analysis, study, or research and publishing the results;
- Responding to a governmental body or committee’s request for technical advice; and
- Appearing before, or communicating with, a legislative body on matters that might adversely affect your organization.
There are many resources on the subject available online, including on the websites of the IRS, New Jersey’s Center for Non-Profits, and the National Council of Nonprofits. See also last month’s Pro Bono Partnership Pundit post for a discussion of the limits on political activity by 501(c)(3) nonprofits.
Additionally, next month’s Pro Bono Partnership Pundit post will address compliance with the requirements of the 501(h) election in more detail.
Kent E. Hansen is a senior staff attorney with Pro Bono Partnership, Inc. Pro Bono Partnership provides free business and transactional legal services to nonprofits serving the disadvantaged or enhancing the quality of life in neighborhoods in New York, New Jersey, and Connecticut.