Lobbying, Advocacy and
the Law for
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.
Nonprofit Lobbying Laws:
Lobbying is not legal
Even if lobbying is legal it will make an
organization subject to audit by the IRS
There are no clear definitions of what is
lobbying and what is not lobbying
This tutorial will address these myths
Is lobbying legal?
YES! Lobbying by charitable
nonprofits -- tax-exempt under
section 501(c )(3) of the
Internal Revenue Code -- is
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…
The Substantial Part Test and the
Expenditure Test, also known as the
One set of rules is generally preferable for most
charities – The Expenditure Test enacted in 1976
What is the “substantial part”
Lobbying cannot be a substantial part of
your organization’s activities.
If it is, your organization may lose its tax
exemption and with it the right to receive tax
What is the expenditure test?
The Expenditure test was enacted in
1976 and implemented by IRS rules in
1990 to provide clear ceilings for lobbying
expenditures by 501(c)(3)s and clear definitions
of what is and is not lobbying.
Frequently known as the 501(h) lobby election,
the expenditure test did not replace the older
substantial part test but is an alternative to it.
Who does the
Only charitable nonprofits that “elect”
to come under it (or section 501(h) of the
Internal Revenue Code).
Lobbying expenditures are to be reported
annually on tax Form 990 Schedule A
The Choice: Substantial Part vs. Expenditure Test
Substantial Part Expenditure Test
No certain and definite Clear and specific definitions
allowable amounts of of lobbying
lobbying expenditures Certain and definite allowable
A single year violation may
amount of lobbying
result in the loss of tax-
Safe harbor exceptions
No jeopardy to tax-exempt
Importance of an issue is a
status for a single year
relevant factor in determining violation
permissible lobbying activity Importance of an issue is not a
Possible additional reporting factor in measuring
burden on tax form 990 permissible lobbying activities
Possibly less reporting burden
than substantial part test
Expenditure Test rules in detail
As stated before the expenditure test rules are
preferable because they provide clear
expenditure limits and definitions of
lobbying for 501(c)(3) organizations.
By default, 501(c)(3) organizations are under
the vague, substantial part test until they
affirmatively “elect” the expenditure test.
How much can my organization spend on
lobbying under the expenditure test?
A generous amount:
– 20 percent of the first $500,000 of
– 15 percent of the next $500,000;
– And so on up to $1 million a year.
See the Nonprofit Lobbying Guide p.55
Charitable nonprofits may spend 1/4
of the total amount of their lobbying budget
on grassroots lobbying.
See the Nonprofit Lobbying Guide p. 55
Example of ABC Nonprofit
ABC charity has annual expenditures of
20% of $250,000 = $50,000 = Direct lobbying
25% of $50,000 = $12,500 = Grassroots
Nonprofits can spend a significant amount on
lobbying under the expenditure test.
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.
Direct lobbying examples continued
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.
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
– Supply the public with legislative contact
Ballot Initiatives and
When a nonprofit urges the public
to vote for or against a ballot initiative
Lobbying communications for or against ballot
initiatives may be conducted through the media
or other means.
Lobbying for or against ballot initiatives and
referenda is considered direct lobbying, not
grassroots, because the public becomes the
Grassroots lobbying examples
A state arts organization sends a letter to
people and organizations who are not their
members, asking them to contact their
Representatives to urge them to support a
bill that would expand state funded arts
education programs. The cost of the time it
took to create and disseminate the letter
would count against the lobbying budget of
Grassroots lobbying examples
An association of land trust organizations prepares
sample letters and a fact sheet and uses them to
send out an action alert by email to landowners in
several counties asking them to email and call
their elected officials to oppose a new bill related
to property taxes. The expense of the time it took
to prepare the materials and send out the message
count toward the association’s lobbying budget.
How can a 501(c)(3) organization
Simply fill out IRS form 5768 that
informs the IRS that you have elected to
follow the expenditure test for lobbying.
It is only one-page and need only be filed
Where can this form be
It is available from
Center for Lobbying in the Public Interest
at www.clpi.org/pdf/f5768.pdf or from
the IRS Web site at
Will IRS “red flag” a 501(c)(3)
for an audit if it elects?
An IRS letter (2000) to Center for Lobbying in the
Public Interest states clearly that election does not
expose nonprofits to an increase audit risk.
See a copy of this important letter at
Will a 501(c )(3) organization’s tax
status be affected if we elect the
Unlike the “substantial part” test, there is no
jeopardy to tax-exempt status for a single
year’s violation under the expenditure test.
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
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).
Important exclusions to
Most public policy work is not lobbying.
The IRS regulations on lobbying further
exclude key legislative related activities:
Self-Defense Lobbying: Matters affecting a
nonprofit’s own status.
– Opposing proposals to curtail nonprofit lobbying;
– Lobbying in support of a nonitemizer charitable tax
Not self-defense lobbying:
– Lobbying for programs in the nonprofit’s field (e.g.,
health, welfare). E.g., a children’s nonprofit lobbying
for increased school appropriations.
Contact with Executive Branch employees
in support of, or opposition to, proposed
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.
Response to written requests from a
legislative body for technical advice on
pending legislation, even if the organization
takes a position on the legislation.
– E.g., a request to provide testimony at a
– Cannot be a request from an individual
Discussion of broad social, economic and
similar policy issues whose resolution
would require legislation.
– Even if specific legislation on the matter is
– So long as the discussion does not address the
merits of specific legislation.
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.
So long as ...
Nonpartisan analysis, study, research
…so long as:
– 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 (for grassroots).
Lobbying by volunteers only to the extent the nonprofit
does not incur expenses associated with the volunteers’
Example: A YWCA holds a “lobby day” at the state
capitol where volunteers visit with their Representatives
about the Y’s position on pending legislation. As long as
the Y does not pick up the volunteers’ costs it does not
incur lobbying expenditures. This exception allows for
organizations to significantly increase their lobbying
capacity by involving volunteers as spokespersons.
Is it lobbying?
A local nonprofit dedicated to education issues
organizes a breakfast at which various public
leaders are invited. The nonprofit’s board
chairperson makes a presentation about school
reform that includes a recommendation in
opposition to school vouchers.
There is a Congressional bill currently pending to
implement school vouchers.
Is it lobbying?
No, it is not lobbying as long as the board
chairperson was making general policy
recommendation but not necessarily urging
support or opposition to specific legislation.
Is it lobbying?
The same nonprofit runs an ad in the local
newspaper calling for parents in the community to
speak up and oppose the proposed school
The ad instructs citizens to call specific members
of Congress today and gives the legislators’ phone
Is it lobbying?
Yes, it is lobbying.
The ad referred to specific legislation and
contained a call to action.
Is that all we need to know
about the regulations?
It depends. If you plan extensive lobbying, you
should be well-acquainted with the regulations.
Keep in mind that lobbying latitude under the
expenditure test is generous.
Further questions about lobbying?
– Contact CLPI at (202) 387-5048 or at
We hope this tutorial
Contact CLPI staff
at (202) 387-5048 or at