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									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:
                Common Myths

 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
 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…

   The Substantial Part Test and the
    Expenditure Test, also known as the
    501(h) election

   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
    deductible contributions.

      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
              expenditure test
                 apply to?

   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
    exempt status
                                              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
      annual expenditures;
    – 15 percent of the next $500,000;
    – And so on up to $1 million a year.

See the Nonprofit Lobbying Guide p.55

         Grassroots lobbying
   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
   lobbying limit
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
      legislators; and
    – Supply the public with legislative contact

          Ballot Initiatives and
   When a nonprofit urges the public
    to vote for or against a ballot initiative
    or referendum.

   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
    the organization.

       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 or from
    the IRS Web site at

Will IRS “red flag” a 501(c)(3)
   for an audit if it elects?
   Absolutely not.
   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
         expenditure test?
 No.
 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
  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).

     Important exclusions to

 Most public policy work is not lobbying.
 The IRS regulations on lobbying further
  exclude key legislative related activities:

                Not Lobbying
   Self-Defense Lobbying: Matters affecting a
    nonprofit’s own status.
   For example:
    – 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.

             Not Lobbying

   Contact with Executive Branch employees
    in support of, or opposition to, proposed

              Not Lobbying
   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.

               Not Lobbying
   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

               Not Lobbying
   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.

               Not Lobbying
   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).

                Not Lobbying
 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
    vouchers legislation.

   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
                was helpful.
Contact CLPI staff
at (202) 387-5048 or at


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