Considering this is an election year, and nonprofit organizations may be engaging in advocacy on various issues, it is important to ensure your nonprofit organization is complying with all lobbying requirements. Engaging in lobbying activities requires vigilant legal compliance with Internal Revenue Service requirements and adherence to all state specific regulations for states where organizations are active. Otherwise, your organization could put its tax-exempt status at risk. Below is a summary of lobbying considerations for nonprofit organizations.
First, it is essential for nonprofits to understand the difference between lobbying and advocacy. Advocacy encompasses an array of activities that are aimed at raising awareness, educating the public, and promoting social change. On the other hand, lobbying involves influencing the public regarding specific legislation or policy. Discussions of broad policy issues requiring a legislative solution are not necessarily lobbying, so long as it does not discuss the merits of the specific legislation.
There are variousexceptions to what constitutes a lobbying communication. This distinction isimportant because Section 501(c)(3) tax-exempt nonprofit organizations arerequired to adhere to certain limitations on lobbying activities to maintaintheir tax-exempt status. The Internal Revenue Service [MC4] [LV5] setsvery specific thresholds and recommendations for allowable lobbyingexpenditures, and organizations must carefully track and report their lobbyingactivities to remain compliant.
Second, another common compliance issue arises from not understanding the distinction between direct lobbying and grassroots (indirect) lobbying. According to the Internal Revenue Service, direct lobbying is attempting to influence a legislative body through communication with a member or employee of a legislative body, or with a government official who participates in formulating legislation. However, grassroots lobbying is attempting to influence legislation by attempting to affect the opinion of the public with respect to the legislation and encouraging the audience to take action with respect to the legislation. Nonprofit organizations must be mindful of the state specific rules and reporting requirements for each type of lobbying activity and must understand that failing to comply result in state action including penalties, sanctions, and similar actions. Additionally, the Internal Revenue Service has a lower limitation for grassroots lobbying than for direct lobbying meaning that nonprofit organizations can spend less money on influencing legislation through grassroots lobbying.
Third, nonprofit organizations that engage in lobbying must prioritize accurate disclosure, such as: registering lobbyists and lobbying firms, reporting lobbying expenditures, disclosing all payments that are made to lobbyists or lobbying firms, and maintaining accurate records of all lobbying activities.
While lobbying can be a powerful tool for nonprofit organizations in advancing their purpose and effecting social change, it is important to approach these activities with a clear understanding of the compliance and legal landscape. Contact our firm to assist with the complex world of lobbying and let us help you remain compliant.
