Yes, Nonprofits Can Lobby!
Disclaimer: This is a blog post intended to provide general legal information only. It should not be regarded as legal advice. If you would like to discuss how these rules apply to your specific organization please contact me for a consultation.
Note: This blog post covers lobbying rules for 501(c)(3) nonprofits only. Other types of nonprofits may be able to engage in substantially more lobbying activities and they often can engage in some political campaigning, within certain limits. This blog post will cover rules applicable only to Internal Revenue Code Section 501(c)(3) nonprofits and not other types of Section 501(c) nonprofits. References to “nonprofits” and the like in the post will generally refer to Section 501(c)(3) nonprofits unless otherwise noted.
A common misconception is that 501(c)(3) nonprofits cannot engage in any lobbying or express a position on any policy issue. It's not an accurate portrayal of the law. It is true that 501(c)(3) nonprofits cannot endorse candidates for public office or otherwise use their resources to support or oppose a candidate for office in any way. However, 501(c)(3) nonprofits can engage in political discourse around policy issues and even take positions and lobby on specific pieces of legislation or legislative proposals, within certain limits.
CC BY-SA 2.0 Sustainable Economies Law Center
The limits are much more permissive than many nonprofit leaders realize. I used to work on staff at a 501(c)(3) nonprofit where I led legislative advocacy campaigns. I routinely went up to the State Capitol in Sacramento for day-long lobbying extravaganzas, and yes, all of this was on the clock for my nonprofit job that paid me a salary (they even reimbursed me for my train tickets to and from the Capitol). This was entirely above board. However, because my former employer engaged in a considerable amount of overt lobbying, we had to pay close attention to the rules for 501(c)(3) nonprofits engaged in lobbying to make sure we were not exceeding any legal limitations. So part of my job was also to oversee a system of tracking all the resources within our organization that went into lobbying efforts, which we then reported in our annual Form 990 filing with the IRS. However, other nonprofits that lobby very infrequently or who just write a letter supporting or opposing a piece of legislation only occasionally may be able to justify skipping the extensive tracking and reporting requirements altogether.
My personal opinion is that most 501(c)(3)s should seek to lobby as much as they are able to do so lawfully because in order to have good public policy lawmakers need to hear from nonprofits. Most nonprofits that I’ve served have staff and volunteers who have deep and practical expertise on important topics that lawmakers need to address, but most of these organizations spend little to no time engaging with lawmakers. Lawmakers at all levels of government cast votes on important pieces of legislation everyday and in some cases much of what they have heard about a particular bill came largely from for-profit industry lobbyists. Nonprofits and public interest organizations often don’t make their voices heard due to a variety of reasons, including lack of resources, but sometimes the barrier is simply a misunderstanding about lobbying rules.
Here are key things that 501(c)(3) nonprofit leaders should know about lawfully engaging in lobbying and other policy advocacy work:
1) What counts as lobbying? The IRS rules affect both direct lobbying and grassroots lobbying. Direct lobbying is what it sounds like: communication directly with lawmakers (or their staff) about a legislative matter where the goal is to persuade them to act in some way as to the legislative matter. Grassroots lobbying occurs when an organization urges members of the public to contact lawmakers to advocate for a particular position or act. Note that a public statement expressing a position on a piece of legislation doesn't necessarily count as grassroots lobbying if there is no request or suggestion that people contact lawmakers to express such a position on the matter. There are different limitations on how much of each—direct lobbying and grassroots lobbying—a 501(c)(3) nonprofit may engage in. Specific actions of the organization that count as direct lobbying can include things like writing a letter to lawmakers, meeting with lawmakers (or their staff), travel to and from those meetings, travel expenses to and from those meetings, preparation for those meetings (e.g. as planning out talking points). To be clear, not every communication with a lawmaker necessarily counts as lobbying; if there's no discussion of specific policy matters and if the purpose of the communication is simply to educate the lawmaker about the nonprofit's work or a general issue area then this probably doesn't count as lobbying. Specific actions of the organization that count as grassroots lobbying can include time spent creating flyers, email blasts, tweets, speaking to a community group, and so on, provided there is a position about a specific policy matter expressed and where there is a call for readers/listeners to contact lawmakers to express that position. There are some exceptions to these rules, including for situations where an organization produces a detailed report about an issue that seeks to be at least somewhat objective and to analyze numerous possible solutions to an issue. If an opinion about the merits of a public policy matter are expressed therein, it may not count as lobbying.
2) If your organization engages in only a trivial amount of lobbying then you don't need to take on the administrative hassles of carefully tracking what resources go into lobbying. Nonprofits that engage in legislative advocacy might be categorized as only doing an “insubstantial” amount of lobbying or they might be categorized as those that do more than an “insubstantial” amount. For those that do only an “insubstantial” amount, they can simply report to the IRS on the Form 990 that only an insubstantial amount of organization resources went into “influencing legislation” for the year without submitting a detailed report with precise numbers. Those that do more than an “insubstantial” amount need to track resources carefully and report certain information to the IRS annually. What counts as only an insubstantial amount? There is no precise threshold in the law. My opinion is that if your organization has many activities going on and it only occasionally signs onto a policy position letter, but doesn’t spend money or staff time on in-person lobbying meetings, then that's probably insubstantial. Also, if an organization has a bunch of expenses associated with non-lobbying work, and the people engaging in lobbying on behalf of the organization are volunteers, then that would likely qualify as insubstantial resources going to lobbying efforts, thus not triggering more onerous reporting requirements. An organization must consider the scope of the lobbying efforts in the context of the organization overall so the amount can vary depending on the organization's other activities.
3) If your organization intends to engage in more than an insubstantial amount of lobbying then you need to take certain steps to ensure compliance with the law. First your organization should file a Form 5768 with the IRS, which is also known as doing a “501(h) election.” This form notifies the IRS that your organization intends to do a substantial amount of lobbying, and you are promising to keep track of the amount of resources that go into lobbying so that you can ensure that you are not exceeding the limits in the rules. Note that you can revoke your 501(h) election later if you determine that your organization won't be engaging in a substantial amount of lobbying. Once the organization has filed a Form 5768 with the IRS, when preparing its annual Form 990 the organization should fill out and submit Schedule C of the Form 990 to disclose details about the amount of its resources that went to lobbying for that fiscal year and to describe the lobbying activities.
4) The limits for how much of an organization's resources can go toward lobbying depends on the organization's overall budget. Once your organization has determined that you will need to closely track lobbying expenses, you must ensure that you do not spend more than the amount reflected in the table below on an annual basis:
| Organisation's Total Expenditures | Total Lobbying Limit |
|---|---|
| $500,000 | 20% of organization's total expenditures |
| Between $500,000 and $1 Million | $100,000 plus 15% of the excess over $500,000 of the organization's total expenditures |
| Between $1 Million and $1.5 Million | $175,000 plus 10% of the excess over $1 Million of the organization's total expenditures |
| Between $1.5 Million and $17 Million | $225,000 plus 5% of the organization's total expenditures over $1,500,000 |
| Over $17 Million | $1 Million |
5) What if an organization thinks it will want to exceed the limits? Many 501(c)(3)s have an affiliated 501(c)(4) nonprofit. An IRC Section 501(c)(4) nonprofit can engage in much more lobbying than a 501(c)(3) and it can also support candidates running for office, within certain limits. There are other types of nonprofits you might consider forming to complement the work of your 501(c)(3).
6) If your organization is engaging in a substantial amount of lobbying then someone in a position of responsibility over those lobbying activities should become well educated on the nuances of the rules. This blog only provides a high level summary of lobbying rules for 501(c)(3) nonprofits; it doesn't cover all of the nuances of the limitations. The Alliance for Justice has a great website with guidance materials for nonprofits on this subject. They also periodically host webinars and trainings. I cannot say enough about how helpful this organization is for nonprofits that engage in lobbying. You can also contact me for a consultation on complying with lobbying rules for 501(c)(3) nonprofits, about lobbying in other types of nonprofits, about setting up a sister 501(c)(4) to accompany your 501(c)(3), or any other nonprofit law questions. Make sure leaders at your organization take the time to become knowledgeable about the rules and periodically check up on your organization’s compliance to help protect your organization’s 501(c)(3) status.