As long as you follow IRS rules, lobbying can be a powerful strategy to raise awareness of your mission, mobilize stakeholders and attract media attention. It also can result in enhanced government investment in social programs and reform of laws and regulations that govern nonprofits.
But you must make sure your nonprofit’s lobbying activities don’t exceed the scope allowed by the IRS.
Lobbying is defined as a communication that attempts to change particular legislation. Advocacy, on the other hand, promotes general causes and issues. Nonprofits may do unlimited advocacy work, but the scope of their lobbying is limited by IRS rules.
Lobbying always involves advocacy, but advocacy doesn’t necessarily involve lobbying. The key to determining whether an activity is considered lobbying or advocacy depends in part on whom you’re trying to influence. Do they make the laws or simply follow and enforce them? Do you want your audience to vote a certain way on proposed legislation or simply be more aware of issues?
If your audience makes laws and you’re attempting to change legislation by encouraging your audience to vote a certain way, it’s lobbying. If, on the other hand, you’re speaking with an administrative official or other non-law-making individual or group about a broad policy change, it’s advocacy.
Keep in mind that promoting a point of view and providing public education aren’t considered lobbying activities — even if you’re speaking with a public official. The discussion crosses the line only when specific legislation is discussed or you urge a particular vote.
Nonprofits often shy away from lobbying for fear of losing their tax-exempt status. And some organizations worry they don’t have the proper resources, time or qualifications to lobby.
But the fact is that nonprofits can lobby without endangering their tax-exempt status and without major financial resources or expert assistance. The Center for Lobbying in the Public Interest suggests that even small nonprofits can make an impact by devoting as little as three hours per week to the endeavor.
The IRS evaluates lobbying based on whether a nonprofit chooses to report its activities under the 1976 lobby law or uses the “no substantial part” test. The lobby law provides nonprofits with a clearly defined set of rules, and requires organizations to file Form 5768, known as the “h” election. The “no substantial part” rule is much more vague and subject to interpretation.
If, for example, an organization chooses to use the lobby law, it may spend 20% of its first $500,000 in annual expenditures on lobbying tax-free. This percentage decreases as annual expenditures increase, and annual nontaxable lobbying expenses are capped at $1 million. An excise tax will apply as spending limits are exceeded.
If a nonprofit doesn’t report lobbying under the 1976 law, it must meet the “no substantial part” test, which stipulates that nonprofits can spend only an insubstantial amount of their resources on lobbying. The specific dollar amount isn’t defined, but courts have ruled that more than 5% of an organization’s budget, time and effort is substantial. Most organizations, therefore, aim for a percentage below 5%.
Whether you’re talking directly to a legislator, conducting an email or letter-writing campaign, or organizing a rally, lobbying can be an effective way to further your cause. But be sure to choose your issues wisely and closely follow IRS guidelines.
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