Can a nonprofit lobby?

First and foremost, it’s important to understand how the law defines lobbying. The IRS refers to lobbying as “influencing legislation.” This is done directly (as in communicating directly with a legislator or their staff to express a view about specific legislation) or indirectly (such as communicating with members, encouraging target audiences to contact legislators or speaking with the media about specific legislation).

A great deal of advocacy does not fall within the definition of lobbying. For example, a 501©(3) is permitted to make the results of nonpartisan research available or broadly discuss social issues. A complete list of permitted activities is available in IRS Publication 557.

Generally speaking, a 501©(3) public-benefit charity is not allowed to make lobbying a “substantial part” of its activities. Unfortunately, this statement is ambiguous at best. In the past, courts have found expenditures of more than 5 percent of an organization’s budget, time and effort to be “substantial.”

A far more defined test is outlined in 501(h) of the Internal Revenue Code. This sets specific dollar limits on an organization’s lobbying activities and counts only lobbying expenditures (money and staff time) toward those limits. In most cases, this will enable an organization to engage in more lobbying activity with greater security that it will not endanger its tax-exempt status. To do so, you must file IRS form 5768 within the first tax year to which the form applies.

It’s also important to note that all 501©(3) organizations are prohibited from campaigning for or against a candidate for elected office.

Private foundations are absolutely prohibited from lobbying. Grant agreements will typically include language noting that the recipient organization agrees to not use any of the granted funds for lobbying activity.

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