«Speak for Yourself Nonprofit Advocacy Toolkit Contents Can Charities Lobby? What Exactly is “Lobbying” What is Not Lobbying? What are the ...»
Speak for Yourself
Nonprofit Advocacy Toolkit
Can Charities Lobby?
What Exactly is “Lobbying”
What is Not Lobbying?
What are the Financial Limits?
Making the 501(h) Election
Registering as a Lobbyist
Funding Lobbying Efforts
Nonprofit activities during an election
Voter and Election Activities All 501(c)(3) Organizations Can Do on a Non-Partisan Basis............... 9
Election Activities 501(c)(3) Organizations CANNOT Do
Tips for Contacting Legislators
Tips for Hosting a Legislative Visit
Lobbying and Advocacy Resources
Nonprofit Advocacy Resources
Note: This tool provides general guidelines only and is intended to serve as an overview. Because the application of law is fact-sensitive and context is critical, this toolkit should not be relied upon as legal advice. Organizations should consult with their attorney to receive guidance on special rules governing their conduct. If your organization has specific questions, a resource list is included on page 14.
Colorado Nonprofit Association Advocacy Toolkit 2 Can Charities Lobby?
Yes they can - and they should!
Contrary to popular opinion nonprofits are legally entitled to lobby and advocate for the causes and constituents they represent. The confusion often results because charitable nonprofits (designated as 501(c)(3) organizations) are prohibited from participating in partisan politics – working for a political party or candidate. But it is imperative that nonprofits get involved in the political process as it affects government funding for their programs and policies that impact their ability to carry out their charitable missions.
What Exactly is “Lobbying” Lobbying is defined by federal tax law as any attempt to influence specific legislation. Lobbying can be done by (1) contacting or urging the public to contact policy makers for the purpose of proposing, supporting, or opposing legislation or (2) by advocating the adoption or rejection of legislation.
Regulations divide lobbying into two types, direct and grassroots. Specific rules apply to each type.
In the case of ballot initiatives or referenda, voters are considered policy makers, because they decide the outcome of legislation at the voting booth. Any communications made to members of the general public encouraging them to vote a certain way on ballot measures is direct lobbying.
Direct lobbying is any attempt to influence legislation through communication with any member or employee of a legislative body, or with any other government official who may participate in the formulation of legislation. Encouraging your members to express your organization’s position to these individuals is also direct lobbying
There is a three part “test” to determine if a specific activity constitutes direct lobbying:
1. The principal purpose is to influence legislation,
2. There is reference to a specific piece of legislation (even if the legislation is not currently under consideration), and
3. A point of view is expressed. Usually, some kind of action is advocated.
Grassroots lobbying is a communication with the public that, like direct lobbying, also is intended to influence legislation, makes reference to specific legislation reflects a point of view and includes a "call to action." The difference is that a grassroots lobbying communication encourages members of the general public to contact government officials about legislation. Generally, if a communication does not have a viewpoint or a call to action but provides information on a law to the public, it should not be considered lobbying. Again, if the communication is directed at voters and intended to encourage them to vote a certain way on a ballot measure, it is direct lobbying. There is an exception for paid mass Colorado Nonprofit Association Advocacy Toolkit 3 media advertisements on "highly publicized legislation,” which are presumed to be grassroots lobbying if they run within two weeks of a vote on legislation, even if the ad does not encourage members of the public to contact government officials.
What is not Lobbying?
If your organization makes the 501(h) election, you should be aware that many activities do not count
as lobbying, including:
1. Distributing materials and other communications of direct interest to members of your organization that express a point of view on legislation but do not urge action by the members.
2. Making available the results of analysis or research on a legislative issue, as long as the facts are presented fully and fairly.
3. Responding to written requests from a legislative body (not an individual legislator).
4. “Self-defense” lobbying on matters that affect the organization's existence, powers and duties, tax-exempt status, or deductibility of contributions.
5. Discussing broad social issues, without mentioning specific legislation.
What are the Financial Limits?
The general rule governing all nonprofits under section 501(c)(3) of the IRS code is that “no substantial part” of their activities may be directed toward influencing legislation. The substantiality rule may be interpreted quite widely and be dependent on the nonprofit’s prominence, perceived impact on public opinion and use of unpaid volunteer labor. An organization with a committed cadre of volunteers that successfully lobbies to pass or defeat a bill may be considered to have substantially influenced legislation, even though it did not spend any money.
In 1976, sections 501(h) and 4911 were added to the Internal Revenue Code to set clear definitions of financial limits and acceptable activities and allow public charities to “elect” to be governed by these regulations instead of the broad “substantiality” rule. (Do note that those organizations supported in large part by government grants are subject to different rules discussed later.) The IRS released the final regulations in August 1990. Nonprofits electing to come under sections 501(h) and 4911 may
spend the following percentages of their “exempt purposes expenditures”* on lobbying activities:
Budget size* Total annual expenditures that may be spent on lobbying.
Up to $500,000 20% $500,000 to $1,000,000 $100,000 + 15% of budget in excess of $500,000.
$1,000,000 to $1,500,000 $175,000 + 10% of budget in excess of $1,000,000.
$1,500,000 to $17,000,000 $225,000 + 5% of budget in excess of $1,500,000.
Over $17,000,000 $1,000,000 *For most organizations, exempt purposes expenditures are the budget. Exempt purpose expenditures do not include tax on unrelated business, expenses associated with unrelated business, capital expenses for new buildings or permanent improvements, expenses for a separate fund raising unit, or the services of a fund raising consultant. Note that the above amounts are for “direct lobbying.” No more than 25 percent of the permitted amounts may be spent on “grassroots” lobbying. In addition, there is no limit on the amount of lobbying that may be conducted by volunteers who are not reimbursed.
Colorado Nonprofit Association Advocacy Toolkit 4 Unless your organization is involved in a substantial amount of lobbying, you are unlikely to even come close to the financial limits. The 501(h) election actually allows for much simpler record keeping organizations which lobby under that “insubstantial part test” are required to provide the IRS with a detailed narrative description of their activities.
Even if you do exceed the limits, you are subject to a tax penalty but do not immediately lose your exemption. The excise tax is one quarter of the amount of the excess lobbying expenditures. The IRS uses a four-year averaging period, and only if you exceed the limits by more than 50 percent over the entire period are you in danger of losing your exemption. Lobbying expenses are counted on a rolling
average over four years. See sample below:
Making the 501(h) Election To make the 501(h) election, file IRS Form 5768 “Election/ Revocation of Election by an Eligible Section 501(c)(3) Organization to make Expenditures To Influence Legislation” and return it to the IRS before the end of your fiscal year. This is a very simple, one-page form that can be downloaded from www.irs.gov/pub/irs-pdf/f5768.pdf and is included in this packet. If, for some reason, you want to cancel the election and return to being governed by the “substantiality” rule, the IRS must be notified before the beginning of your fiscal year (use the same form).
Colorado Nonprofit Association Advocacy Toolkit 5 Colorado Nonprofit Association Advocacy Toolkit 6 Record Keeping Many organizations are understandably concerned that the rules are complicated and require substantial record keeping. Reporting your organization’s lobbying expenditures actually requires very little extra paperwork. The amount of money your organization spends on lobbying each year only needs to be reported in one section of your IRS form 990.
If anyone in your organization is a registered lobbyist with the Colorado Secretary of State, you also need to report your income and expenditures for lobbying expenses to the Secretary of State on a monthly basis. See below in the “Registering as a Lobbyist” section for more details.
Registering as a Lobbyist The Colorado Secretary of State’s elections web page, www.sos.state.co.us/pubs/elections/main.htm, provides the following information about who needs to register as a lobbyist: “Professional Lobbyists are registered through the Secretary of State's office. Lobbyists who receive some form of compensation are required to register prior to engaging in lobbying activity.” “Volunteer lobbyists register with the Chief Clerk of the House of Representatives pursuant to Rule 40 of the Rules of the House of Representatives and Rule 36(c) of the Joint Rules of the House and Senate.” To register as a lobbyist in Colorado From www.sos.state.co.us, click on Elections Center. Go to Lobbyist Information under the Elections Information menu. From this page, you can access lobbyist manuals and directories of registered lobbyists.
To register as a lobbyist, click on "Online Lobbyist System" from the menu at the right. Click "Request
Lobbying Disclosure Reporting You will need to file a report of your lobbying income and expenditures every month, even if there were no lobbying income or expenses for that month. You will also need to report on the bills that you are currently tracking for your organization along with any positions taken on those bills. Reports are due by the 15th of the following month; check the Secretary of State's lobbyist calendar for a yearly schedule.
To file your lobbyist report online, access the Online Lobbyist System and log in with your username and password. Enter your lobbying expenses for the month, and file your report. In the final step, be sure to click "Submit Report" or it won't be processed!
Amendment 41 In 2006, the voters passed Amendment 41 (Colorado Constitution Article XXIX), which prohibits lobbyists from giving any gifts or things of value to elected officials or government employees.
Previously, lobbyists had to report any gifts of $50 or more to statewide elected officials. While current lobbying disclosure rules have not been updated yet for the changes made by Amendment 41, lobbyists should be aware of the gift ban provisions particularly as they are interpreted by the independent ethics commission established by Amendment 41.
Amendment 41 also places a $50 aggregate limit per year on gifts from individuals or organizations to any government employees and officials. The $50 cap does not apply if the recipient gives “lawful consideration of equal or greater value.” While this term is not defined by Amendment 41, it is presumed to include compensation for a good or service, fair trades, and other obligations to be performed in return for the gift.