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A picture of raised fists at a protest. (Credit: commons.wikipedia.org)

Charities Can Lobby – But What Activities are Lobbying?

Many tax-exempt organizations are speaking out about what happens in their legislature. Charities are allowed to be active and speak out. Whether locally or in Washington, legislators have a significant impact on charities’ programs and the populations charities serve. Activism can be tricky when it crosses over into lobbying, an activity subject to restrictions imposed by the IRS.

Questions

In order to obtain tax-exempt status, charities cannot spend a substantial part of their activities attempting to influence legislation (aka lobbying). This means charities are allowed to lobby, but only an insubstantial amount. But what is or is not lobbying? Can an exempt organization escape the lobbying limitation if it opposes an Executive Order? What if the charity urges its supporters to call their senators to oppose a cabinet nominee? Can a charity support the organization of a march that supports its charitable mission?

The Rule

A charity can engage in advocacy around its core causes, but has to be cautious when its advocacy places the charity in the position of supporting or opposing legislation or nominees. The IRS prohibits organizations exempt under section 501(c)(3) from being organized or operated as “action” organizations. Generally this prohibition requires exempt organizations to spend an insubstantial amount of time and resources to lobbying. Unfortunately, there is no clear definition of “substantial” or “insubstantial” in the eyes of the IRS. So while a charity may lobby, the line between the safe amount of advocacy and too much lobbying can sometimes be hard to draw. The rules are stricter for private foundations – any time or resources spent on lobbying or political activity by a private foundation is considered a taxable expenditure.

Some types of lobbying are easy to identify. If a charity contacts their senator or representative to urge a vote in favor or against a particular bill, the charity is engaged in direct lobbying. If the charity encourages its supporters to take action in favor or against a particular piece of legislation, the charity is engaged in grass roots lobbying. Direct and grass roots lobbying are subject to the IRS’s rules on lobbying.

Cabinet and Judicial Nominations

A picture of a protest in Union Square, New York, NY.

A picture of a protest in Union Square, New York, NY. (Credit: commons.wikipedia.org)

At first glance, a cabinet or judicial nomination might not seem like “legislation.” Charities might think they are allowed to contact their legislators about nominees, or urge supporters to do so, without considering those activities as lobbying. But under long-standing guidance, the IRS considers a legislature’s advice and consent on the nomination process for cabinet appointees and federal judges to fall within the definition of “legislation.” Therefore, if a charity attempts to sway a legislator in favor or against a cabinet or judicial appointee (either directly or via public opinion), the charity is engaged in lobbying. In the case of a private foundation, such lobbying will trigger a tax liability.

Executive Orders

An Executive Order, on the other hand, is outside the legislative process. A charity can attempt to rally support for or opposition against an Executive Order without triggering the restriction on lobbying so long as it does not urge lawmakers to pass new legislation in response to the order. This applies equally to public charities and private foundations.

Marches & Rallies

In recent weeks numerous high-profile marches and rallies were organized around the country in support of or opposition to a number of causes. Some were in response to particular actions by the Executive Branch, while others were organized to support women’s rights, immigrants’ rights, or refugees’ rights. Where a march furthers a charity’s exempt purpose it is not lobbying. Consider a pro-environment march organized by a charity whose mission involves protecting the environment – the expenditures by the charity will further the charity’s mission, and are entirely appropriate. So long as a march or rally is not in support of or opposition to legislation, or a particular candidate for political office, the charity’s activities will not be subject to the lobbying or political action restrictions imposed by the IRS. As noted above, a march or rally in response to an Executive Order would not be considered lobbying, since an Executive Order is not legislation.

A picture of a protest march. (Credit: commons.wikipedia.org)
Credit: commons.wikipedia.org

We Lobbied or We Want to Lobby– Now What?

If a 501(c)(3) already lobbied, or it wishes to lobby in the future, there are a few steps the organization should take. The first is to set up accounting and bookkeeping procedures that ensure all expenditures on lobbying activity are clearly accounted for. A public charity may choose to make a 501(h) election which will provide a fixed limit on what the charity can spend on lobbying. While the 501(h) election imposes a limit, it also acts as a safe harbor – the charity knows exactly how much it can spend on lobbying activity. Under 501(h), a charity may use up to 20% of the first $500,000 of its exempt-purpose expenditures to lobby – the limit increases depending on the size of the charity’s expenditures on charitable activities.

Charities should note that the 501(h) election only applies to the money spent on lobbying activities. If the charity has very cost effective methods of lobbying (such as rallying support on social media), it will be able to engage in a significant amount of lobbying activity.

A public charity also has the option to forego the 501(h) election. The charity would then be subject to the “insubstantial part test.” The test examines whether the charity’s lobbying activities are “substantial” or “insubstantial”, the vague standard set by the IRS.

Get Help

In today’s political climate, many charities find themselves confronting challenging questions regarding lobbying and political activity. While some of these questions have straightforward answers, others require careful consideration. A charity’s decisions around lobbying and political activity have potentially significant consequences, ranging from possible taxes to loss of exemption.  If you have any questions regarding lobbying or political activity, consultation with a legal professional may be a good idea.

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who we work with

Our clients are diverse nonprofit organizations with a broad range of missions, as well as for-profit companies in evolving areas such as social enterprise, corporate philanthropy, joint ventures, technology-driven fundraising, and impact investing.

A.B. Data
AB InBev Foundation
Absolut Company
American Committee for the Weizmann Institute of Science
American Diabetes Association
American Friends of the Hebrew University
American Parkinson Disease Association
Americans for Ben Gurion University
Association of Fundraising Professionals
Avalon Consulting
Baton Rouge Area Foundation
Black Lives Matter Global Network Foundation
Bleeding Blue for Good Fund
Bradley Cooper’s One Family Foundation
BrightFocus Foundation
Brooks Brothers
Chadwick Boseman Foundation for the Arts
Changing Our World
Charity Defense Council
Christian Appalachian Project
Doctors of the World/ Medecins du Monde
Doctors Without Borders/ Medecins San Frontieres
Drug Policy Alliance
Duke University
Emory University
Estee Lauder Companies, Inc.
Feed The Children
Food For The Poor
Gerald R. Ford Presidential Foundation
Grameen Foundation USA
Hope for New York
International Campaign for Tibet
International Crisis Group
International Justice Mission
J. Crew Group
Johns Hopkins University
Lautman Maska Neill & Company
Lawyers Committee for Civil Rights Under Law

LSU Foundation
Marts & Lundy
Meyer Partners, LLC
Milken Institute
NAACP Foundation
National Alliance on Mental Illness (NAMI)
National Marrow Donor Program
National Park Foundation
Natural Resources Defense Council
North Carolina State University
North Shore Animal League
Operation Smile
PBS Foundation
Pernod Ricard USA
PetSmart Charities
PopSockets
Population Action International
Project ORBIS International
Public Interest Communication
Rails to Trails
Redeemer Presbyterian Church
Rockefeller Philanthropy Advisors
Save the Children Federation
Sesame Workshop
Simon Wiesenthal
SOS Children’s Villages – USA
Subaru of America
The Little Market
Touro University
United States Equestrian Team Foundation
United Way Worldwide
University of Connecticut
University of Virginia
Vote.org
Whitney Museum of American Art
World ORT
World Wildlife Fund
YWCA USA

A.B. Data
Absolut Company
American Committee for the Weizmann Institute of Science
American Diabetes Association
American Friends of the Hebrew University
American Parkinson Disease Association
Americans for Ben Gurion University
Association of Fundraising Professionals
Baton Rouge Area Foundation
BrightFocus Foundation
Burger King McLamore Foundation
Cancer Care
Carnegie East House and James Lenox House Association
Center for Car Donations
Changing Our World
Charity Defense Council
Christian Appalachian Project
Coca-Cola Scholars Foundation
Convoy of Hope
Cornell University
Doctors Without Borders/ Medecins San Frontieres
Drug Policy Alliance
Duke University
Emory University
Feed The Children
Gerald R. Ford Presidential Foundation
Grameen Foundation USA
Helen Keller Services
Hope for New York
Human Rights Watch
Humane Society of US
Indiegogo
International Campaign for Tibet
International Crisis Group
International Justice Mission
Japanese American National Museum
Johns Hopkins University
Lane Bryant Charities
Lautman Maska Neill & Company
Lawyers Committee for Civil Rights Under Law
LSU Foundation
Mattel
Meyer Partners, LLC
Milken Institute
National Breast Cancer Coalition
National Marrow Donor Program
Natural Resources Defense Council
North Carolina State University
North Shore Animal League
Obama Foundation
Operation Smile
PBS Foundation
Pernod Ricard USA
PetSmart Charities
Population Action International
Project ORBIS International
Public Interest Communication
Rails to Trails
Redeemer Presbyterian Church
Rock and Roll Hall of Fame and Museum
Rockefeller Philanthropy Advisors
Sesame Workshop
Simon Wiesenthal
SOS Children’s Villages – USA
Steinhardt Foundation
Subaru of America
United States Equestrian Team Foundation
University of Montana Foundation
University of Nevada, Las Vegas Foundation
Whitney Museum of American Art
World ORT
World Wildlife Fund
YMCA USA
YWCA of New York City
YWCA USA

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news & events

Our attorneys’ recent contributions to the media and nonprofit sector publications.

news & events

Check out our attorneys’ recent contributions to the media and industry publications.

Secure Your Data – Seriously, AFP New York Chapter News
As Jon Dartley, a data privacy and security attorney at Perlman and Perlman says, “It is vital to have the appropriate legal terms in the contract to protect your interests.”  Find out what your liability limit is.  Have it in writing who bears the responsibility and cost of a data breach.  And, have the vendor agree on a specific timeframe within which they need to advise you of a data breach.

Warning: Don’t Cut Legal Corners When Mixing Social And Business Impact,  Forbes
Particularly striking is that (Karen) Wu believes this is the “first multi-state regulatory activity involving cause marketing in almost two decades.”

Is stealing, then giving back, OK?
Cliff Perlman lends his advice on theft within a nonprofit.

Buyer Beware: Negotiating Terms in Technology Agreements
Jon Dartley provides tips on negotiating contracts with technology vendors.

Four Ways Charitable Giving Could Change with a Tax Overhaul
Cliff Perlman remarks on the possible threat of a change to charitable deduction.

How To Deal With Residual Data, Nonprofit Times
Jon Dartley’s advice on addressing “data exhaust”.

Secure Your Data – Seriously, AFP New York Chapter News
As Jon Dartley, a data privacy and security attorney at Perlman and Perlman says, “It is vital to have the appropriate legal terms in the contract to protect your interests.”  Find out what your liability limit is.  Have it in writing who bears the responsibility and cost of a data breach.  And, have the vendor agree on a specific timeframe within which they need to advise you of a data breach.

Warning: Don’t Cut Legal Corners When Mixing Social And Business Impact,  Forbes
Particularly striking is that (Karen) Wu believes this is the “first multi-state regulatory activity involving cause marketing in almost two decades.”

Is stealing, then giving back, OK?
Cliff Perlman lends his advice on theft within a nonprofit.

Buyer Beware: Negotiating Terms in Technology Agreements
Jon Dartley provides tips on negotiating contracts with technology vendors.

Four Ways Charitable Giving Could Change with a Tax Overhaul
Cliff Perlman remarks on the possible threat of a change to charitable deduction.

How To Deal With Residual Data, Nonprofit Times
Jon Dartley’s advice on addressing “data exhaust”.

perlman & perlman philanthropic sector law firm blue and green logo

click to exit page

perlman & perlman philanthropic sector law firm blue and green logo

click to exit page

silk lanterns

who we work with

Our clients are diverse nonprofit organizations with a broad range of missions, as well as for-profit companies in evolving areas such as social enterprise, corporate philanthropy, joint ventures, technology-driven fundraising, and impact investing.

who we work with

Our clients are diverse nonprofit organizations with a broad range of missions, as well as for-profit companies in evolving areas such as social enterprise, corporate philanthropy, joint ventures, technology-driven fundraising, and impact investing.

A.B. Data
AB InBev Foundation
Absolut Company
American Committee for the Weizmann Institute of Science
American Diabetes Association
American Friends of the Hebrew University
American Parkinson Disease Association
Association of Fundraising Professionals
Avalon Consulting
Baton Rouge Area Foundation
Black Lives Matter Global Network Foundation
Bleeding Blue for Good Fund
Bradley Cooper’s One Family Foundation
BrightFocus Foundation
Brooks Brothers
Chadwick Boseman Foundation for the Arts
Changing Our World
Charity Defense Council
Christian Appalachian Project
Doctors of the World/ Medecins du Monde
Doctors Without Borders/ Medecins San Frontieres
Drug Policy Alliance
Duke University
Emory University
Estee Lauder Companies, Inc.
Feed The Children
Food For The Poor
Gerald R. Ford Presidential Foundation
Grameen Foundation USA
Hope for New York
International Campaign for Tibet
International Crisis Group
International Justice Mission
J. Crew Group
Johns Hopkins University
Lautman Maska Neill & Company
Lawyers Committee for Civil Rights Under Law
LSU Foundation

Marts & Lundy
Meyer Partners, LLC
Milken Institute
NAACP Foundation
National Alliance on Mental Illness (NAMI)
National Marrow Donor Program
National Park Foundation
Natural Resources Defense Council
North Carolina State University
North Shore Animal League
Operation Smile
PBS Foundation
Pernod Ricard USA
PetSmart Charities
PopSockets
Population Action International
Project ORBIS International
Public Interest Communication
Rails to Trails
Redeemer Presbyterian Church
Rockefeller Philanthropy Advisors
Save the Children Federation
Sesame Workshop
Simon Wiesenthal
SOS Children’s Villages – USA
Subaru of America
The Little Market
Touro University
United States Equestrian Team Foundation
United Way Worldwide
University of Connecticut
University of Virginia
Vote.org
Whitney Museum of American Art
World ORT
World Wildlife Fund
YWCA USA

A.B. Data
Absolut Company
American Committee for the Weizmann Institute of Science
American Diabetes Association
American Friends of the Hebrew University
American Parkinson Disease Association
American Rivers
Association of Fundraising Professionals
Baton Rouge Area Foundation
BrightFocus Foundation
Burger King McLamore Foundation
Cancer Care
Carnegie East House and James Lenox House Association
Center for Car Donations
Changing Our World
Charity Defense Council
Christian Appalachian Project
Coca-Cola Scholars Foundation
Convoy of Hope
Cornell University
Doctors Without Borders/ Medecins San Frontieres
Drug Policy Alliance
Duke University
Emory University
Feed The Children
Gerald R. Ford Presidential Foundation
Grameen Foundation USA
Helen Keller Services
Hope for New York
Human Rights Watch
Humane Society of US
Indiegogo
International Campaign for Tibet
International Crisis Group
International Justice Mission
Japanese American National Museum
Johns Hopkins University
Lane Bryant Charities
LSU Foundation
Mattel
Meyer Partners, LLC
Milken Institute
National Breast Cancer Coalition
National Marrow Donor Program
Natural Resources Defense Council
North Carolina State University
North Shore Animal League
Obama Foundation
Operation Smile
PBS Foundation
Pernod Ricard USA
PetSmart Charities
Population Action International
Project ORBIS International
Public Interest Communication
Rails to Trails
Redeemer Presbyterian Church
Rock and Roll Hall of Fame and Museum
Rockefeller Philanthropy Advisors
Sesame Workshop
Simon Wiesenthal
SOS Children’s Villages – USA
Steinhardt Foundation
Subaru of America
United States Equestrian Team Foundation
University of Montana Foundation
University of Nevada, Las Vegas Foundation
Whitney Museum of American Art
World ORT
World Wildlife Fund
YMCA USA
YWCA of New York City
YWCA USA
Lautman Maska Neill & Company
Lawyers Committee for Civil Rights Under Law

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