Non-Profit Organization Lobbying
Many non-profit organizations miss out on educating policy makers and influencing legislation that would help their cause because they are under the mistaken belief that non-profits cannot lobby. That could not be further from the truth. There are two rules that govern the ability of charities and non-profit organizations to lobby Congress and the federal government: the ‘substantial part’ rule and the ‘Section 501(h) election’ rule. Once a non-profit decides which rule works best for them (yes, they do have the option of choosing one or the other), then they need to abide by the spending limits and lobbying limits associated with the rule.
From 1934 to 1976, the sole standard for lobbying by charities and non-profit organizations was the ‘substantial part’ rule. The key part of the rule said: “a charity may not devote a substantial part of its activities to attempt to influence legislation.” A charity may engage in legislative lobbying without risking its tax exempt status so long as it is an insubstantial part of its overall activities.
Qualifying what is “substantial” is paramount, but it is also ambiguous. The IRS has ruled that determining what is substantial should not be based on the percentage of time and resources spent on lobbying. Courts have held that all facts and circumstances of an organization’s legislative and other activities would have to be examined.
Charities and nonprofit organizations can also lobby under the ‘Section 501(h) election’ rule. In 1976, Congress added Section 501(h) to the Internal Revenue Code. It was created to be an alternative to the “no substantial part” test. It represented Congress’ recognition that lobbying by charities can benefit the public and the use of deductible contributions is appropriate.
Important Note: The ‘No Substantial Part’ test is still the law for a charity that does not or cannot elect to be governed by Section 501(h) with respect to its lobbying activity.
Section 501(h) provides that an otherwise qualifying charity or nonprofit organization will not be denied 501(c)(3) status for engaging in too much lobbying, so long as its lobbying expenditures do not exceed certain calculable dollars. A charity or nonprofit organization must choose, or “elect” to be governed by Section 501(h).
It is important to remember that charities and nonprofit organizations can, and often should, lobby at all levels of government. The federal government clearly supports lobbying by 501(c)(3) organizations. The law regarding lobbying by charities and nonprofit organizations makes it very clear how much money a 501(c)(3) organization can spend on lobbying, and it makes clear which activities are considered lobbying and which are not.
The right of citizens to petition their government is basic to our democratic way of life, and associations, including 501(c)(3) organizations, are one of the most effective vehicles for making use of citizen participation in shaping public policy.
By not engaging in lobbying, charities and nonprofit organizations may be failing to employ a very important activity that could be enormously helpful in carrying out its mission.