Click on a link below to jump to a specific topic:
- Direct Lobbying
- Grassroots Lobbying
- Administrative, Judicial, and Executive Lobbying Are Not Lobbying
- How Much Is Too Much? Defining "Substantial"
- Advocacy That Does Not Qualify as Lobbying
- What About International and Foreign Legislation?
- How Do These Rules Affect Equivalency Determinations?
Many charities engage in some degree of advocacy for or against causes that matter to them. Such advocacy may be in the form of publications, research, protests, community outreach, polls, petitions, debates, monitoring of legislation, drafting of legislation, communications with stakeholders, meetings with legislators, or educational programs and awareness-raising activities. Importantly, not all forms of advocacy qualify as lobbying under U.S. tax law that governs charities.
An attempt to influence legislation is commonly referred to as lobbying. U.S. tax law permits 501(c)(3) public charities (and their foreign equivalents) to engage in lobbying as long as it constitutes no more than an insubstantial part of their overall activities. Lobbying may take the form of either “direct lobbying” or “grassroots lobbying.”
A direct lobbying communication is any attempt to influence specific legislation through a communication with any member or employee of a legislative body, or any government official or employee who may participate in the formulation of the legislation, with the principal purpose of influencing legislation.
The communication must both refer to specific legislation (even indirectly) and reflect a view on it. "Specific legislation" includes both legislation that has already been introduced in a legislative body and a specific legislative proposal that the organization either supports or opposes. In the case of a referendum, ballot initiative, constitutional amendment, or other measure that is placed on the ballot by petition, an item becomes specific legislation when the petition is first circulated among voters for signature. See Treas. Reg. § 56.4911-2.
A grassroots lobbying communication is any attempt to influence specific legislation through an attempt to affect the opinions of the general public or any segment thereof. The communication must, as with direct lobbying, refer to and reflect a view on specific legislation. In addition, the communication must encourage the recipient of the communication to take action with respect to such legislation. That is, it must include a "call to action." A call to action is strictly defined as, and only as, an act that does one of the following things:
- States that the recipient should contact a legislator or an employee of a legislative body, or should contact any other government official or employee who may participate in the formulation of legislation (but only if the principal purpose of urging contact with the government official or employee is to influence legislation);
- States the address, telephone number, or similar information of a legislator or an employee of a legislative body;
- Provides a petition, tear-off postcard, or similar material for the recipient to communicate with a legislator or an employee of a legislative body, or with any other government official or employee who may participate in the formulation of legislation (but only if the principal purpose of so facilitating contact with the government official or employee is to influence legislation); or
- Specifically identifies one or more legislators who will vote on the legislation as: opposing the communication's view with respect to the legislation; being undecided with respect to the legislation; being the recipient's representative in the legislature; or being a member of the legislative committee or subcommittee that will consider the legislation.
Treas. Reg. § 56.4911-2(b)(2)(iii).
Direct and grassroots communications that refer to and reflect a view on regulations to be adopted by administrative, executive, and regulatory bodies are generally not lobbying communications. Nor is advocacy through litigation or other judicial means treated as lobbying.
The Treasury regulations specify that a “’[l]egislative body’ does not include executive, judicial, or administrative bodies." Treas. Reg. § 56.4911-2(d)(3).
"Administrative bodies" includes school boards, housing authorities, sewer and water districts, zoning boards, and other similar Federal, State, or local special purpose bodies, whether elective or appointive. Thus, for example, … the term "any attempt to influence any legislation" does not include attempts to persuade an executive body or department to form, support the formation of, or to acquire property to be used for the formation or expansion of, a public park or equivalent preserves (such as public recreation areas, game, or forest preserves, and soil demonstration areas) established or to be established by act of Congress, by executive action in accordance with an act of Congress, or by a State, municipality or other governmental unit, … as compared with attempts to persuade a legislative body, a member thereof, or other governmental official or employee, to promote the appropriation of funds for such an acquisition or other legislative authorization of such an acquisition.
Treas. Reg. § 56.4911-2(d)(4).
Consequently, advocacy through the courts, regulatory, and administrative agencies will generally not constitute lobbying, even if such advocacy ultimately affects policy.
There are two options for determining whether an organization’s lobbying activity is substantial enough to disqualify the organization from 501(c)(3) status.
1. The "No Substantial Part" Test
Internal Revenue Code ("Code") section 501(c)(3) defines a charitable organization as one that is organized and operated exclusively for charitable purposes, "no substantial part of the activities of which is carrying on propaganda, or otherwise attempting, to influence legislation." From 1930, when this language was introduced, until 1976, there was little guidance as to how to quantify "no substantial part." A seminal 1955 case, Seasongood v. Commissioner, found that a charity whose lobbying activities constituted "something less than 5% of the [organization's] time and effort" was safely "insubstantial." Many practitioners still rely on this safe harbor as a means of ensuring insubstantiality of lobbying activities under this test.
2. The "501(h)" Test
In 1976, Congress amended the Code to provide another option for charities that wish to calculate the substantiality of their lobbying. The added Code section 501(h) permits most U.S. 501(c)(3) charities to affirmatively "elect" to have their lobbying measured by an expenditure test. The 501(h) expenditure test permits charities to measure their lobbying solely based on the amount of funds they spend on this activity. In contrast to the original — and still default — "no substantial part" test, volunteer or other activities that use neither funds nor resources, such as staff time, need not be counted. The 501(h) expenditure test permits charities to expend funds on lobbying in accordance with the following limits:
- 20% of the first $500,000 of charitable expenditures;
- 15% of the second $500,000 of charitable expenditures;
- 10% of the third $500,000 of charitable expenditures; and
- 5% of charitable expenditures over $1,500,000.
Of these limits, grassroots lobbying may not constitute more than a quarter. Charitable expenditures — technically termed exempt purpose expenditures — include most expenditures, with the exception of capital expenditures, investment-related expenses, unrelated business income expenses, and certain external fundraising expenses. Charities that are "501(h) electors" are capped at $1 million of lobbying expenditures no matter how great their overall expenditures. Thus, for very large charities, the 501(h) test ultimately permits them to engage in less lobbying than they would otherwise be permitted under the no substantial part test.
Many forms of advocacy either (1) fall outside the definition of lobbying or (2) are statutorily excepted from the definition of lobbying. These exceptions are often crucial for charities that rely heavily on advocacy in pursuing their missions.
1. Communications That Do Not Meet the Above Definitions
Any advocacy that meets all but one of the elements of either direct lobbying or grassroots lobbying will not qualify as lobbying. For example:
- A charity can send out mass communications via its website, email, postal mail, TV ads, and so on, that express a view on pending legislation, other than a ballot measure, but do not encourage the public to contact their legislators or otherwise provide the names and contact information of their legislators. In other words, such communications do not meet the definition of direct lobbying because they do not include a communication with a legislator or a government official. They also do not meet the definition of grassroots lobbying because they do not include a call to action. Therefore, such communications fall outside the definition of either direct or grassroots lobbying.
- A charity could file suit against the government to challenge the constitutionality of a law, file an amicus brief, or praise or criticize judicial opinions that uphold or strike down laws. All such forms of advocacy are judicial and not legislative advocacy and therefore also fall outside the statutory definition of lobbying.
- A charity may attempt to influence regulatory (i.e., non-legislative) actions by administrative bodies. Examples of administrative bodies in the U.S. include the Environmental Protection Agency, the Federal Communications Commission, the National Labor Relations Board, and the Social Security Administration, to name just a few.
- A charity may attempt to influence purely executive actions such as executive orders.
2. Statutory Exceptions to Lobbying
With the introduction of Code section 501(h), Congress also enacted a set of regulations defining lobbying expenditures that are specifically excepted from the definition of lobbying under the 501(h) test. They include the following:
- Nonpartisan analysis, study, or research. "Engaging in nonpartisan analysis, study, or research and making available to the general public or a segment or members thereof or to governmental bodies, officials, or employees the results of such work constitute neither a direct lobbying communication … nor a grass roots lobbying communication. … For [these] purposes, … 'nonpartisan analysis, study, or research' means an independent and objective exposition of a particular subject matter. … Thus, 'nonpartisan analysis, study, or research' may advocate a particular position or viewpoint so long as there is a sufficiently full and fair exposition of the pertinent facts to enable the public or an individual to form an independent opinion or conclusion. The mere presentation of unsupported opinion, however, does not qualify as 'nonpartisan analysis, study, or research.'" Treas. Reg. § 56.4911-2(c)(1).
- Examinations and discussions of broad social, economic, and similar problems. "Examinations and discussions of broad social, economic, and similar problems are neither direct lobbying communications … nor grass roots lobbying communications … even if the problems are of the type with which government would be expected to deal ultimately. Thus, … lobbying communications do not include public discussion, or communications with members of legislative bodies or governmental employees, the general subject of which is also the subject of legislation before a legislative body, so long as such discussion does not address itself to the merits of a specific legislative proposal and so long as such discussion does not directly encourage recipients to take action with respect to legislation." Treas. Reg. § 56.4911-2(c)(2).
- Requests for technical advice that are initiated by a specific written request from a legislative body. "A communication is not a direct lobbying communication … if the communication is the providing of technical advice or assistance to a governmental body, a governmental committee, or a subdivision of either in response to a written request by the body, committee, or subdivision." Treas. Reg. § 56.4911-2(c)(3). "The offering of opinions or recommendations will ordinarily qualify under this exception only if such opinions or recommendations are specifically requested by the governmental body, committee, or subdivision or are directly related to the materials so requested." Treas. Reg. § 53.4945-2(d)(2)(ii).
- Communications pertaining to "self-defense" by the organization. "A communication is not a direct lobbying communication … if … [t]he communication is an appearance before, or communication with, any legislative body with respect to a possible action by the body that might affect the existence of the electing public charity, its powers and duties, its tax-exempt status, or the deductibility of contributions to the organization." Treas. Reg. § 56.4911-2(c)(2)(4). The self-defense exception does not apply to legislation that merely affects the programs or scope of activities of the charity. See § 53.4945-2(d)(3)(ii), Example 4.
"[T]he term 'legislation' includes foreign as well as domestic laws. Accordingly, an organization that attempts to influence and advocates changes in the laws of a foreign country," is also engaging in lobbying for U.S. tax law purposes. See Rev. Rul. 73-440 (PDF). "Although the regulations refer specifically to Federal, state and local legislative bodies, the term 'legislation' contemplates foreign as well as domestic laws. … As with domestic governments, the critical issue here is whether there is a legislative body involved." Lobbying Issues (PDF), 1997 IRS EO CPE Text, by Judith E. Kindell and John Francis Reilly.
For further discussion on foreign and international lobbying, see International Advocacy: What You Need to Know (PDF), by Bolder Advocacy, a program of the Alliance for Justice. According to that publication, there is no current guidance on whether the UN should be considered a legislative body for lobbying purposes:
It most likely depends on the nature of the UN body or office with whom the organization is communicating. Since the UN General Assembly has the ability to make laws, it is likely to be considered a legislative body. The Security Council is probably considered a legislative body, as well. Thus, communications with members of the General Assembly or Security Council that are attempts to influence resolutions, for example, will constitute lobbying. The UN Secretariat and the various agencies and commissions that are part of the UN's Economic and Social Council will likely be considered administrative bodies, and thus communications with them will not be lobbying. The International Court of Justice is a judicial, not legislative, body and therefore communications with it will not be seen as lobbying.
Often a careful review of the agency and its method of adopting rules or laws is required in order to determine whether a particular body is in fact a legislative body such that communications with it may constitute lobbying.
Organizations that undergo an equivalency determination (ED) through NGOsource are asked whether their governing documents or local law permit them to lobby more than insubstantially, and whether they in fact lobby more than insubstantially. Notably, certain countries, such as Mexico, Australia, and the United Kingdom, permit lobbying to a greater extent than that allowed in the U.S., subject to different restrictions. These varying local law regimes may complicate, but typically do not impede, organizations from qualifying as foreign public charity equivalents. Because the term lobbying has a very specific definition under U.S. tax law, however, it is important that non-U.S. charities understand what does and does not constitute lobbying when they respond to these questions. It is also important to remember that many forms of advocacy will not amount to lobbying for these purposes.
- An Introduction To Lobbying By Charities, by Rosemary Fei
- Lobbying Issues (PDF), IRS
- Advocacy – Public Charities, NEO Law Group
- Being a Player: A Guide to the IRS Lobbying Regulations for Advocacy Charities (PDF), Alliance for Justice
- Preguntas Frecuentes (FAQs) de las Organizaciones Sin Fines de Lucro de los EE.UU.: Involucrando a los Activistas Indocumentados en la Defensa y Promoción de Causas, Alliance for Justice