Does you want to want to engage with public policy, influence a decision on an important bill, add your voice to a debate? Thousands of human and social services nonprofits leaders have something to say. What are you allowed to do without violating the IRS codes?
It’s important to define terms. What is “lobbying?” It comes from milling around outside legislative chambers, according to Thomas Boyd, chief editorial consultant to The Grantsmanship Center. It often happens “in “lobbies, waiting to buttonhole a member to press your views on a pending bill,” he said. Most nonprofits don’t send someone to Washington to stand in the halls outside Congress (unlike big corporations, who set up shop there). But nonprofits do communicate with elected officials about important matters.
Unhelpfully and predictably, the language about what nonprofits can do includes terms like “excessive. . . substantial. . . knowingly.” The rules also differ when it comes to type of nonprofit. If your organization is a 501(c)(3) nonprofit, you are more limited in what you can do. The limits include a maximum of 20% of the organization’s first $500,000 expenditures, 15% of the next $500,000, and an annual cap. (These need to be discussed with your tax or legal advisor if you’re planning any significant lobbying.)
It gets complicated if your organization urges members to do their own individual messaging. That steps off into the murky field of “grassroots lobbying” and has its own limits and parameters.
If, on the other hand, you’re a 501(c)(4) nonprofit, the rules are much more generous. Just ask ACLU, Sierra Club, National Organization for Women. Those major nonprofits (and many others) spend a lot of time and resources trying to push the Congress in a particular direction.
No matter the type of nonprofit tax-exemption, there are some general rules that apply. Nonprofit organizations aren’t allowed to endorse or campaign for or against candidates. Whatever is spent on lobbying has to be reported to the internal Revenue Service.
What happens if your organization goes over the line and spends more than it’s supposed to on lobbying? The “good news” might be a 25% tax on the amount over the limit. The “very bad news” might be loss of tax-exempt status and all income becoming taxable.
If your organization plans to write a letter to a Member of Congress or a city council member or a state senator, urging them to support a bill that’s important to your organization’s mission, the IRS doesn’t care and you don’t have to worry. It’s “unsubstantial” in terms of your expenditures. But if you plan to work steadily to influence public discussion, best to consult with tax and legal professionals. They can help you make sense of the rules.
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