On this episode, our second in our ongoing lobbying series, we’ll focus on direct lobbying for public charities that have taken the 501(h) election.   

For an introduction to lobbying and more on the 501(h) election for public charities, see part 1 of the series. 

Attorney Co-hosts  

• Jen 
• Shyaam 
• Leslie 

Not all advocacy counts as lobbying 

• Communications aimed at executive orders or special purpose bodies like school boards (even though they are elected, those school boards don’t make new laws!). 

• Example: asking the incoming Biden Administration to rejoin the Paris climate agreement or ban fossil fuel production on federal lands through Executive Order. 
• Example: The incoming Biden Administration might be able to take executive action to dramatically expand the number of gun sellers required to do background checks.  

What counts as direct lobbying under 501(h) 

• Remember that 501(h) is an expenditure test so it only counts what the organization spends on the communication that is lobbying (including staff time and overhead).  
• If you are an all volunteer organization, you should keep track of your time for your own purpose but unpaid volunteer time wouldn’t be counted on the 990 at the end of the year. However, any expenses to facilitate volunteer lobbying (e.g., reimbursements for meals or travel associated with lobbying) would need to be tracked and reported.  
• Typically, the types of expenses you need to track are direct costs (e.g., travel costs), staff time, and overhead expenses.  

The three-prong defintion of direct lobbying 

• A communication 
• To someone who formulates legislation (like a legislator, or city council member) or their staff or committee staff 
• Expresses a view about a specific piece of legislation 

Communication 

• Tweets, emails, letters.  Preparation for those communications too.  
• One on One meetings (when we can do those!) 
• Or good old fashioned phone calls? 
• What does the communication say? 

  Legislators (and their staff) 

• The legislator that can make the decision needs to be the target of the communication. And it’s at any level of government – city, county, tribal govt., state, federal, even international.  
• It can be broader though to include his or her staff because those staff (like the policy director, or the chief of staff) are normally authorized to represent the views of their boss (the elected official).   
• What about staff of the Committee on Appropriations when the nonprofit public charity seeks to ensure a line item in the budget to buy new land for a new state park? 

• What about public testimony at the committee hearing when a bill is being considered and the nonprofit says “we support this bill in its entirety?” In a later episode we will talk about some exceptions, including being invited to give testimony.  
• Executive officials in certain situations, too.  
• Are members of the public ever considered “legislators”? Yes when voting on public questions, referenda, constitutional amendments, bond measures. Anytime voters are asked to vote “yes” or “no” in an election, may constitute “legislators” for the IRS for your organization’s advocacy work. 

Specific legislation 

• The easy case is when the bill has a number, like HB 270.   
• How about a piece of model legislation that your nonprofit public charity is trying to get adopted in your state? Or asking for a law to be enacted that was recently enacted in a neighboring state? 
• Harder is when you’re working with a champion, an elected official that supports your mission, for example, to end homelessness.  Is working with that officials’ office to highlight policy changes, perhaps discussing opportunities to revise statutes, or look for additional funding, is that lobbying? In some cases, you might just be educating legislators and not expressing a view on any specific legislation.  
• What about just an idea?  The We Want World Peace bill where we’ll teach about peace instead of war? We want you to address climate change. We want you to prioritize arts in the budget. The context is important.  

    Examples    Southerners on New Ground (SONG) a 501(c)(3) . 

The Montgomery County Public School Board is holding a public hearing to discuss renaming Lee High School and the issue of Confederate statues. SONG shared this Instagram post.  Does the post constitute Lobbying, what if SONG’s followers took these signs to the school board meeting? 

  An example from the state of Texas.  In Texas, the legislature meets every odd numbered year. This year, there’s a bill by Representative Johnson that removes the Confederate Hero’s Texas State Holiday from the code.  

Generally, if an Executive Director met with their local state representative to tell them to vote for removing this day, then that would be direct lobbying.  Because , you have a (1) communication, (2) to the legislator, (3) on a specific bill.     

When to start tracking expenses 

• Almost always has to be you or your organization specifically sending something to a sitting official asking them to support a bill or ordinance.   

• Examples?  Let’s say your E.D. has an appointment with a city council member who historically has not supported funding for LGBTQ homeless shelters.  The staff prepare a report that the ED will use with the opposing city council member and the ED intends to specifically ask for the city councilmembers support for a new ordinance creating a shelter for LGBTQ kids.  What is the cost of the expenditures? 
• Staff time on report? Travel and lunch of ED?  Printing?  ED time?  Overhead?   

 Resources  

Being a Player: A Guide to the IRS Lobbying Regulations for Advocacy Charities  

What is Advocacy?  

Worry-Free Lobbying For Nonprofits: How To Use The 501(h) Election To Maximize Effectiveness  

Public Charities Can Lobby: Guidelines for 501(c)(3) Public Charities (Factsheet)  

When Does Your Activity Become Lobbying? (Factsheet)  

501(h) Lobbying Limit Calculator  

On this episode, we begin a multi-part series on lobbying for 501(c)(3) public charities — the limits, the definitions, the exceptions and much more. If you’re advocating on federal, state or local public policy in 2021, this is the podcast you’ve been looking for. 

Our Attorneys

Tim MooneyNatalie OssenfortQuyen Tu

Intro – Why are we talking about public charities and lobbying? 

• It’s still worth a listen for 501(c)(4)s, private foundations, and others. 
• Underscore that not all advocacy is lobbying (which is why we’ll spend several episodes on defining lobbying) 
• Lobbying limits as a function of tax treatment and deductibility of contributions to 501(c)(3) 
• Is this a 1st Amendment issue of speech being curtailed? Not according to the Supreme Court of the United States 

The Insubstantial Part Test 

• This is the default measurement system for 501(c)(3)s 
• Very little IRS or legal guidance on this 
• No “substantial” part of a public charity’s activities can be lobbying 

• No definition of lobbying 

• No definition of substantial 
• All activity is counted, whether it costs money or is done by volunteers 
• Most practitioners go with 5% but that is not an IRS rule! 

• Report lobbying on Schedule C of Form 990 

501(h) Election 

• In the 1970s Congress passed reform legislation that included another choice for most charities 
• 501(c)(3)s must “elect” this option 
• Available to most charities, but not churches or auxiliaries (controlled by) of churches also referred to as houses of worship 
• This is an expenditure-based test 

• Clear limits based on organizations exempt expenditure 

• For most 501(c)(3)s that’s 20% of their annual exempt expenditures but this limit does go down as the organization’s exempt expenditures go up 
• Max cap is $1 million for organizations with exempt expenditures $17 million or more 

• Clear, bright-line definitions of lobbying 

What Are the Advantages 501(h)? 

• Clarity of what is lobbying 
• Organizations ca pay excise taxes for going over limits rather than risk losing their tax status 
• Easier to plan for lobbying activities 
• Easier to report 

• No additional risk of audit (perhaps less?) 
• Example: AFJ and many other 501(c)(3) public charities 

What Are the Advantage of the Insubstantial Part Test (IPT)? 

• Vanishingly small 

• Very large organizations with budgets $100 million or more maybe able to lobby more with IPT than under the 501(h) election despite the IPT’s lack of clarity 

• These organizations can afford to hire lawyers! 

• Example: The Nature Conservancy 

Bolder Advocacy strongly recommends that public charities make the 501(h) election 

How do you know if your organization has made 501h? Look at your Form 990 Schedule C. 

How do you make the 501(h) election? File IRS Form 5768v 

• Backdates to the beginning of the organization’s tax year 
• You only have to make this election once 

Resources 

Being a Player: A Guide to the IRS Lobbying Regulations for Advocacy Charities 

What is Advocacy? 

Worry-Free Lobbying For Nonprofits: How To Use The 501(h) Election To Maximize Effectiveness 

Public Charities Can Lobby: Guidelines for 501(c)(3) Public Charities (Factsheet) 

Lobbying Rules For Houses of Worship 

501(h) Lobbying Limit Calculator 

On this episode, we chat about impeachment and detail how nonprofits, including 501(c)(3)s, can take a stance on the renewed calls for impeachment and removal of the President plus calls for expulsion of some members of the Senate and House following the failed attempt to baselessly challenge the November election and the insurrection of January 6th.

Resources

Reminder: Nonprofits Can Advocate for Impeachment

Can a 501(c)(3) Advocate for Impeachment of a Federal Office Holder?

Taking a Stance on Articles of Impeachment and the Senate Trial

As we close out 2020 and look to the start of new legislative sessions in Congress and in many states, we wanted to remind folks that lobbying is an important tool for nonprofits to make positive changes for the communities they serve.

Our attorneys for this episode:

• Tim Mooney
• Jen Powis
• Ronnie Pawelko

Shownotes

• Bolder Advocacy: lobbying advocates
• Why it’s important to lobby
• Why has lobbying become a dirty word in some circles?
• What role will lobbying play in 2021?
• Coming in January – a three-part series on the ins and outs of lobbying for public charities and more.