On this episode of Rules of the Game, we’re going to talk about money. Because at this point you already know that 501(c)(3) public charities and 501(c)(4) social welfare organizations are allowed to lobby and pursue robust advocacy agendas, but how can they secure funding to make their short and long-term advocacy goals a reality? Stick with us for the next few minutes, and we’ll have the answers you are looking for. 

Our hosts for this episode: 

Natalie Ossenfort  

Jen Powis 

MISCONCEPTION #1: Foundations are not allowed to fund lobbying – REALITY: Both public and private foundations can fund grantees that lobby 

• COMMUNITY FOUNDATIONS 

• Just another type of public charity 
• Allowed to engage in lobbying and directly fund grantee lobbying activities 
• Lobbying grants will count against lobbying limit of foundation and public charity grantee 

• PRIVATE FOUNDATIONS 

• Rules for private foundations are a bit more restrictive than those for public charities / community foundations 

• Not allowed to engage in lobbying and effectively prohibited from earmarking grants for lobbying purposes (if they do these activities, the foundation and managers are subject to a prohibitive excise tax) 
• This does not mean that private foundations can’t fund grantees that lobby: 

• General support grants are not earmarked for any particular purpose, so a grantee could choose to use those funds for lobbying without exposing their private foundation funder to an excise tax  
• Specific project grants are another option. So long as the grantee’s project budget clearly delineates between lobbying and non-lobbying expenses, the private foundation can fund up to the non-lobbying portion of the grant request without earmarking funds for lobbying / exposing itself to an excise tax.  

• Grantees can go to multiple PF’s, each can give up to the non-lobbying portion of the grant request. 

• GENERAL 

• Both private and public foundations must prohibit their funds from being used for partisan political purposes / support or opposition of candidates 
• Grantees should carefully check the language of their grant agreements to see if lobbying is prohibited. Language that says that the funds are “not earmarked for lobbying” is not the same as language that says that lobbying is prohibited. 
• EXAMPLES that sound restrictive, but actually permit lobbying:  

• “Lobbying and Non-Permitted Uses: This grant is not in any way earmarked to support or carry on any lobbying or voter registration activity. Grantee warrants that none of these funds will be used to influence legislation unless permitted by law.” 

• “This grant is not earmarked for influencing legislation within the meaning of IRC Section 4945(e), and the foundation and Grantee have made no agreement, oral or written, to that effect.” 

MISCONCEPTION #2: Foundations can’t fund public charity voter registration drives 

• Both private and public foundations can fund the NONPARTISAN voter registration activities of public charities, but the rules for private foundations can be a bit complicated… 

• VR Drive must be nonpartisan, over multiple election cycles, in five or more states and cannot be subject to conditions requiring use of the funding in a specific state or election cycle. 

• There are also requirements related to the grantee’s finances (e.g. at least 85% of organization’s income must be spent on activities relating to the purposes for which it was organized) 
• Public charities can receive an advanced ruling from IRS certifying their ability to receive private foundation voter registration grants (confirms that organization meets the requirements of sec. 4945(f) of tax code) 

MISCONCEPTION #3: Foundations are not allowed to fund 501(c)(4)s. REALITY: Both private and public foundations can fund 501(c)(4)s…. if they know the rules 

• COMMUNITY FOUNDATIONS 

• Can fund any work conducted by 501(c)(4) that the community foundation itself would be allowed to engage in (e.g. lobbying, but NOT partisan political activity) 
• IRS presumes that grant to 501(c)(4) is for lobbying  

• needs to count against public foundation’s grassroots lobbying limit (unless grant was expressly made for direct lobbying purposes and foundation can show that funds were spent on direct lobbying) 
• Grant will not be counted as a lobbying expense if it is a controlled grant expressly given for non-lobbying purposes (prohibits lobbying with grant funds) 

• PRIVATE FOUNDATIONS 

• Must use “expenditure responsibility” when making grants to organizations that are not 501(c)(3)s 

• Must conduct a pre-grant inquiry and execute a written grant agreement. The foundation must ensure that funds are spent only for the purposes expressly agreed upon. 
• Must obtain detailed reports from grantee about how funds are spent 
• Must provide complete report of expenditures to IRS on annual 990-PF 
• Must prohibit partisan political activities AND lobbying. Because of this, it’s often easier for 501(c)(4)s to raise lobbying funds from individuals and community foundations. 

Resources 

Foundation Advocacy Grants: What Grantees Need to Know 

Investing in Change: A Funder’s Guide to Supporting Advocacy 

On this episode, we celebrate Pride month with a discussion about the fight for equality at the ballot, in legislatures and the courts. From Stonewall to Obergefell and beyond, nonprofits have stood center stage as key advocates. 

The pod team for this episode 

Zack Ford 

Tim Mooney 

Natalie Ossenfort 

Milestones 

• 1961: Illinois becomes first state to decriminalize homosexuality 
• 1969: Raid of Stonewall Inn (NYC) 
• 1973: Lambda Legal becomes the first legal organization created specifically to fight for gay rights, and Maryland becomes first state to legislatively ban same-sex marriage 
• 1978: Inspired by Harvey Milk, Gilbert Baker designs the first rainbow flag as a symbol of pride 

• 1996: Defense of Marriage Act (DOMA) signed into law by President Clinton, banning federal recognition of same-sex marriage 
• 1998: Murder of Matthew Shepard in Laramie, Wyoming makes national news. His killers are later sentenced to life in prison 
• 2009: President Obama signs into law the Matthew Shepard and James Byrd Jr. Hate Crimes Prevention Act 
• 2011: Repeal of Don’t Ask, Don’t Tell 
• 2013: U.S. Supreme Court in United States v. Windsor strikes down part of DOMA, paving the way for legally-married, same-sex couples to receive federal benefits 

• 2015: U.S. Supreme Court in Obergefell v. Hodges holds that 14th Amendment requires states to recognize same-sex marriages 
• 2021: President Biden issues executive order repealing former administration’s ban on transgender Americans joining the military 

Nonprofit advocates and their work 

Recent Developments / Coming Soon… 

• During the 87th Legislative session, nonprofit advocates in TEXAS successfully defeated SB 29, which would have banned transgender student athletes from competing on sports teams based on their gender identity. Local nonprofits like the Texas Freedom Network and Equality Texas led the charge in advocating against the bill alongside several other incredible nonprofits. While it’s possible the bill may be revived during a later legislative session, there is much to celebrate for now. 

• ARKANSAS recently passed a new law (one of the first of its kind in the nation) that bans gender-affirming healthcare for transgender youth. The ACLU recently filed a lawsuit on behalf of four families and two doctors, who argue that the law is unconstitutional and that it should be struck down so that all children have access to medically necessary care. 
• Any day now, the United States SUPREME COURT is expected to release a decision in the case of Fulton v. City of Philadelphia, which will decide the constitutionality of a Philadelphia ordinance that bars discrimination based on sexual orientation. A legal challenge against the ordinance was brought by a Catholic foster agency that lost its contract with the city as a result of the nondiscrimination policy. The agency says that the policy violates its First Amendment rights to freedom of religion and speech. 

Resources 

• LGBTQ Advocacy Toolkit 

• The Work for LGBTQ Equality Marches On by Leslie Barnes 

• Learn more about Daniel Quasar’s redesigned Pride flag 

On this episode, we cover a very specific type of lobbying that doesn’t necessarily seem like lobbying in the first place. Ballot measures can range from local bonds to state constitutional amendments, and everything in between. What can nonprofits do to support or oppose them, and how do they comply with state and federal law?  

Our attorneys for this episode 

• Tim Mooney 
• Natalie Ossenfort 
• Quyen Tu 

What are Ballot Measures? 

• Called different things in different states and localities 

• • Bond 
  • Constitutional Amendments 
  • Referenda 
  • Ballot questions / initiatives  
  • Propositions 
  • Any policy matter put to a vote of the general public 

• There are no federal ballot measures, but federal law has one major thing to say about measures for 501(c)(3)s 
• State and sometimes local laws cover campaign finance and reporting requirements 

Can nonprofits take a stance? 

• No. End of episode. (just kidding!) 
• Most can. All 501(c)s that aren’t charities or foundations can (generally) do an unlimited amount of ballot measure advocacy, but must follow state and local laws for reporting their work 
• Public charities can take a stance, but ballot measures are lobbying (which is why this episode is in the lobbying series!). From there, they also have to follow state and local laws for reporting their work 

• Private foundations cannot take a stance on ballot measures (again…lobbying) without being hit with a big excise tax 

Wait, lobbying? Tell me more. 

• Boil it down? Voters are a giant legislative body 
• Direct lobbying, not grassroots – and that’s good because charities can do more direct lobbying 

• Doesn’t violate the prohibition on electioneering to support or oppose measures because they are not related to candidates 

• Be careful to make sure your org’s advocacy isn’t seen as/tied to a candidate’s position on the ballot measures 

• Clock starts ticking when petitions go out to qualify for the ballot or (probably) when you’re lobbying legislative bodies when they are determining whether to refer an item to the voters 
• Count all prep work, staff time, communications costs, etc. 
• You non-c3s? Tax law doesn’t restrict lobbying, and this counts toward primary purpose activity… so load up on your GOTV and voter reg work on ballot measures and (strategy time!) it can offset candidate work you do. 

State laws… 

Every state is different, starting with the fact some states don’t have ballot measures at all. Even states without statewide ballot measures like NY have local bond measures though. 

Any state or locality with ballot measures has some kind of registration and reporting laws 

We have state law resources for your state! Examples: 

Texas 

Corporations (including nonprofits) can support or oppose ballot measures in Texas. 

• Texas Election Code defines a political committee as two or more persons acting in concert with a principal purpose of accepting political contributions or making political expenditures. Since the definition of “persons” includes nonprofit corporations and expenditures and contributions include those made in connection with a measure, it is possible for nonprofits to trigger PAC registration and reporting in Texas even if they don’t do any candidate-related work. 
• TRANSLATION: if a group of nonprofits comes together to raise funds for the support or opposition of a measure, they may need to register and report as a PAC. 
• It is also possible that if a nonprofit acts on its own to impact a ballot measure, it could trigger direct campaign expenditure (aka independent expenditure) reporting even if it doesn’t coordinate its work with other organizations or individuals. DCE reporting, as it’s sometimes referred to, kicks in when more than $100 is spent to support or oppose a measure. 
• Of course, there are other scenarios as well that might not require state-level reporting in the ballot measure context in Texas (e.g. nonprofit contributions to a ballot measure only PAC), so feel free to reach out to our TX team if you have any questions about when and what you have to report when you engage in ballot measure advocacy. 

Oregon 

• Trivia: Oregon is one of the first states to adopt ballot measures… started them in 1902 (just behind SD and UT) 
• Five forms: state statutes (legislature or citizen referred), constitutional amendments (legislature or citizen referred), and veto referenda. 
• If your nonprofit’s purpose is to support/oppose a ballot measures you have to register as a political committee 
• No contribution limits (those are unconstitutional per SCOTUS)  

• Real time online reporting (ORESTAR!!!!) 
• 3 reporting periods 
• Contributions over $100 – the name/address of the donor disclosed 

California 

• These rules are about transparency and tracking money in CA elections. 
• Most important: if you engage in certain fundraising activities or spending, you could become a ballot measure committee and not even know it. That means your nonprofit would have filing and reporting obligations. 
• There just isn’t enough time to do justice to the CA BM rules on this show so if you’re interested in a whole show, please shoot us an email 
• Ballot measures are treated as campaign activity 
• Rules are designed so that when people or organizations accept or spend money for ballot measures, it gets reported by someone. 

• When there is advocacy for a ballot measure, there will be a main ballot measure committee. Must report contributions of $100+, whether financial or in-kind, and expenditures. This usually works best as a separate entity from a 501(c)(3). 
• Even if you are not the main ballot measure committee, there are ways NPs could trigger reporting with the FPPC 

• receiving or spending money on ballot measure advocacy 

• receive $2k+ in calendar year earmarked for ballot measures, you become a recipient committee. Recipient committees have to report their donors. 
• Another way to become a recipient committee is to spend at least $50k in non-earmarked donated funds. At these higher levels of spending it gets more detailed so please check out our resources.  

• Major Donor Committee: give $10k+ in calendar year to a recipient committee (staff time counts) but does not receive $ earmarked for ballot measures 
• Independent Expenditure Committee: spends $1k+ in a calendar year on communications that expressly advocates for/against ballot measures and not made in coordination with a ballot measure committee 

• Non reportable activities: 

• 10% or less of staff time 

• Paid staff time counts as an expenditure, or if it’s coordinated with a ballot measure committee, a contribution. If you have staff spending more than 10% of their time in any calendar month on ballot measures, you need to consider that expenditure towards these thresholds. 

• Newsletter 
• Member communications 
• Contracted services to the ballot measure committee 
• Certain limited fundraising expenses 
• Raising money for the ballot measure committee where the contributions go directly to the ballot measure committee (funds do not pass through the org)  

• You can ask people to donate to the main ballot measure committee and only your fundraising costs would count as a contribution toward these thresholds, some fundraising costs are even exempt from reporting. 

Final thoughts? 

• Often critically important advocacy 
• Private foundations! You can and should support this work, even though you cannot directly advocate or fund it. How? 

• • general support grants 
  • specific project grants for non-lobbying portions of the work 
  • educate the public about the ballot measure process 
  • communications that qualify as nonpartisan analysis 
  • communications that are neutral urging voters to study the issue 

Resources 

• Bolder Advocacy ballot measure toolkit 
• Seize the Initiative 
• Foundations and Ballot Measures 

• California Campaign Finance and Ballot Measure Guide 
• Ballot Measure Activities Exempt from California Disclosure Laws 
• Initiating Policy Change: Circulating Ballot Initiatives in California 
• Texas Campaign Finance and Ballot Measure Guide