The following is not intended as legal or tax advice. If your organization is embarking upon lobbying activity, you should consult a tax attorney, accounting firm, and other legal resources.
The question of whether to lobby—and whether it’s even possible for a nonprofit—comes up again and again. It’s true that the IRS has been more aggressive in questioning exempt status for organizations who are active politically–for example, the IRS’s NAACP case, which was eventually dropped. But the question really is…
Can your nonprofit succeed in its mission without engaging in the policies that affect the very people or places you were created to help?
Today’s Washington Post story about the Chesapeake Bay evokes that question as it assesses whether the Chesapeake Bay Foundation can clean up the bay while still refraining from being politically active. It’s a good question and one which nonprofits of all sizes should ask themselves.
Many nonprofits don’t even engage in the most basic policy activism because they fear for their tax exempt status. But legally, all nonprofits can engage in some non-partisan policy activities.
So which 501-c’s can lobby?
There are actually 28 different “501-c” designations by the IRS. Wow. We won’t be covering the bulk of these today. But most organizations fall under 501(c)3, (c)4 or (c ) 6.
Organizations with 501 (c) 3 status—public charities and foundations—can participate in lobbying as long as it is not a “substantial” part of their activities. More on this in a second.
A 501(c) 6 designation is usually reserved for trade associations and professional associations (known in IRS lingo as “business leagues.”) These entities are allowed to have lobbying as a primary activity, as long as they notify members how much of their dues go to such activities.
The 501(c)(4) exemption goes to civic leagues and other organizations operated exclusively for the promotion of “social welfare,” which the IRS defines as “civic betterment and social improvements.” This includes local associations of employees of a particular organization or neighborhood. These organizations have an unlimited ability to lobby for legislation and the ability to participate in political campaigns and elections. But the catch is that the organization must benefit society as a whole, not just its members.
So, if we’re a 501-c-3, why should we lobby?
The question really is, why not? Aren’t you part of a neighborhood? A broader community? A region? A state? A nation? Don’t the rules and regulations and actions of the key policy players affect you and the people you serve? I won’t deny it, 501-c-3’s have it the hardest time with lobbying because the definition of “substantial” is so squishy. But if you are focusing most of your staffing, budget and attention on your primary mission, you shouldn’t have anything to worry about (see disclaimer above, please!).
On the other hand, if you’re not politically engaged, you might have a lot to worry about–including the very substance of your work.
If you are a school, for example, then local and national education policies, land use policies, and rulings related to local traffic and roadways may all affect your institution and others like it. Staying engaged and being a voice as these policies are made or revised is vital not just to your institution, but to the broader community (in which other, more practiced voices might be louder). This is playing itself out on a very local level in my neighborhood, where a new land development project could reconfigure a major roadway and an independent school could lose its left-turn lane, and therefore access for most of its families. The school has become actively engaged as local leaders try to finalize the roadway plan. The key is that the lobbying activities do not promote a particular candidate or party, but rather a broader issue. Even universities, which often hire government relations staff, do not lose their exempt status for their engagement in public policy.
As a nonprofit, you may feel you have enough challenges already and want to play it safe on lobbying. But if your issue is saving your school, or saving the entire Chesapeake watershed, then not raising your voice might kill you. Literally.
Does your nonprofit lobby? On what issues? Or do you strongly feel it shouldn’t? Please share your views!