In the world of nonprofit organizations, lobbying and advocacy are essential for influencing decision-makers and forming policy. Since they represent the interests of underrepresented groups and support causes that are consistent with their goals, nonprofit organizations are at the forefront of social change.
A more focused strategy that entails speaking with lawmakers and government representatives directly in order to affect particular laws or policy decisions is lobbying. Lobbying for Nonprofits trying to negotiate the complicated terrain of political engagement must comprehend the subtleties of these two ideas. Nonprofits must acknowledge the value of lobbying and advocacy as instruments for bringing about change as they work to achieve their goals.
What is Lobbying for Nonprofits?
Lobbying is defined by the IRS as contacting members or staff of a legislative body (or encouraging the public to do so) in order to propose, support, or oppose a specific piece of legislation, along with any other measures that support or oppose the adoption of a specific piece of legislation. Legislative entities include the general people through initiatives, referendums, and proposed constitutional amendments, as well as Congress and state and municipal legislatures. Administrative, judicial, and executive entities—like zoning and education boards—are not regarded as legislative bodies.
Gift Regulations and Tax Laws
Trade, labor, agricultural, and advocacy groups are allowed to lobby indefinitely under the tax code. Lobbying for Nonprofits take advantage of the IRS safe harbor (“501(h) election”), which sets a sliding-scale percentage of the organization’s yearly lobbying expenditures as the maximum. A nonprofit that disregards lobbying restrictions risks losing its tax-exempt status. Most trade associations and other noncharitable organizations are required by the IRC to disclose in their fundraising appeals that donations are not tax-deductible as charitable contributions for federal income tax reasons.
Requirements for LDA Reporting
In addition to providing a good-faith estimate of the total costs incurred during the quarter, the organization is required to produce quarterly lobbying reports that include information on the bills, policies, or other issues that were the focus of lobbying efforts.
For companies that engage in a lot of government affairs operations, calculating these costs can be challenging. The amount of time employees spend supporting lobbying efforts and having direct conversations with covered legislative and executive branch officials must be factored into the good-faith assessment. Costs incurred to support lobbying efforts, payments to outside lobbyists and other consultants who assist the organization’s lobbying efforts, must be included in the estimate.
Knowing the IRS’s Nonprofit Lobbying Regulations
Nonprofit organizations’ lobbying efforts are governed by rules set forth by the Internal Revenue Service (IRS), especially for those that are 501(c)(3) entities. Nonprofits are permitted to lobby under IRS laws, provided that lobbying does not make up a significant portion of their overall operations.
For clarification, the IRS provides the “substantial part test” and the “expenditure test” as the two main criteria for judging whether lobbying by a nonprofit is allowed. The substantial part test determines whether the time and money invested in lobbying is noteworthy in relation to the organization’s operations. According to the expenditure test, nonprofit organizations can engage in lobbying up to 20% of their overall spending without endangering their tax-exempt status.
