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Lobbying and Political Action: What is Permissible by 501(c)(3) Organizations?

The following brief description is not intended as legal advice. Organizations should seek the advice of qualified legal counsel if they are considering engaging in lobbying or similar activities. What follows was adapted from a National Trust for Historic Preservation publication entitled: "Lobbying by 501(c)(3) Organizations: The Basics"

501(c)(3) organizations are limited in lobbying by the requirement that "no substantial part of the activities to be used for carrying on propaganda or otherwise attempting to influence legislation." Because this rule is vague and difficult to interpret, it was modified to permit certain 501(c)(3) organizations to elect to lobby under certain prescribed limits which would provide a safe harbor for the lobbying activities of that organization. An organization that chooses not to follow the safe harbor limits of the tax code may still lobby, provided that lobbying does not constitute a "substantial part" of that organization's activities.

A 501(c)(3) organization may choose to elect to participate in lobbying activities under the safe harbor provisions of the tax code by filing form 5768 (see link below) with the IRS. Upon filing this form the organization is subject to specific expenditure limits for lobbying activities. (Again filing form 5768 is optional; an organization may choose to rely on the "no substantial part rule," especially if lobbying activities are minimal.) Expenditure limits under the election rules (that is, if you choose to file) are graduated beginning at 20% of the first $500,000 of the organization's expenditures for charitable, "exempt function" purposes, 15% of the next $500,000, 10% of the next, 5% of any additional expenditures, subject to a maximum of $1,000,000 for any one year. For example, if your organization spends $100,000 a year on your open space preservation initiatives, you could spend a maximum of $20,000 on lobbying associated expenses.

Clearly it is important to understand what activities constitute lobbying for these requirements. Lobbying activities are activities that seek to influence specific legislation. Legislation, in turn, is defined as action taken by Congress, by any state legislature, by any local council or similar governing body, or by the public in a referndum, initiative, constitutional amendment or similar procedure. Lobbying is broken down into two categories. Direct lobbying includes contacting members and employees of legislative bodies, such as congressman, senators, state legislators, city council memers, or their staffs. Grass-roots lobbying is an attempt to influence the general public on legislative matters. (For more information see articles below.) Only 25% of the permitted lobbying expenditures may be made on grass-roots lobbying. Thus to return to our open space preservation group with its $100,000 a year budget, $20,000 can be spent on lobbying, $5,000 can be spent on grassroots lobbying, $15,000 would be available for direct lobbying.

Another critical distinction for nonprofit organizations is the difference between lobbying - seeking to influence legislation - and political activity - participating in any political campaign on behalf of or in opposition to any candidate for public office. Nonprofits are prohibited from engaging in political activity and may lose their tax exempt status if they do so.

Additional Resources:

Below you will find a list of articles and publications which clearly outline the types of lobbying and political action that are permissible by 501(c)(3) organizations, including the rules as stated by the IRS.