Leslie M. Redd
E-Portfolio Assignment #1
Law, Policy & Government in
Nonprofits are vital to civil society.
Nonprofits are distinct from government and
Nonprofits and government sometime pursue
Ultimately there will always be some level of interaction
between nonprofits and government.
Key Learning Objectives
The legal requirements of nonprofit organizations;
The benefits of tax-exempt status;
The process of developing and implementing public policy;
The role of nonprofits as aggregators and advocates of the public
interest visa vie the government;
The role of nonprofits as providers of socially beneficial goods and
services visa vie the government;
The challenges faced by nonprofits when they simultaneously perform
public service advocacy and provide public services using government
The ethical issues that can arise when 501c3 and 501c4 nonprofits deal
with government entities;
The questionable role of 501c4 organizations in political campaigns;
Designing effective lobbying campaigns.
Federal, State and Local governments have regulatory
requirements for nonprofit organizations. It is important that
you have a good understanding of this regulatory landscape.
The legal requirements of nonprofit
Organizations get their nonprofit incorporation status from
their individual states based upon their promise to serve the
“public good” and to not use the operation of the nonprofit for
private gain—private inurnment and/or excessive benefit.
They incorporate at the State and get state tax exemption from
the individual states. Organizations get their tax-exempt
status by being granted 501C3 status by the IRS at the federal
level. Monitoring is done at the Federal level with the FORM
990 and various electronic database for intense scrutiny.
Benefit of Tax Exempt Status
To retain tax-exempt status, 501c3 organizations
must do three things:
Refrain from engaging in any “electioneering”—any
activities for or against an candidate for elected office;
2. Adhere to Lobbying rules established by government;
3. Adhere to all federal and state reporting requirements.
We focused on the federal requirement to submit the
We looked at meeting social needs
Compared the independent sector and government
Analyzed relationships between government and
nonprofits – is it complementary, supplementary or
Understanding public policy and its limitations and
determining a framework for analysis
The various roles non-profits play as independent
organizations and in relationship to the government.
Findings from the 2010 National Survey of
Nonprofit Government Contracting and Grants
Elizabeth T. Boris
Nonprofit as Advocates of The Public Interest and the impact
of direct government funding
Sixty-eight percent reported that government not paying the full
cost of contracted services was a problem (both a big and small
Seventy-six percent indicated that the complexity and time
required for reporting on contracts and grants was a problem.
Seventy-five percent indicated that the application process was
too complex and time consuming.
Fifty-eight percent said that government changes to contracts
and grants were a problem.
Fifty-three percent said that late payments were a problem.
In general, no organization may qualify for section 501(c)(3) status if a substantial part of
its activities is attempting to influence legislation (commonly known as lobbying). A
501(c)(3) organization may engage in some lobbying, but too much lobbying activity risks
loss of tax-exempt status.
Legislation includes action by Congress, any state legislature, any local council, or similar
governing body, with respect to acts, bills, resolutions, or similar items (such as
legislative confirmation of appointive office), or by the public in referendum, ballot
initiative, constitutional amendment, or similar procedure. It does not include actions
by executive, judicial, or administrative bodies.
An organization will be regarded as attempting to influence legislation if it contacts, or
urges the public to contact, members or employees of a legislative body for the purpose of
proposing, supporting, or opposing legislation, or if the organization advocates the
adoption or rejection of legislation.
Organizations may, however, involve themselves in issues of public policy without the
activity being considered as lobbying. For example, organizations may conduct
educational meetings, prepare and distribute educational materials, or otherwise
consider public policy issues in an educational manner without jeopardizing their taxexempt status.
Internal Revenue Code section 501(c)(4) provides for the
exemption of two very different types of organizations with
their own distinct qualification requirements. They are:
Social welfare organizations: Civic leagues or organizations
not organized for profit but operated exclusively for the
promotion of social welfare, and
Local associations of employees, the membership of which
is limited to the employees of designated person(s) in a
particular municipality, and the net earnings of which are
devoted exclusively for the promotion of social welfare.
Increased involvement with government in the areas of
advocacy and service provision—historically two major
areas of nonprofit activity—can/will effect the
operations of a nonprofit and its ability to fulfill its
The CEO/CDO need to have a good understanding of
the nonprofit laws and regulations, and have to
determine their optimal level of involvement with