The rules governing what non-profits are allowed to do with respect to legislation can be confusing and downright frightening with the threat of losing your non-profit status if you do the wrong thing. Anne will cover the basic definitions and rules of advocacy and lobbying. She will highlight some of the main considerations each group should make and encourage discussion on why non-profit groups should take advantage of lobbying.

1. Non-Profit Lobbying Rules
An Outline of the Rules and Regulations for
Non-Profits to Influence Federal Legislation
By: Anne Daymut, Watershed Coordinator
March 2016

2. Non-Profit Lobbying Rules
• Focus on the Federal Rules for 501(c)3 non-
profits
• Why your organization should Lobby
• General Definitions
• How the amount of lobbying is measured
• The role of funders
• Brief overview of PA’s Lobbying Laws
• Quiz

3. Why Lobbying is Important to Your
Organization
• Legislative actions directly impact your
organization’s ability to achieve its goals
• No one is going to lobby on your behalf
• Who knows your community’s issues better
than you?
• If you aren’t lobbying, you are missing out on
the most effective way to promote your
organization’s missions.
• It’s your right and responsibility!

4. General Definitions
• Advocacy – Publically supporting and/or
recommending a particular cause or policy
• Lobbying - Attempting to influence legislation
by contacting, or urging the public to contact,
members or employees of a legislative body
for the purpose of proposing, supporting, or
opposing legislation, or by advocating the
adoption or rejection of legislation.*

5. 501(c)3 Non-Profit Status
• In general, no organization may qualify for
section 501(c)(3) status if a substantial part of
its activities is attempting to influence
legislation. *
• A 501(c)(3) organization may engage in some
lobbying, but too much lobbying activity risks
loss of tax-exempt status.*

6. Lobbying Definition (Repeated)
• Lobbying - Attempting to influence legislation
by contacting, or urging the public to contact,
members or employees of a legislative body
for the purpose of proposing, supporting, or
opposing legislation, or by advocating the
adoption or rejection of legislation.*

7. Influence
• Contacting, or urging 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.

8. Legislation
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.

9. Lobbying Exemptions
• Nonpartisan analysis, study or research that presents
all sides of an issue
• Conducting educational meetings
• Preparing and distributing educational materials
• Responses to written requests for assistance from
committees or other legislative bodies
• Challenges to or support for legislative proposals that
would change the organization’s rights or its right to
exist
• Examinations and discussions of broad social,
economic, and similar problems

10. 2 ways to Measure Amount of
Lobbying Activity
• Substantial Part Test
• Insubstantial Part Test, aka Expenditure Test,
aka 501(h) election

11. Substantial Part Test
• IRS considers time devoted (by both
compensated and volunteer workers) and the
expenditures devoted by the organization to
the activity, when determining whether the
lobbying activity is “substantial”.
• Must report on Form 990 activities of all staff
and volunteers with regards to lobbying
• But…What is Substantial?

12. Penalties of Too Much Lobbying
• Losing tax-exempt status, resulting in all of its income
being subject to tax.
• Excise tax equal to five percent of their lobbying
expenditures for the year in which they cease to qualify
for exemption.
• Tax equal to five percent of the lobbying expenditures
for the year may be imposed against organization
managers, jointly and severally, who agree to the
making of such expenditures knowing that the
expenditures would likely result in the loss of tax-
exempt status.

13. Expenditure Test*
If the amount of exempt purpose
expenditures is:
Lobbying nontaxable amount is:
≤ $500,000 20% of the exempt purpose expenditures
>$500,00 but ≤ $1,000,000
$100,000 plus 15% of the excess of exempt
purpose expenditures over $500,000
> $1,000,000 but ≤ $1,500,000
$175,000 plus 10% of the excess of exempt
purpose expenditures over $1,000,000
>$1,500,000
$225,000 plus 5% of the exempt purpose
expenditures over $1,500,000
• may not exceed $1,000,000
• 25% of your limit may be spent on Grass Roots
Lobbying

14. Expenditure Test
• Easier
– Form 5768, less detailed reporting
• You don’t have to record, prepare, or file a detailed
description of activities
• Allows for better planning of activities and finances

15. Expenditure Test
• Safer
– More precision/less guessing
– More freedom
– Does not increase likelihood of audit
– Less frightening penalties for exceeding allowance
• Lose tax exempt status after 4 years of excessive lobbying
• After first year, excise tax equal to 25% of the excess
• No personal penalty for individual managers of an electing
charity that exceeds its lobbying expenditures limits (not so
for those in non-electing charities)

16. Expenditure Test
• Additional Exemptions not included in the substantial test
– Making available the results of nonpartisan analysis, study, or research;
Providing technical advice or assistance (where such advice would otherwise
constitute the influencing of legislation) to a governmental body or to a
committee or other subdivision thereof in response to written requests by
such body…;
– Appearing before, or communicating to, any legislative body with respect to a
possible decision of such body which might affect the existence of the
organization, its powers and duties, tax-exempt status, or the deduction of
contributions to the organization [otherwise known as “self-defense
communications”];
– Communications between the organization and its bona fide members
regarding legislation or proposed legislation of direct interest to the
organization and such members [other than communications that “directly
encourage” the members to engage in direct or grass roots lobbying]; and Any
communications with a government official or employee” that are not for the
purpose of influencing legislation. (See 26 USC Section 4911)

17. Expenditure Test
• No limit on lobbying activities that do not
require expenditures, such as unreimbursed
activities conducted by bona fide volunteers
(not true for non-electing charities)
• Higher lobbying dollar limits and fewer items
which count toward the exhaustion of those
limits (unlike the miniscule and artificial
restrictions adopted by some nonelecting
charities)

18. Expenditure Test*
If the amount of exempt purpose
expenditures is:
Lobbying nontaxable amount is:
≤ $500,000 20% of the exempt purpose expenditures
>$500,00 but ≤ $1,000,000
$100,000 plus 15% of the excess of exempt
purpose expenditures over $500,000
> $1,000,000 but ≤ $1,500,000
$175,000 plus 10% of the excess of exempt
purpose expenditures over $1,000,000
>$1,500,000
$225,000 plus 5% of the exempt purpose
expenditures over $1,500,000
• may not exceed $1,000,000
• 25% of your limit may be spent on Grass Roots
Lobbying

19. Types of Lobbying
• Direct - In general, any
attempt to influence any
legislation through
communication with a
legislator, an employee of a
legislative body or other
government official, which:
• (1) refers to specific
legislation; and
• (2) reflects a view on such
legislation.
• Grassroots lobbying -- any
attempt to influence any
legislation through an attempt
to affect the opinions of the
general public or any segment
thereof. A grassroots lobbying
communication is one which:
• (1) refers to specific
legislation;
• (2) reflects a view on that
legislation; and
• (3) encourages the recipient to
take action with respect to the
legislation

20. Encourages the recipient to take action
with respect to the legislation…(cont.)
• (a) directly urging the recipient to contact legislators or other
government officials in order to influence legislation;
• (b) including the address, phone number or similar information
about a legislator or government official;
• (c) providing a petition, postcard or other prepared message to
send to a legislator or government official in order to influence
legislation; or
• (d) identifying one or more legislators who will vote on the
legislation as opposing the organization's view; being undecided;
being the recipient's representative in the legislature; or being a
member of the legislative committee that will consider the
legislation. Encouraging the recipient to take action does not
include naming the main sponsor(s) for the purposes of identifying
the legislation.

21. Exempt Purpose Expenditures
• include everything a charity spends to accomplish
its exempt purpose, but excludes certain
expenditures for fundraising, capital expenses,
unrelated business activities, and other purposes
not connected to carrying out the organization’s
charitable purposes. For many organizations, all
of the organization’s expenditures qualify as
exempt purpose expenditures.
• https://www.law.cornell.edu/cfr/text/26/56.4911
-4

22. The Role of the Private Foundation
• Foundations are allowed to prohibit the use of their funds for lobbying.
• Foundations are not allowed to earmark or designate funds for lobbying!
• Foundations may make general support grants to charities whether or not
the charities are currently lobbying, have lobbied in the past, have made
the 501(h) election, or even use the grant for lobbying purposes. The
grants will not be taxable expenditures by the foundation as long as they
are not earmarked for lobbying. The regulations do not require a private
foundation to seek information about a charity’s lobbying budget when
the charity applies for a general support grant.
• Foundations can give specific project grants to fund projects that include
lobbying, so long as an individual foundation’s total grants for the same
project and year do not exceed the amount the grantee had budgeted for
the nonlobbying portion of the project. In making this determination,
foundations may rely upon the budgets provided by grantees.

23. Other Funding Considerations
• Community Foundations are treated like all
other 501c3, with the same limits and
penalties
• All other funding sources are allowed to
prohibit the use of funds for Lobbying
– EPA 319 grants
– State Grants

24. Prohibited Activities
• strictly prohibited by the IRS from
participating in campaigns for (or against)
political candidates to public office
• No partisan political activities

25. State and Local Lobbying
• State and municipal lobbying disclosure laws
impose additional reporting requirements on
all organizations—not just on 501(c)(3)
organizations—that lobby a certain amount at
the state or local level.
– Pennsylvania Lobbying Disclosure Law – Only
applies to PAID lobbying at the State Level

26. PA Lobbying Disclosure Law
• Paid Lobbying does not include volunteers or
Board of Directors but does include paid staff
and reimbursement of expenses.
• Requires Registration and Reporting
(depending on time and money spent)
• Definitions, allowances, and penalties go well
beyond the Federal Law

27. Local Lobbying Laws
• Pittsburgh and Philadelphia
• Townships and Municipalities

28. QUIZ
• Organization M writes to its Congresswoman
requesting that she contact an administrative
agency regarding a proposed regulation.

29. Quiz
• A pamphlet distributed by organization Y states that the
“President’s plan for a AMD-Free America” should be
passed, and encourages readers to “write or call your
senators and representatives and tell them to vote for the
President’s plan.”
• Assume the same facts as above except that the pamphlet
encourages readers to “write the President to urge him to
make the bill a top legislative priority” rather than
encouraging readers to communicate with members of
Congress.
• Assume the same facts as above, except that the pamphlet
does not encourage the public to write or call legislators or
the President, but does list the members of the committee
that will consider the bill.

30. Quiz
• In each edition of its newsletter, Organization
E, an environmental organization, routinely
summarizes and reports on the status of
environment-related bills pending in Congress.
The newsletter identifies each bill by a bill
number and the sponsor’s name. Although
the summaries and status reports refer to, and
often reflect a view on, specific legislation,
they do not encourage readers to take action
with respect to any of the bills.

31. Quiz
• Organization Z prepares a paper on a
particular state’s environmental problems. The
paper does not reflect a view on any specific
pending legislation nor on any specific
legislative proposal which Z supports or
opposes.

32. Quiz
• The President nominates X for a position in
the President’s cabinet. Organization Y
opposes this nomination and sends a general
mailing requesting recipients to write to four
Senators on the Senate Committee that will
consider the nomination.

33. Quiz
• A pamphlet distributed by organization L
discusses the dangers of drugs and encourages
the public to send their legislators a coupon
printed with the statement, “I support a drug-free
America.” The term “drug-free America” is not
widely identified with any of the many specific
legislative bills regarding drug issues. The
pamphlet does not refer to any of these bills, nor
does the organization support or oppose a
specific legislative proposal.

34. Quiz
• Organization B researches, prepares and prints
a code of standards booklet of minimum
safety requirements for electrical wiring. B
sells the booklet to the public and it is widely
used by professionals in the installation of
electrical wiring. Occasionally, B lobbies state
legislators for passage of the code of
standards for safety reasons.

35. Quiz
• Organization R’s monthly newsletter contains
an editorial column that refers to and reflects
a view on specific pending bills, but does not
encourage readers to take action with respect
to these bills. R sends the newsletter to
10,000 nonmember subscribers, including
Senator Doe.

36. Quiz
• The Organization places an advertisement that
specifically identifies and opposes a bill that it
asserts would harm the Waste-Coal industry. The
ad is not a mass media communication described
in the special rules for certain mass media
advertisements, but it does state that Senator Y
favors the bill.
• Assume the same facts as above except that
instead of identifying Senator Y by name, the
advertisement identifies the “junior Senator from
State Z” as favoring the legislation.

37. In Closing
• Lobbying is your Right and Responsibility!
• The Federal Rules of non-profit lobbying have
recently become more clear and safe with the
ability for 501(h) election
• Just be careful how much of each type of
lobbying you do
• Consider who your funding sources are and if
they have placed lobbying restrictions on the
funds
• And look into the state and local laws if your
mission is impacted by state and local policy

38. Helpful Organizations
• *www.irs.gov
• Independentsector.org/lobby_guide
• Allianceforjustice.org
• Bolderadvocacy.org
• PA State Ethics Commission

39. Additional Resources
• Worry Free Lobbying for Non-Profits: How to
Use the 501(h) Election to Maximize
Effectiveness, Alliance for NonProfits
• Lobbying by NonProfits in Pennsylvania: The
Rules of the Road, 2014, Philadelphia Bar
Association

40. Anne Daymut, Watershed Coordinator
anne@wpcamr.org
724-832-3625