What is Lobbying?
According to the IRS, “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.”
This means activities that try to influence legislators to pass laws that are favorable or overturn laws that are unfavorable to one’s cause.
There are two categories of lobbying:
- Direct lobbying refers to communications with members or employees of a legislative body, or with any other government official or employee who may participate in formulating the legislation, if the principal purpose of the communication is to influence legislation.
- Grassroots lobbying refers to attempts to influence legislation by attempting to affect the opinion of the public with respect to the legislation and encouraging the audience to take action with respect to the legislation. In either case, the communications must refer to and reflect a view on the legislation.
Can Nonprofits Lobby?
Yes, nonprofits can lobby. Most nonprofits, lobbying is legal and recommended within the limits outlined below.
To be considered lobbying by the IRS, both direct lobbying and grassroots lobbying must refer to a specific piece of legislation, express a view or an opinion on it, and, in the case of grassroots lobbying, include a call to action.
“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.”
What is not lobbying?
Numerous activities resemble lobbying but are not considered lobbying by the IRS because they do not fulfill the above-mentioned criteria. These activities, which include the following, are legal activities. They are not limited and can be extremely valuable in educating the public, the government, and administrative agencies about issues impacting your community and mission.
- Communication with the judicial or executive branch or administrative agencies
- Discussion of broad issues that does not refer to a specific piece of legislation
- Preparing and distributing a nonpartisan analysis of a legislative proposal
- Testifying for or providing assistance to a legislative committee after a written request
- Self-defense lobbying where the organization’s future is threatened
- Lobbying as private citizens and not as representatives of the organization
For public charities, lobbying itself is recommended but within specific limits
- The IRS allows 501(c)(3)s to engage in lobbying as long as it is not a “substantial part” of their activities. As this definition is quite ambiguous, charities (excluding churches) have the option to elect an expenditure test under Section 501(h). Please visit the IRS website and the Stand For Your Mission website for more information about this option.
- Federal grant funds may not be spent on lobbying.
Private foundations may not engage in any lobbying activities or earmark funds specifically for a lobbying activity; however, they can and should support nonprofits that lobby and advocate on issues.
Naturally, an individual, even when associated with a nonprofit, can participate in any legal activity as a private citizen.
Any charity that is active in lobbying should elect 501(h).
Electing under 501(h)
The 501(h) option allows charities to clearly delineate their lobbying activities. Smaller charities may spend up to 20 percent of its first $500,000 of exempt expenditures on lobbying. For larger organizations, the limit on total lobbying expenditure is $1,000,000, with a cap of 25 percent of the permitted amount allowed to be devoted to grassroots lobbying. Under the substantial part test, the organization must include volunteer participation as a percentage of activity; under the expenditure test, only money used or staff time spent count. Expenditure is calculated over a four-year period, not annually.
Benefits of 501(h)
- It is easier for the nonprofit to survey and control its lobbying activities.
- Only actual expenses are included in the calculation, thus eliminating volunteer time from lobbying totals.
- If no expenses occur, there is no lobbying to report.
- By managing the costs well, a nonprofit may be able to increase its lobbying activities without penalties.
Constraints of 501(h)
- The organization must keep accurate records of all activities that relate to lobbying.
- The organization must clearly separate direct and grassroots lobbying expenses, as only 25 percent of the total expenses can be spent on grassroots lobbying.
What is allowed for other nonprofits?
501(c)(4) social welfare organizations and 501(c)(6) trade associations may engage in lobbying activities without limits; in fact, that may be one of their main functions. Moreover, these organizations are allowed to participate in political campaigns but may not exclusively operate for the benefit of one political party or candidate.
Are there other options?
A public charity can form a separate 501(c)(4) organization, to lobby on its behalf. 501(c)(4)s can create special funds, Political Action Committees (PACs), under section 527 of the tax code to carry out electoral activity.
101 Resource | Last updated: April 15, 2025