Nonprofit Advocacy or Lobbying: It Seems So Technical!

When do you become involved in a nonprofit advocacy or lobbying campaign? Wait, or is it a grassroots campaign? Then, someone corrects you and tells you that you are engaging in an “outreach and education” campaign. All of these terms are so nuanced it feels like you need a law degree just to let a legislator know that his or her actions are a bad idea.  If you have ever been in this situation before, this article will provide information on the following:

• A description of the difference between lobbying and advocacy;

• Nonprofit advocacy or lobbying limitations from the IRS;

• Lobbying restrictions from funders; and

• How to prepare and train your staff.

Nonprofit Advocacy or Lobbying

Advocacy

Organizations can become involved in public policy without the activity being considered lobbying. Advocacy is a process in which organizations or individuals meet with policy brokers in the legislature and in government to provide general information and educate them about a public policy issue. This includes raising awareness about a general issue and providing information about a topic. However, the information provided to the decision-makers does not include any requests to amend, support, or oppose a specific piece of legislation. A couple of examples of advocacy include the following:

•  You are preparing and distributing educational materials;

• You are informing either a legislator, a Governor or the President, or a public agency official about the impact of a broad policy on your organization;

• You are providing information to either a legislator, a Governor or the President, or a public agency official about a problem that has surfaced that requires a legislative or regulatory remedy, but you have not proposed or expressed support or opposition to a specific bill or piece of legislation;

• You are asking a legislator, a Governor or the President, or a public agency official to arrange a meeting on your behalf or to inquire about an issue that is not directly related to amending, supporting, or opposing  pending legislation;

• You are working with your nonprofit peers to present data that shows the impact of an existing public policy or enacted bill without a corresponding request to amend, support, or oppose pending legislation;

• You are asking a collective of people or a grassroots association to mobilize around an issue without a direct request to amend, support, or oppose existing proposed legislation; and

• You are working with a grassroots coalition to influence administrative rules, regulations, or other work with the executive branch.

Lobbying

The IRS has two classifications for what it considers lobbying:  direct lobbying and grassroots lobbying, which it defines as follows: “Direct lobbying refers to attempts to influence a legislative body through communication with a member or employee of a legislative body, or with a government official who participates in formulating 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.” For more information, click here.

Examples of Lobbying

• You engage ask a legislator, either at the local, state, or national level, to introduce a piece of legislation, or support or oppose a piece of legislation that has been introduced; and

• You ask constituents or other nonprofits or associations to contact their local, state, or congressional legislators to introduce a piece of legislation referendum/ ballot initiative, or support or oppose a piece of legislation that has been introduced. This includes the budget, which is one the most impactful pieces of legislation that legislators vote on.

Nonprofit Lobbying Limitations from the IRS

When it comes to nonprofit advocacy or lobbying, the IRS has different standards. One thing that most nonprofits are aware of is that the IRS has pretty strict limitations on what constitutes lobbying and how much can be done. The IRS explicitly states that the primary work of a 501(c)3 cannot be lobbying. Associations/ 501(c)6 associations, on the other hand, do not have these limitations. However, 501(c)3s are prohibited from engaging in too much lobbying, but what does that mean exactly? How do you know if you are within range of what is acceptable before jeopardizing your tax-exempt status?

The IRS has developed two tests for measuring lobbying activity:

• The substantial part test: The IRS uses a multi-pronged approach to assess the extent of a nonprofit’s lobbying activities. They consider how much time was devoted (by both compensated and volunteer workers) and the expenditures devoted by the organization to the activity. Excessive lobbying in any taxable year could endanger an organization’s tax-exempt status and could result in a series of severe penalties. One consequence is that the organization’s income becomes subject to tax. For more information on the test and penalties, please click here.  For schedule C on Form 990 where you should report Political Campaign and Lobbying Activities, click here.

• The expenditure test:  Under the expenditure test, the extent of an organization’s lobbying activity will not compromise its tax-exempt status if its lobbying expenditures are in proportion to its budget. The limit is generally based on the size of the organization and may not exceed $1,000,000. For the full IRS table, please click here.  Organizations electing to use the expenditure test must file Form 5768. Similarly to the Substantial Part Test, under the Expenditure Test, an organization that engages in what the IRS deems to be excessive lobbying activity over a period of a year jeopardizes its 501(c)3 status by making all of its income for that period subject to tax. If the organization exceeds its lobbying expenditure dollar limit for a particular year, it must then also pay an excise tax equal to 25 percent of the excess.

Nonprofit Advocacy or Lobbying Restrictions from Funders and Supporters

When nonprofit leaders decide whether they are going to engage in nonprofit advocacy or lobbying activities, whether direct or grassroots, they must consider the following:

• Which funding sources will pay for the work? Numerous funders from the corporate and philanthropic arenas tend to either curb the type of nonprofit advocacy or lobbying activities their dollars can be used for or, altogether, not permit it. Typically, federal, state and local public agencies prohibit any of their dollars from being utilized for lobbying. Thus, you have to consider whether you have funding from an unrestricted source, or, your organization may have to sit out of this particular nonprofit advocacy or lobbying initiative.

• Do you have the time and ability to document your time and nonprofit advocacy or lobbying activities? Funders and the IRS expect you to be able to prove that you did not use any of their dollars in lobbying activities. Thus, both your staff and yourself should keep copious records of your nonprofit advocacy or lobbying work.

• Ensure that you do not focus on your nonprofit advocacy or lobbying activities over carrying out the mission of your organization. It is very easy to get roped into advocacy efforts because of the connections they result in and the potential benefits they could provide your organization. However, funders, board members, community members, and your organizational constituents are most concerned about you carrying out your mission. If your supporters perceive that you are moving away from your mission, their support of your nonprofit will dwindle.

Preparing your organization for Nonprofit Advocacy or Lobbying Efforts

• Ensure that your bylaws and your resolutions permit you to engage in nonprofit advocacy or lobbying. There are some nonprofit organizations that absolutely forbid any involvement in lobbying activities as a preventative measure to ensure the organization is not politicized. If your bylaws or the corresponding resolutions include nonprofit advocacy or lobbying prohibitions, until there is an official change to your organizational policies, you cannot engage in lobbying. Otherwise, you run the risk of receiving a “finding” in your annual audit.

• Ensure all of your staff know how to manage calls pertaining to a nonprofit advocacy or lobbying initiative. Often, depending on the intensity of the nonprofit advocacy or lobbying initiative, reporters or stakeholders will call nonprofits to find out “off the record” information about an initiative, and then put it on the record. You should train all of your staff to remain silent about the issue and refer the call to the designated representative. Otherwise, it could result in an uncomfortable situation for your staff, and compromise your nonprofit advocacy or lobbying initiative’s goals.

• All staff involved in nonprofit advocacy or lobbying efforts should be trained on all components of the initiative. This includes the difference between nonprofit advocacy or lobbying, how to document their activities, the talking points, the strategy, interactions with legislators and their staffers, and what the different branches of government are responsible for. The same should be the case for coalition members, but you cannot control what other organizations do with their staff. You should also ask yourself, do the staff have all of the skills they need? If not, how should you go about helping them acquire professional development opportunities?

• The impact on the organization’s workload and morale should be assessed at various points throughout the campaign. There should be an ongoing discussion with staff on how to distribute the workload of existing staff if there is a nonprofit advocacy or lobbying initiative that requires existing staff to become involved. Questions that senior staff should ask to include, what will staff not be able to complete if nonprofit advocacy or lobbying is not part of their regular workload? How will their regular work be impacted and potentially re-distributed? Are the staff members prepared to handle some of the challenging personalities one can encounter in nonprofit advocacy or lobbying?

• Prepare your organization for all possible outcomes: There are some nonprofit advocacy or lobbying initiatives that are very intense and others that are not. Some of the questions you should ask yourself include, does this nonprofit advocacy or lobbying initiative require Board approval? Is this something that could ultimately bring a bad reputation for your organization, or threaten its sustainability? Are the political players, policy brokers, and decision-makers you are working with ethical people or is there a possibility that they may retaliate against your organization? Could this nonprofit advocacy or lobbying initiative result in vengeful bureaucrats deciding internally not to fund you anymore? Will there be any major consequences?

Next Time:

Engaging in a nonprofit advocacy or lobbying initiative can bring about many benefits to your organization. However, you have to prepare yourself, and your organization for undertaking such an initiative, particularly if both advocacy and lobbying are outside of the typical scope of your work. You also should do an environmental scan to assess whether the initiative truly benefits your organization.

Next time, we will discuss advocacy efforts with public agencies. Also, if you have not done so already, please subscribe to my blog where you will get articles on the latest nonprofit trends. When you subscribe, you will also receive more resources and tips on how to manage the ups and downs of the nonprofit cycle. You will also be updated on what I have been up to.

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