Advocating or Lobbying?

Understand Your Role to Protect You & AAFCS

The term “advocacy” is often used synonymously with the expression “lobbying.” For both tax and non-tax reasons, however, there is an important distinction between the two terms for nonprofit organizations. In both tax and non-tax areas, there have been rules adopted with respect to “lobbying.”

Non-tax Lobbying Rules

General: The non-tax lobbying rules focus on disclosure of lobbying activities. The premise to these disclosure rules is that public awareness of lobbying activities results in responsible government representation and increases public confidence in the integrity of the government.

Federal Law: The original federal disclosure law was passed in 1946 and was called the Federal Regulation of Lobbying Act. The law was misconstrued and misunderstood, in large part, because it was vague and contained weak enforcement provisions. Finally, in 1995, Congress was able to reach agreement on new lobbying legislation called The Lobbying Disclosure Act of 1995 which replaced the 1946 law. The Lobbying Disclosure Act of 1995 was signed by President Clinton on December 19, 1995.

Lobbying Activities: The definition of a “lobbying activity” is any oral or written communication (including electronic communication) to a covered executive branch official or a covered legislative branch official that is made on behalf of a client regarding:

  • Formulation, modification, or adoption of federal legislation (including legislative proposals).
  • Formulation, modification, or adoption of a federal rule, regulation, Executive Order, or any other program, policy, or position of the United States government.
  • Administration or execution of a federal program or policy (including the negotiation, award, or administration of a federal contract, grant, loan, permit, or license).
  • Nomination or confirmation of a person for a position subject to confirmation by the Senate.

Registration and Reports. The Lobbying Disclosure Act of 1995 requires certain individuals and entities to both register with Congress and subsequently report and disclose on a regular basis pertinent information about the individual’s or entity’s lobbying activities. An initial registration form must be submitted with semiannual reports filed thereafter by all organizations and individuals engaged in lobbying activities covered by the Lobbying Disclosure Act of 1995.

For more information about registering to lobby:

Tax Lobbying Rules

General: The tax lobbying rules focus on tax-exempt organizations, in particular Section 501 (c)(3) organizations. The tax exemption category employed by the organization will dictate which lobbying rules apply and how lobbying is permissible for the organization.

Federal Law: Most of the federal legislation in the tax area on lobbying focuses on Section 501 (c)(3) tax exempt organizations. There are two basic tests for Section 501 (c)(3) organizations relating to lobbying activities which are the “substantiality test” and the “expenditures test”. Under these tests, it is critical to review the particulars of each unique circumstance.

Under the substantiality test, Section 501 (c)(3) organizations are restricted in their lobbying activities by the rule that “no substantial part of the activities” of the organization may constitute “carrying on the propaganda, or otherwise attempting, to influence legislation.” There are no specific guidelines or definitions of “substantial part.” Virtually all the court cases regarding the “substantiality test” have assessed an organization’s overall programs and objectives, therefore, no strict percentages have been applied.

The alternative to the substantiality test is the expenditures test. The expenditures test, also commonly known as the 501 (h) election, was first provided for by Congress in 1976 but final regulations were not issued until 1990. The expenditures test is formulated in terms of a ceiling on lobbying expenses based on an organization’s annual total exempt expenditures. Organizations must elect to be governed by the expenditures test.

The ceiling limitations are as follows:

Lobbying Activities: Under the expenditures test, lobbying (or more precisely, “influencing legislation”) is defined in Section 4911 of the Internal Revenue Code as:

  • Any attempt to influence any legislation through an attempt to affect the opinions of the general public or any segments thereof; or
  • Any attempt to influence any legislation through communications with any member or employee of a legislative body, or with any government official or employee who may participate in the formulation of the legislation.

According to IRS regulations, a tax-exempt organization is attempting to influence legislation if it:

  • Contacts or urges the public to contact members of a legislative body for the purpose of proposing, supporting, or opposing legislation; or
  • Advocates the adoption or rejection of particular legislation.

Section 4911 of the IRS Code also lists exceptions to the term “influencing legislation.” These non-lobbying activities include:

  • Making the results of non-partisan analysis, studies, or research available.
  • Providing technical advice or assistance in response to a written request by a government body, committee, or subcommittee.
  • Appearing before, or communicating to, any legislative body with respect to a possible decision by that body that could affect the organization’s existence, powers, and duties, its tax-exempt status, or the deduction of contributions to it.
  • Communicating with its members regarding legislation or proposed legislation of direct interest to the organization or its members, unless the communication directly encourages the members to become involved in direct or grass roots lobbying.
  • Communicating with government officials or employees on routine matters.

Elections: Many Section 501 (c)(3) organizations have continued to opt for the substantiality test. This is in part due to the perceived burden the expenditures test places on the organization and the fear that electing the latter will increase scrutiny from the IRS. To date, there are no cases to support this contention.